Threat to sustainability: A serious concern for Assam’s 200-year-old tea History

 Uddhab Sarmah

(ucsarmah@ gmail.com & uddhab@ solidaridadnetwork.org)

It’s heartening to note with great pride that the people of Assam today have been able to witness the great eras of the tea industry steadily for the last 200 years of time since the discovery of tea plants in 1823 AD. With the bicentennial celebrations of the age-old tea industry held recently, it can be understood that the doyens of the industry have undoubtedly come up with a concrete plan and vision for upholding the image of the past glory, which has been passing through a very critical phase at present. There has been a serious concern for the producers of all companies at present about how to run the business when the prospects of profitability depend on all social costs, maintenance of over one million families to meet their needs, and other fixed costs, etc., which are to be counted for despite having to maintain the properties in a proper way to be on par in the competitive markets. 

Going by the general scenario of the Indian tea industry at present, there are a few critical factors that have been noticed to be matters of concern for all producers.

1. Oversupply of production, i.e., increased growth of production of teas coming out mainly from the segment of STGs (52% of total productions), has a direct effect on the supply-demand ratio. The lower the supply (availability) is, the lower the demand for tea, resulting in a lower price than expected.

2. There has been a decreasing trend of productions with productivity almost in all estates of the agency houses and big producer companies owing to the increasing trend of unproductive areas due to the old ages of tea bushes and the direct effect of prevailing climate change succumbing to the pressure of adverse weather conditions and attacks of pests and diseases that affect the health of tea bushes to a large extent.

3. The escalating cost of production per kg of tea has been gradually found to be much higher than the selling price of tea per kg in the markets, rendering the tea business almost non-profitable as compared to other agricultural crops.

4. Stagnation of tea prices over the past two decades of time as compared to all other edible and non-edible commodities, thereby crippling the overall tea marketing scenario in the domestic markets.

SUPPLY vs. DEMAND RATIO: India stands next to China in terms of total tea production. It is a matter of great pride that total production has been showing an increasing graph in the last few years. It shows from the statistics that in 2009, the total production of India was 982 million kg, whereas in 2022 it was 1365 million kg. Which shows over 13.65% increase during the 14 years of time.

Although the production has reached a reasonably high level of expectations, the domestic consumption of teas in India by our populations has not grown to the extent expected, in spite of the fact that tea is considered the most common man’s drink next to water. The average per capita consumption of tea in India is only 850 grams (hardly a cup of tea per head per day in a year), which is far too low if we compare it with other tea-drinking countries. This consumption rate has really set back despite various efforts of advertisements and propaganda about the ‘health benefits’ of tea consumption in the country.

Based on the consumption rate of 850 gm per head throughout the year, we find that the requirement of teas for domestic consumption in India is around 1040 million kg, which creates a surplus of over 300 million kg to be sold either by export or to carry over to the next season. It has been noticed that the quantity of exports from India to other countries has been showing a decline over the years because of mainly quality and MRL factors as compared to other competitive tea-growing countries in the world. However, the export quantity from India to other countries hovers around 220-230 million kg each year, and eventually it results in an oversupply of 80-100 million kg remaining to be sold in domestic markets in the next season. This carryover accumulation over a period of time is very high, and its effect is reflected in the lower price realisation at the domestic markets. 

So when the supply is higher, the demand for some good teas also automatically comes down to a lower level, much like expectations. It is obvious that unless the per capita consumption of teas is increased to a reasonable level of around 1.5 kg per head per year, the economic theory of demand and supply will continue to dominate in the tea markets for a long period, ultimately making the industry sick. The government has to think seriously with a visionary look as to how to communicate to the masses, from the grassroots level to the elite class of people, about the benefits of tea drinking. The main challenges are with the youth generations, which encompass around 30% to 40% of the total population of India, just to create habits of tea drinking.

If we look at the total production of teas in India, amounting to 1359 million kg, 52% of teas come from the segments of ‘SMALL TEA GROWERS’ production, which emerged as one of the most enterprising revolutionary segments of the Indian tea industry. Nearly over 700 million kg are contributed each year, 90% of which are bracketed in the common tea quality category, the price of which hovers around an average of Rs 120–150 per kg in the auction market. The quality suffers for many reasons, among which concern for handling raw materials from field to factory, lack of scientific base knowledge in field practices, low holding areas not receiving due attention as required from the owners, MRL-level chemicals used not being understood properly, etc. are some of the basic areas. So, one can imagine the market conditions of having a huge quantity of over 700 million kg of common teas out of 1340 million kg in the total basket of Indian teas, which strongly affects the average price in totality at the close of the season.

