The tea industry is passing through a crisis of oversupply. Even in the international tea market, supply outpaces demand. Small tea growers are coming up in a big way in India and producing tea at a lower cost as compared to big tea producers. Arun Kumar Ray, IPS, Deputy Chairman, Tea Board, spoke to BE’s Kishore Kumar Biswas.
Q. What are the main problems faced by the Indian tea industry?
A. In India, tea production is high but consumption is not so high. There is a demand and supply mismatch. So for price stability, we are thinking of higher exports. But this is also not happening. Last year, 253 million kg were exported. This year (2018-19), it is almost the same.
Global tea production is also rising. Kenya, Rwanda, etc. are producing more amounts of tea. Tea is an old drink. But there are more drinks like coffee, coke, etc. which are substituting tea. Food and Agriculture Organization (FAO) also finds a slowdown of growth of demand for tea and the price is not rising due to oversupply in the world market.
Q. The tea producers, particularly the bigger ones in India, are displeased with the inadequate price recovery of their products. How can this be addressed?
A. This is a common problem that happens in agricultural commodities. It is true. But at the same time, the prime producers are perhaps, getting satisfactory prices for their products. Their products are sold at Rs. 3000 or Rs. 4000 per kg or even more, if they can market it properly. Pricing is a market function and also a marketing function. The prices of agricultural products do not rise regularly. It may rise when the supply is short. But now, supply of tea is more than the quantity demanded. But it is seen that the quality producers are satisfied. The tea industry is totally quality driven. There are some standards that one has to maintain. If that is maintained then one can get satisfactory prices. How many estates have branding?
Q. That is an important point you have raised. Why has Indian tea not been able to have any brands whereas Sri Lanka has been able to successfully launch a global tea brand?
A. Tea business in India differs from that in Sri Lanka. India depends heavily on domestic consumption. About 80% of India’s products are sold in the domestic market. But Sri Lanka is almost dependent on exports. It has to sell almost all its products in the foreign market. Otherwise, it cannot sustain the industry. We are safe in that sense but our product is low priced. One cannot have a good price in the home market. In India, tea consumption can be increased. We have conducted a study with the help of Deloitte. The study observes that in India, sale of tea is more where per capita milk availability is higher. That is why the sale of tea is more in states like Maharashtra, Gujarat, and Punjab. In these states, per capita milk availability is more than other states. This is because milk tea is preferred in India.
Q. But what about the branding of tea, particularly, Darjeeling tea?
A. See, in Darjeeling, there are 87 gardens. All are certified in the GI index. Darjeeling tea is sold at high prices like Rs. 3000 / Rs. 4000 per kg. Again, some tea is sold even at as low as Rs. 400 / Rs. 300 per kg. We have only eight to nine million kg production of Darjeeling tea. When it is sold in Kolkata, for example, customers do not know what quality they are consuming in the name of Darjeeling tea. Now if all the qualities of tea are brought under one head, it is possible to create a brand. This is like scotch. A single generic promotion is required. But it is not happening. Taking advantage of this situation, some other qualities of tea are sold in the market as Darjeeling tea.
Q. Doesn’t the government have a role in branding?
A. Not at all. Marketing is a costly affair. Why will the government spend crores of money on this? I have told the tea producers to make their own brands. That will help them.
How long will one depend on the same Darjeeling tea established by the British? Now the time has come to compete in the tough market and branding is necessary. There will be a codemark in Darjeeling tea. One can verify it by scanning. Anyone can easily identify the product. In a new block chain system, it is not possible to copy any product. Every producer will get a code number in the block chain system for traceability of the products.
Q. From different corners it is said that the Tea Board of India has not been proactive in developing the tea sector in our country. What is your response?
A. We do not have the required funds to do the necessary jobs. Promotion is the job of the marketing divisions of the respective tea companies. Our mandate is to look into the welfare of small tea producers, tea labourers, and promoting governmental schemes aimed at the sector. We have specific allocations for these schemes. We are allotted money for the execution of these schemes and we do that judiciously.
Q. It is said by many tea producers that the growing presence of small tea growers is hampering the tea industry. They do not maintain the quality of tea and do not pay proper wages and can sell tea at lower prices. How do you look at it?
A. The nature of the business is quite dynamic in nature and is fast evolving. Regarding payment of wages, the Tea Board has nothing to do with it. It depends on the states. Each state has its own minimum wage act. It is different for different kinds of jobs. But small tea growers have to maintain all the quality of tea. Non-compliance may lead to the loss of license.