A brewing crisis

The apprehension expressed by the tea industry bodies that the industry could be heading towards a crisis due to a decline in prices and reduction in production is a cause of concern for all stakeholders. The tea industry is the largest employer in Assam, the state will have to grapple with problems of livelihood and income loss of lakhs of garden workers if the crisis is not prevented. The primary concern of the associations of the tea planters is that prices are not rising to match the rising production cost. Fall in export volumes and rise in import volumes have aggravated the problem. Against the country's export volume of 252 million kilograms of tea in 2019, India exported 134 million kg in 2020 and 118 million kg from January to August this year. Tea Board data reveal that India imported 15.86 million kg of tea worth Rs 239.13 crore priced at Rs 150.78 for each kg in 2019 which increased to 16.97 million kg in just the first eight months of this year at a reduced price of Rs 146.38 for each kg. A huge jump in the import of cheap tea from Kenya, Nepal, and other countries when exports have declined by over 15% in this period has left the industry associations in India worried. The Tea Association of India (TAI) is worried that import prices are much lower than the cost of production in India and if the industry is not shielded with a protection regime of 100 per cent customs duty on imported tea, the crisis could precipitate further. It has drawn the attention of the Ministry of Commerce and Industries that of the total import of 60.35 million kg of tea in the last three years only 23.43 million kg were re-exported which means that 36.92 million kg were sold in the country in the domestic market and therefore this imported tea creates additional pressure on demand-supply equilibrium adding to worries on economic unsustainability. The industry body has also flagged the issue of decline in the price of domestic tea and highlights that the prices have declined by almost Rs 15 this year against the price in November last year. The association attributes the drop in production primarily due to weather conditions where availability of sunshine during daytime has reduced substantially with the decreased temperature at night and occurrence of pests. The decline in end season tea is estimated to be dop by around 10.5% against 2020 level and by 16% against 2019. The North Eastern Tea Association has also identified a lack of irrigation support for tea cultivation in Assam and the Central and the state government acting on its suggestion to formulate an irrigation scheme, rainwater harvesting, digging of ponds for the better micro-climatic condition will be critical to mitigating climate change impact on the tea industry in Assam. A key suggestion put forward by the industry bodies to rescue the industry from the crisis-like situation is the generic promotion of tea in the domestic market to increase per capita consumption in India which is estimated to be only 830 grams against 1.61 kg in the United Kingdom, 1.01 kg in Pakistan and 1.31 kg in China. The TAI estimates that an increase of even 100 grams in per capita consumption would lead to consumption of another 131 million kg annually in India while NETA estimates that an increase of 70 grams per head than 50% of the challenges faced by the industry can be overcome. Instead of solely depending on the government for generic promotion of tea, the industry can also launch aggressive promotion to popularise tea as healthy and lifestyle beverages to tap the huge potential of promoting tea among health and lifestyle-conscious young Indians. Declaration of tea as a national drink, which has been a long-pending demand by the industry, by the Central government can bolster such campaign and increase per capita consumption in the country. A mere declaration of the status is not going to change the situation unless the government, as well as the industry, do not take promotional campaigns. Assam government declared tea as the state drink way back in 2012 but promotional campaigns have remained limited mostly to the branding of Assam tea in trade fairs and expositions. The suggestion by NETA for the formulation of a scheme for tea producers to directly export from the northeast region to align with the Act East Policy is worth consideration by the Central government for expansion of the market of tea produced in the state. Passing off Assam tea blended with tea produced in other regions as 100% Assam tea in packet teas is another genuine concern over the reputation of high-quality Assam tea being ruined which has been raised by NETA calls for immediate action by the Central and State governments. Actions by all stakeholders are needed to weather the storm in the tea sector.