ESCALATING COST OF PRODUCTION (COP) vs. SELLING PRICE: As mentioned above, the higher production of teas is mainly due to the contributions that have come from the bought-leaf segments in the country. The evolution of small tea growers emerging in the early 1980s, then coming into shape in the 1990s, and the gradual upsurge from 2000 to the present period have been recognised as the most revolutionary period for growers of over 1.5 lakh who have been self employed and taken the tea business as budding entrepreneurs.

According to the statistics for 2018, Assam produced around 690 million kg, out of which 320 million kg (47%) came from STG segments.

This bulk quantity of 320 million kg gets sold at an average price of Rs 120 to Rs 125 per kg, and the remaining 370 million kg produced by the organised sector gets sold at an average rate of Rs 175 to Rs 180 per kg, thus making an average auction price of Rs 150 to Rs 156 per kg of tea made, which has been found from the records of the auction average for the year.

The cost of production per kg of tea for an organized sector estate varies from minimum Rs 220 to Rs 260 plus per kg of made teas based on productivity and quality tea productions. In the same way, the cost of production of teas from a bought leaf factory varies from Rs 140 to Rs 150 per kg, approximately at present, with increased costs of gas and power.

With all the realities mentioned above, the whole picture of the present situation of the tea estates in Assam lies in the fact that unless the price of the teas is fetched over Rs 300 per kg as a minimum support price (MSP), all the regulated estates will not be able to run the tea properties meeting all the statutory requirements and other liabilities conforming to welfare activities, which include providing housing facilities, provisions for drinking water, health and hygiene works, etc.

In the case of BLF producers, the margin of profit has come down as compared to earlier years, and factories producing ordinary liquoring teas are certainly going to suffer a setback in their business profitability despite having fewer liabilities and fixed costs in comparison with organised properties. In the same way, the cost of production per kg of green leaf for small tea growers has gone up in recent years from Rs 12 to over Rs 22–24 per kg of leaf because of the high rate of inflation of all inputs of chemical fertilisers and pesticides, fuels, and predominantly wages to workers. As the average selling price of leaf is around Rs 15 per kg at the close of the year, the growers are finding it very difficult to run the properties, having to render losses for their productions yielding from the tea areas. The small tea growers are gradually highly demoralised because of the losses accrued from tea cultivation. Unless the prices of tea are improved like other commodities, there will be a huge setback to this growing industry.

Lately, it has been learned that the escalated high cost of production in all inputs, including worker’s wages, and subsequently lower prices of tea realised in the markets have almost paralysed the functioning of the tea productions in Kenya, resulting in the unemployment of thousands of workers and joblessness to the extent of the closure of tea factories. The same situations are going to emerge in our country too unless immediate intervention into the gravity of this issue is understood and taken care of. 

STAGNATION OF TEA PRICES: As mentioned earlier about the prevailing prices of teas of different classifications of teas, it is really ironic that the same scenario of the prices of teas have been witnessed over the last two decades of time, almost causing a ‘STAGNATION’  as compared to the escalated growth of prices for all other edible and non-edible commodities in the markets. This stagnation of prices can be reckoned as one of the draconian causes of the downfall of the industry in the last 10-15 years of time, compelling the proprietors of the big, reputed tea companies to dispose of their prized properties on a large scale.

STEPS FOR REMADIES TO OVERCOME THE CRISIS: Considering the latest ongoing crisis period of the industry, the tea producers of large and small companies need to carry out their own self-introspections as to how best the law of diminishing returns can be averted by way of executing both need-based short- and long-term planning for improvement of their products and properties. The incoming period is expected to be much tougher owing to the present wage increase and the rapid escalation of the of the costs of every input required for field and factory productions. Urgent attention from all is required for the following areas:

1. Since customer awareness of quality teas has been increasing and there is always a wide gap in price realisations between common, medium, and good/best brackets of teas, quality produce is a must for all producers to come out of the impending danger of natural death.

2. In view of the oversupply of productions coupled with the left-over bulk of huge quantities from each year’s productions, which are having a direct effect on prevailing tea prices, the tea producers must concentrate on making quality teas for higher prices rather than the common medium standard of teas coming out of uncontrolled raw materials detrimental to quality products and health. 

3. Since there has been a downward trending of productivity almost in all the estates of the all-organised sector for an increase of high percentages (35–40%) of uneconomic areas that are too high to be uprooted and replanted for a productive stage within a short period of time, the producers are therefore required to make a thorough study of each property in carrying out the exercise of revamping the existing areas in a systematic plan phase wise for completion within a time-bound period. All these development works are to be considered an investment cost for the future sustainability of the existing property.

