A cup of cheers is now a source of miseries for the Indian tea industry

The Indian tea industry is adversely affected by lower production rates, higher imports of cheap variants, lower exports and the rising production costs due to high wages and low prices

A cup of cheers for many is brewing miseries for many workers and estate owners. The apprehensive Tea industry bodies clearly indicate a crisis due to lower prices and production that became a headache for stakeholders. The shortage of coals in some states is also adding to the existing troubles for the tea makers.

India is one of the world’s largest tea producers and exporters. In turn, it offers direct employment to 1.2 million workers, of which 50% are women. If no preventive measures are taken now, especially in  Assam and Bengal, the economy will grapple with lakhs of livelihood and income loss of tea-garden workers. Both Assam and Bengal (North) state coffers are dependent on tea industry revenue.

Cost and pricing imbalance: Low exports and high imports

One of the primary concerns of estate owners is the rising imbalance between the cost of production and selling and export price. According to the data published by the Indian Tea Association, the export volume fell by almost 11.6% in 2021 on year (Jan-Aug).

India has exported 252 million kilograms of tea in 2019, which plummeted to 134 million kilograms in 2020 from January to August. In 2021, the number further dropped to 118 million kg. The data published by the Tea Board revealed that India had imported 15.86 million kg of tea worth 239.13 crore rupees priced at 150.78 rupees for each kg in 2019. This number soared by 1.11 million kg to 16.97 million kg in 2021 till August at a reduced price of 146.38 rupees for each kg. The soaring cheap tea import as exports plummet had left the tea associations worried.

Of the total import of 60.35 million kg of cheap tea in the last three years, only 23.43 million kg were re-exported. Therefore, 36.92 million kg were sold in the Indian domestic market, creating additional pressure on internal demand-supply equilibrium and leading to economic unsustainability. The decline in the price of domestic tea by almost 15 rupees this year against the price in November last year has increased the imbalance.

Coal shortage increases production costs

Another factor contributing to the impending crisis to the Assam tea industry is the rising coal price. Over 800 tea manufacturing and bottling factories across the state are staring at an acute coal shortage, amounting to almost 50% of total factories. It has aided to lower tea production rates and increased production costs. Assam is one of the primary and biggest tea producers in India.

Most of the tea production plants based in Dima Hasao District and Margherita in Tinsukia District is dependent on coal-burn-fuel for various purposes. The tea factories in Barak Valley, North Bank and middle Assam are dependent on imported coal.

Both bottle and tea factories need around 3.50 lakh metric tonnes of coal, whose supply from local sources has diminished considerably in the last few months.

According to various regional media reports in October, local tea producers are now importing coal for around 13,000 rupees per MT, a steep rise from 9,000 rupees per MT. They are importing coal from Arunachal Pradesh, Bihar and Meghalaya. High fuel prices have also aided the hike in import prices of coal.

Lesser tea production

Another feather on the cap is lower production rates due to changing climatic conditions. Most estate owners of the tea industry have attributed reduced sunlight and decreased night temperature to low production rates. Tea plants grow best in cool climates with at least 40 inches of rainfall per year and prefer acidic soils.

The problem is further aggravated by pest issues. The season tea in 2021 year-end is expected to decline by 10.5% compared to 2020 and 16% compared to 2019. The North Eastern Tea Association has also pointed at the lack of irrigational support for tea cultivation in Assam for the low production numbers. The low rate of production will be further affected by the rising import of cheap tea.

Lower price for green leaves

The Tea Board has massively reduced the average price, which brought leave factories has to pay to the small growers this month to 13.67 rupees per kg. Tea Board’s executive has said that this price is arrived at under Section 30A of Tea Marketing Control Order (TMCO) based on the consolidated auction sale average of CTC teas from bought leaf factories in October.

It is not only the lowest price in 2021 but lower since April 2020, when the price was 12.19 rupees a kg. It is 10.25 rupees less per kg than November 2020, a surreal decline of 42.85%.

In October 2021, the average price was around 14.74 rupees per kg. Thus, November average price for small tea growers is 1.07 rupees less per kg than last month, a 7.26% fall. The growers will now get 40 rupees less on year for one kg of manufactured tea if four kg of green leaves is required to make a kilo of tea.

 A Keralian factory where tea leaves are processed

The list of solutions: Give farmer status to small growers

In a letter submitted to Piyush Goyal, the Commerce and Industry Minister, CISTA has asked the government to set the price of green tea leaves at around 30 rupees per kg. The small tea growers or STGs now get between 17 rupees and 18 rupees a kg, depending on the region and quality.

Due to higher production costs and wages, the production expense of green tea leaves has increased to 18 rupees - 22 rupees per kg. Thus the STGs are on the brink of shutting their farms.

Hence, CISTA has urged the government to grant the “farmer” status to STGs to ensure that they can avail the benefits of farmer welfare schemes such as loan waivers, crop insurance and others. STGs, which cultivate and sell green tea leaves, do not get the benefits. The tea industry falls under the Ministry of Commerce and Industry. “We urge the government to take initiative so that STGs can get farmer status and enjoy farmer welfare schemes,” the letter said.

Other measures to ensure Tea industry sustainability

The Tea Association of India (TAI) is concerned about the lower import price compared to the production cost of tea in India. In such a situation, the government should increase the customs duty to the maximum on imported tea. Apart from that, they can also take up estate welfare measures and infrastructures like hospitals and schools and help them to commercialize the property for a diversified income.

Both the Central and the state government should start implementing the suggestion to devise an irrigational scheme, rainwater harvesting and digging of ponds for a better micro-climatic condition to lower the climate impact on tea industries.

Promotions to increase internal tea consumption

In India, per capita consumption is as low as 830 grams, according to the tea association's data. It is even lower than Pakistan, where the average rate is 1.01 kg. If the Indian per capita consumption rate increases by 100 grams, the annual consumption rate will jump by 131 million kg, as per TAI.  

The North Eastern Tea Association estimated that even if the per capita consumption rate increases by 70 grams, it would solve 50% of the existing problems. The Central government can promote tea as an alternative and healthy drink to lifestyle-conscious young Indians to increase the per-capita consumption rate.

Assam has declared tea as a state drink in 2012, but promotional campaigns are limited to the branding of ‘Assam Tea’ in export trades and fairs. The Central government should declare tea as a national drink. It can bolster the consumption rate which will aid in averting the impending crisis threat to the tea industry.

Maintaining the quality of high-quality Assam and Bengal tea for export and sales is mandatory to tap the luxurious tea-lovers market in India. The low-quality imported tea at cheap prices is mixed with the high-quality Indian produce and sold as a ‘Himalayan’ blend in foreign countries. 

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