The Tea Industry’s Tipping Point

The Indian Tea Association (ITA) has pressed the alarm bell on falling tea prices and low-duty imports from Kenya and Nepal precipitating the financial crisis gripping the tea industry. As more than 80% of the total tea produced is consumed within the country, the oversupply in the domestic market and volatility in price realisation are serious problems. The deepening crisis calls for urgent recalibration of policy to find out alternative strategies for both domestic and export channels of Indian tea. Assam tea industry stakeholders, including the small tea growers and large tea estates, have been flagging the persistent problem of price volatility posing sustainability threats, but a policy response is still awaited. The ITA Chairman Hemant Bangur’s address at the 142nd Annual General Meeting held in Kolkata on October 9, in which he said that the financial health of the Indian tea industry is at the breaking point with over 80% of organised tea estates reporting cash losses last year and further price decline this year, paints a grim picture. His call for optimised production and a sustainable pricing regime is a pragmatic solution, but the road ahead has too many challenges to overcome. The industry body has flagged the issue of increasing low-duty imports of tea from Kenya and duty-free imports from Nepal adding to the crisis of oversupply in the domestic market. The Parliamentary Standing Committee on Commerce, in its report, emphasised the need for tapping into institutional buyers like railways, airlines, and government departments while promoting speciality and value-added teas to health-conscious and premium segments. The central government accepting this recommendation and the tea-growing states also pursuing a similar policy can significantly increase domestic consumption. The parliamentary panel also highlights that Indian tea exporters have a cost disadvantage in terms of high inland transportation costs, skewed ocean freight for crucial markets (high international freight charges ex-Kolkata port, which is a riverine port as compared to Colombo or Mombasa ports having direct shipment facilities), non-availability of containers, etc. Besides, India has been facing high competition from the cheap tea producers such as Vietnam, Indonesia and Malawi, which are able to sell the tea at cheaper prices because of their low-cost, smallholding-orientated production structure, the report adds, which needs to be considered while redrawing the export strategy. The Committee has rightly recommended that the organisation of tea festivals, road shows, and tasting sessions across metropolitan and Tier-II cities can create greater consumer connection and appreciation, but the continuation of such initiatives is essential to create a stronger influence among the consumers, as sporadic campaigns fail to leave a lasting impression. The recommendation by the Committee to increase exports includes aggressive marketing campaigns and targeted promotion of Geographical Indications (GI) like Darjeeling, Assam, and Nilgiri teas to strengthen India’s tea brand globally; government support for exporters with assistance in compliance with international quality and safety standards, including residue testing and certification, to access high-end markets; and exploring non-traditional and emerging markets in Asia, Africa, and Latin America to reduce over-dependence on a few traditional buyers. The Committee’s recommendation that the Government should ensure a level playing field for the Indian tea industry vis-à-vis their South Asian and SoutheastAsian countries, like Sri Lanka, Indonesia, etc., is crucial to increase the volume in the export basket to channel to address the problem of oversupply in the domestic market. It notes that the governments in these countries provide subsidies and export incentives to the tea industry, which gives their producers a competitive advantage. The recommendation for India restricting the import of low-quality tea from these countries for re-export deserves expeditious implementation, as the committee points out that these low-quality teas are repackaged, rebranded and mixed with Indian-origin tea and sold in international markets without proper disclosure. An integrated policy is needed to address the overall crises gripping the Indian tea industry, but a differentiated approach is needed within the same policy to fund solutions to the problems of different stakeholders – small tea growers, large estates, bought leaf factories, etc. In addition to removing the bottlenecks in the production of green leaves, ensuring a steady supply of quality leaves to bought leaf factories is pivotal to increasing consumers’ confidence in domestic and export markets. If the persistent problem of small tea growers in Assam in unstable price realisation and the burden of rising statutory costs on large estates on account of compliance with various welfare measures for workers are left unaddressed, then sustainability woes will only become a permanent feature. Piecemeal solutions risk compounding the problem rather than solving it. If a solution to the problems faced by one stakeholder is applied without considering the ripple effect on other stakeholders, it can jeopardise their interdependence in the industry and further deepen the crisis. Without ensuring a minimum sustainable price for growers, the tea industry in Assam and across the country is on the brink of an unwarranted tipping point.