4. Practices of’regenerative agriculture’ using ‘biofertilisers’ and minimising use of inorganic fertilisers and chemicals need to be adopted so as to cut down on the high cost of production. Consumers are becoming more concerned about food safety and health; therefore, ‘quality ‘products with food safety’ needs to be the main priority for value-added teas.

5. The urgent need of the industry is to pay all attention to how to bring out a dramatic change for Bought Leaf Productions to a level of good standard of tea quality from the existing rank of “common teas,” which are being used by the giant buyers for the purpose of packaging as fillers. The total production of teas coming out of the BLF segments is over 300 million kg in Assam and over 700 million kg in the country. These huge quantities have brought down the total average price realizations for all producers. The role played by the giant buyers in exercising their dominance over the price scenario for all grades of tea in the Indian auctioning system is also one of the most important areas of concern to all producers.

6. Attention to follow good standards of plucking and handling of leaves properly to maintain undamaged conditions right from field to factory continues to be a major problem, which produces poor and common teas responsible for affecting the image of Assam and Indian teas in both domestic and international markets. The government and the Tea Board authorities need to be more concerned about how best a system can be developed to connect BLF owners and the STGs at grassroots levels for the production of quality teas in the factories. 

7. The main problem with the small tea growers is with their planting materials planted 20–30 years ago, when the quantity of production was the main area of attention by all for immediate short-term gain. All the planted materials come from quantity clones, which are fast-growing and high yielding. So farsightedness for the future of the industry was never a concern for all at the nascent stages.

8. Since the unorganized segment of the STGs is being considered the ‘backbone’ of the tea industry for the contributions of the productions, which are almost reaching over 52% now and are expected to achieve over 60% in another 10 years of time, the multiple challenges being faced by the industry in the process of restoring the past glory of Assam, Darjeeling, and all Indian teas must need to be diagnosed to meet the consumer’s requirements for both domestic and international markets. There needs to be a strong, cohesive effort from all concerned in the tea industry to prepare a road map for the entire STGs of the country to produce the desired standard of quality of teas (both specialty and black teas) through the process of collectivization, good agricultural practices based on scientific norms, and the pathways to productivity, which can help the growers in their socio-economic developments and recognitions at the same time.

9. The markets for value added for specialty teas like hand-rolled green and oolong of both organic and black teas are very limited; the total consumption does not exceed even 1% of the total production in India. There needs to be an aggressive marketing policy for these teas to be exported and consumed in domestic markets. If due attention is given by the government to organised markets by encouraging small tea farmers in groups like FPO/FPC/SHG or in the form of cottage industries, there will be a tremendous achievement in promoting the small tea growers in their self-development process of enriching socio-economic conditions with the production of healthy and safe products.

10. Tea consumers in today’s world are very concerned about ‘food safety and health measures’ for every edible product. Not much attention has been noticed to be paid by the Department of Food Safety and concerned authorities of the government, especially for teas. Owing to the adverse climate and change of weather globally, there has been a visible change in weather as compared to earlier years, two to three decades ago. At the same time, attacks of pests and diseases have been noticed to be a major challenge in protecting crops and tea bushes. All these have resulted in the in the indiscriminate use of chemicals and fertilisers for the production of teas by the majority of big and small tea growers, causing a major threat to all consumers as far as the MRL (maximum residue level) of chemicals is concerned. This has been reflected in our export of teas being restricted to almost the same quantities for the last two decades since compliances of food safety for MRL of use of chemicals mainly have been found to be lacking seriously. The need for serious attention from the government and Tea Board to curb this menace by establishing laboratories to check pesticide residue levels frequently throughout the year.

At present, from the perspective of ‘Tea Producers’,  the ‘Tea Business’ has been reckoned as the most unremunerative because of the stagnation of low prices despite producing reasonably good teas and for being burdened with heavy liability to bear from all corners, eventually succumbing to heavy losses in running the properties. Because of continued losses, most of the owners of big companies sacrificed their sentiments for their own belongings and preferred shifting to other businesses in search of profitability and mental peace of mind. Lately in the last 4/5 years of time, there has been a sea-change of ownership shifting to the hands of ‘traders’ mainly by the big house of agency groups and companies rendering the ‘glory of the 200-year-old tea industry’ in shambles without paying a single moment of thought about the plight of lakhs of people who have sacrificed their lives in the upbringing of the properties in good, bad or the worst times of the yesteryears!!