February , 2024
Stagnancy in the Indian tea industry
17:03 pm

Kishore Kumar Biswas

The production, pricing, and export of tea in India have remained stagnant, as highlighted by Ajay Jalan, the President of the Tea Association of

India (TAI) during the 49th biennial Annual General Meeting held in Kolkata a few days ago. Additionally, this year marks the significant milestone of the Assam tea industry completing its 200-year journey. Assam contributes to more than 50% of India’s tea production. The president of TAI addressed several long standing issues faced by the Indian tea industry and urged the government to take proactive measures in the industry’s interest.

Stagnant Production, Prices, and Export of Tea:

The primary challenge facing the industry is its lack of growth despite the overall economic acceleration. Over the past 15 years, the annual tea production has increased by only 39%, reaching 1366 million KG (mkg) in 2022, with a projected production of around 1365 mkg for the entire year 2023. However, this minimal growth contrasts with the rapid expansion in other sectors of the economy.

Tea prices have remained relatively stable for several years, with the exception of a spike in 2020 during the COVID-19 period. Disruptions in production and distribution, coupled with increased domestic demand, led to a temporary rise in prices. However, this trend has not been sustained, and prices have failed to see substantial growth over an extended period.

The export of Indian tea has been a persistent concern, with 2023 figures showing a marginal change compared to 2022. India heavily relies on the domestic tea market, considering the volatility and price fluctuations in the international market. Despite the competitive nature of the global market, India has maintained a reputation for producing high-quality tea, providing a secure market for both domestic and international producers.

Challenges and Solutions:

The tea industry faces vulnerability due to stagnant growth and rising production costs, primarily driven by increasing labor expenses. While wages are on the rise, tea prices have not kept pace, leading to a decline in labor productivity. Labor supply issues in many tea estates further exacerbate problems, impacting both production and tea quality.

To address the supply-demand mismatch affecting pricing, the President emphasized the concentration of market power among a few key players in the tea industry. The Tea Board of India could play a role in mitigating cartelization during auctions, allowing sellers to set prices more independently. Moreover, an influx of low-quality tea into the market is negatively impacting the production of high-quality tea. The TAI suggests three measures to maintain tea quality:

  •  TAI recommends the early closure of production during the winter season in north India to ensure tea plants and gardens are adequately cared for. The Tea Board of India is urged to mandate closure by or before November 30th.
  • Government regulation on selling tea waste in the domestic market can reduce the supply of low-quality tea, potentially lowering market supply by 15-20 mkg.
  • TAI asserts that approximately 30 mkg of poor-quality teas are annually imported into India, affecting the reputation of the Indian tea industry. Imposing minimum import prices on tea could help control this issue.

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