The Indian tea industry is growing as its production level is rising. In spite of that, the industry is passing through a crisis. Arun Kumar Ray, IPS, Deputy Chairman, Tea Board of India, told BE that the main problem is the demand for tea not growing commensurately with the level of production. Therefore, prices of tea had been more or less flat for some years. Actually, this is the prime problem of the tea industry in India.
Growth of production is coming, mainly, from West Bengal and Assam. This is due to the growth of small tea growers in these regions. Within two decades or more, the contribution of small tea producers has been close to 60% in West Bengal. India’s tea production grew by 6% in 2017-18 over the previous year and the total production reached 1,325 million kg. The Tea Board of India sources said that the annual production of tea in 2018-19 is expected to be around 1,334 million kg.
The tea owners’ bodies have been vocal about the ongoing stress. PK Bhattacharjee, Secretary General, Tea Association of India, said that the crisis of the tea industry would continue for some time. He pointed out that emergence of unorganised small tea growers and loss of traditional markets like the erstwhile Soviet Union is some of the prominent reasons behind this stress. Indian tea had a near monopoly over the former USSR market.
Another problem is inadequate price discovery and the problem is particularly acute for the organised tea sector. Therefore, even premium qualities of tea cannot fetch good returns. It is said that some of the big tea purchasers, in many cases, distort the tea market price. This is because they enjoy near monopoly in the market. Therefore even in auction selling, pricing is actually controlled by some of the very big tea traders of India. So proper price discovery has been a problem in the country. Actually, the prices are more or less static but cost of tea production is escalating.
Problems in exports
The export market for Indian tea is also not looking up. India produces about 23% of the global tea but its share in the global tea export market is around 12%. Bhattacharjee said that Kenya exports almost all its products which are 23% of the total global exports. It produces and exports CTC (crush-tear-curl) tea. Sri Lanka produces and exports orthodox tea and its share is 16% of the total global exports. China has the highest share which is 23% of the total global exports. But China mainly produces and exports green tea.
India’s total exports of tea in 2018-19 have been a little over 250 million kg. The unit price of tea was Rs. 215. But the export in 2017-18 was 257 million kg and the average unit price was Rs. 197 per kg. This has been historically, the highest export of tea from India. One of the major reasons for this high export was increased demand for Indian tea in Iran and Egypt. At the same time, China bought higher amounts of tea from India.
Export of tea
One of the advantages of the tea industry in India is that more than 80% of its products is consumed by the domestic consumers. It has to depend less on export. But the export market is very important for the industry. China is the biggest producer of tea in the world. It also has a big domestic market. Its export is also high. But China is not a competitor of India in tea. It is specialised in producing green tea.
India is mainly a black tea producer. India has been facing stiff competition from Sri Lanka and Kenya. Sri Lanka produces and exports orthodox tea. On the other hand, Kenya produces and exports CTC tea. The cost of production of orthodox tea is costlier by at least 25% as compared to CTC tea. India’s tea production is mostly of the CTC variety. But the costs of production of both orthodox and CTC tea are higher in India than those in Sri Lanka and Kenya. This is due to various reasons.
Productivity of Indian tea is lower
India’s tea industry is more than 175 years old. It was first fully established in the 1840s in Assam. Later, it came to Darjeeling and subsequently it started in south India. Therefore, the tea plants are quite old. This affects the productivity of tea gardens. On the other hand, the tea plants are comparatively quite young in Sri Lanka and Kenya. Therefore tea productivity is higher in those countries. Bhattacharjee gave a rough estimate of difference of productivity. He said that in Kenya and Sri Lanka, productivity of tea is 4000 kg/ hectare. In India it is 2000 kg/hectare. The Indian government has been trying to replant the old gardens by phases. But that is a costly process. It is also known that the cost of production is lower in Sri Lanka and Kenya because labour cost is lower there. Small tea gardens are dominant in those countries. At the same time, most of the producers are in unorganised sector. Therefore total cost of production of tea is much lower in those countries.
Is the Panbari Model the future of India’s tea industry?
Panbari is located in the Jalpaiguri district of West Bengal. There small tea growers (STGs) have set up a tea producing factory. Bijoy Gopal Chakraborty, President, Confederation of Indian Small-Tea Growers’ Association (CISTA), said, “A medium sized factory requires around Rs. 6 crore to be set up.” In the case of this factory, the Tea Board of India had given Rs. 2 crore as subsidy. The STGs have themselves contri-buted Rs. 3 crore. Additionally, Rs. 1.5 crore had been received as bank loans.
The first centre of production has been at Panbari. There have already been three factories. Other two are being set up. Additionally, another two will be set up by 2020. So there will be seven factories by 2020. In this model, a tea planter will also be a tea producer and at the same time a tea seller. Self-help groups will play an important role in this model.
In this model, an STG spends around `80 to Rs. 110 per kg in producing tea. The cost of production varies in different seasons but is lower than that in the tea estates. But it is said that the STGs do not maintain quality.
They are blamed for tarnishing the fame of Indian tea. It is also said that the STGs do not pay labourers according to the wage rule of the government and hence exploit the labourers.
Chakraborty accepted there is need to improve the quality of the tea produced by the STGS. He however stated, “Lower payment to tea plantation workers by STGs is not true in most of the cases. In many cases, STGs plant in its own land by using family labours.” Chakraborty also said that this model is the future of the Indian tea industry. This is to an extent, similar to the models followed by Sri Lanka and Kenya and by many other countries. In West Bengal, about 60% tea is produced by STGs and in Assam it is around 42%.