Why is India’s tea industry in crisis?

During the Annual general meeting of the Indian Tea Association (ITA) in Kolkata, the Tea Board of India sought a special financial package of ?1,000 crores from the Centre for the tea Industry over five years.

• This package is allocated for the industry to make the tea crisis sustainable for small and marginal tea estate owners.

India’s Tea industry:

• In India, tea is cultivated in almost 15 states, of which Assam, West Bengal, Tamil Nadu, and Kerala are the major tea-growing states, accounting for nearly 98% of the total production.
• India is also known for producing some of the finest teas in the world, like the Darjeeling, Assam, Sikkim, Nilgiris, and Kangra tea varieties.
• However, India’s tea exports declined marginally to around 196 million kg in 2021 from 210 million kg in 2020.
• Small tea growers (STGs) and industry stakeholders fear the news of the tea consignments being rejected in the international market may further hit the Indian tea sector.
  • According to available data, about 52% of tea in the country is produced by STGs.

The Reasons for the decline in Tea Industry:

• Drop in Production of Tea per Hectare: The average yield per hectare of Darjeeling Tea, according to ITA, is about 350 kg at present which was about 542 kg in 2000.
  • The yield per hectare in the foothills, particularly the Dooars region, is about four times higher than the Darjeeling tea gardens.
• Monopoly of Big Tea Estates: Industry experts point out that an average tea garden in Darjeeling is about 150 hectares whereas those in the foothills vary from 400 to 500 hectares.
• Less Price in Auctions: Planters have also been complaining about the stagnant prices of the auction of Darjeeling Tea, which in 2021 was on average pegged at ?365.45 per kg.
• Reduced growth rate: According to the ITA, prices of Darjeeling Tea in the last six years have grown at a CAGR (cumulative annual growth rate) of only 1.7% against an increasing cost of input between 10% and 12% CAGR.
• Reduction in Demand for Indian Tea: Global factors like the decline in demand from European markets in the wake of the Russia-Ukraine war have compounded the problem.

Other emerging Issues:

• Lack of Quality checks mechanism
• Duty-free imports from neighboring estates like Nepal
• Competitive markets (In 2020 alone, Sri Lanka exported $1.27 billion worth of tea and remained the world’s top five exporters of the commodity)

Suggestive Measures:

• The Standing Committee of Parliament has recommended that the Government review and revisit the Indo-Nepal Treaty for incorporating stringent requirements for a certificate of origin on tea imports from Nepal.
• The committee suggested that Small Tea Growers (STGs) should also be recognized as GI-registered producers on a par with the 87 tea estates which produce Darjeeling Tea to ensure better price premiums.
• Industry experts called for raising the domestic consumption of tea in India, particularly when exports are not picking up.