17 April 2019, 02:04 PM

Indian tea Industry fights for survival

Indian tea Industry fights for survival

“If you are cold, tea will warm you. If you are too heated, it will cool you. If you are depressed, it will cheer you." This was how William Ewart Gladstone, the four-times prime minister of the United Kingdom, described Indian tea, which came to the British market in the early 1800s.

The observation was made a long time ago, but Indian tea is still a morning necessity across the globe. It’s among the finest in the world because of its unique geographical features, continuous innovations, changing product mix, and strategic market expansion.

While China, Sri Lanka and Kenya have made huge in-roads to the global market, when it comes to quality, Indian tea still tops the list in quality. But low-priced teas from China, Sri Lanka, and Kenya have slowly replaced Indian tea in many global drawing rooms. Stiff price competition has given an upper hand to both Kenya and Sri Lanka. Kenya and Sri Lanka have continued to surpass India in CTC tea export, although their combined production is much less than India's.

India losing out in the global market

In 2017, India accounted for 23% of the global tea production. But Kenya and Sri Lanka contributed to just 13% of the world's production. However, when it comes to exports, both have an export share of about 38% against less than 10% of India's.

Indian tea has lost large global markets because it continues to be traded as a commodity. The much talked about value addition is limited and came late. Only the markets that have consumers with shallow pockets buy tea as a commodity and that share is fast depleting. Despite being a large producer of tea, the country lacks properly organised production systems in which small tea producers find a respectable place. The industry has limited, except a handful of big players, access to capital at globally competitive rates.

The deceleration in export volume of Indian tea began with the breakup of the Soviet Union in the early 1990s. The region used to import 130-140 million kg of tea from India annually. After the breakup, the region suffered and the purchasing power of the Russians declined. They also shifted from high-priced, hand-rolled orthodox tea to the more common CTC variety. Subsequently, India’s tea export to the region dwindled and today it stands at just 48.1 million kg valued at $ 120.8 million. Other big purchasers were Iran ($126.4 million), UAE ($61.2 million), UK ($ 55.4 million) and the US ($51.2 million) in 2017-18.

Things seem to have changed somewhat recently. Indian tea industry has recorded the highest ever production and exports in 2017-18. The total tea production was 1325.05 million kg – an increase of 74.56 million kg as compared to 2016-17. In percentage terms, the increase was around 6%. Similarly, the total quantity of tea exported during the financial year 2017-18 was a record 256.57 million kg and foreign exchange earned from exports of tea was $ 785.92 million.