20-September-2024-Special-Article

TEA INDUSTRY IN INDIA

The tea industry in India, a vital part of its agricultural sector, has been facing significant challenges due to climate change, policy reforms, and fluctuating demand.

Recent extreme weather events have adversely affected tea production, particularly in Assam and West Bengal, leading to an increase in domestic prices. This situation calls for sustainable reforms to ensure the industry’s long-term viability.

  

Current State of the Tea Industry in India

Recent Trends:

• Decline in Tea Production: Tea output in 2024 saw a decline of 21% in West Bengal and 11% in Assam. This led to a 13% increase in domestic tea prices.
• Loss of Premium Teas: The reduction in production primarily affected the first and second monsoon showers, considered the finest teas of the season, causing significant losses in revenue.
• Decrease in Export Prices: Export prices for Indian tea fell by about 4%, adding to the industry’s financial strain.
• Unpaid Subsidies: The Tea Board of India owes subsidies for developmental activities. Delays in receiving these subsidies have exacerbated financial difficulties for tea producers.

About the Tea Industry:

• Global Ranking: India is the second-largest tea producer globally, after China, and ranks among the top five tea exporters, contributing 10% to the global tea trade.
• Tea Consumption: Around 81% of India’s tea production is consumed domestically, with India accounting for 19% of global tea consumption.
• Major Producer States: Assam, West Bengal, Tamil Nadu, and Kerala produce about 97% of India’s total tea output.
• Export Varieties: India predominantly exports black tea, which makes up 96% of total tea exports. Assam, Darjeeling, and Nilgiri teas are known worldwide for their high quality.

Key Challenges Faced by the Tea Industry

Climate Change and Extreme Weather:

• Adverse Weather Conditions: Climate change has severely impacted tea production in India. Excessive heat in May 2024 followed by floods in Assam led to a significant reduction in output. May 2024 saw the lowest production in over a decade at 90.92 million kgs compared to 130.56 million kgs in May 2023.
• Price Surge: Due to production disruptions, tea prices could rise by up to 20%. By July 2024, tea prices had already increased by 47% since the beginning of the year.
• Droughts and Frost: In addition to heat and flooding, droughts and frost conditions in some regions have further impacted tea cultivation.

Ban on Pesticides:

• Government Action: The Indian government banned 20 pesticides, which has increased production costs due to the need for alternative, costlier pest control solutions.
• Export Demand: Despite the challenges, demand for Indian tea has risen among key buyers like Russia, Ukraine, Belarus, Azerbaijan, and Kazakhstan, following the pesticide ban. However, production challenges persist as growers struggle to adopt new pest management practices.

Challenges for Small Tea Growers (STGs):

• Disproportionate Impact: STGs, who contribute over 55% of India’s total tea production, have been hit hardest by the decline in production and export prices. Many of these growers operate on less than one hectare of land.
• Bought Leaf Factories (BLFs): The reduced output also affects BLFs, which rely on leaves purchased from STGs to process into tea. A decline in raw material supply poses risks to these factories’ operations.

Tea Garden Closures:

• North Bengal: Around 13-14 tea gardens in the Dooars, Terai, and Darjeeling regions have shut down, displacing over 11,000 workers. North Bengal, which has around 300 tea gardens, produces roughly 400 million kgs of tea annually.

Global Tea Industry Insights

Global Tea Production and Consumption (2022):

• Production: The global tea production stood at 6,478 million kgs.
• Consumption: Global tea consumption was 6,209 million kgs in 2022.
• Export Market: Tea exports from producing nations reached 1,831 million kgs.

Major Global Producers:

• Leading Nations: China, India, Kenya, and Sri Lanka dominate the tea market, accounting for 82% of global production and 73% of global exports.

Tea Board of India

• Establishment: Founded in 1953, the Tea Board is a statutory body under the Tea Act, 1953. Its headquarters are in Kolkata with 17 offices across India.
• Functions: The Tea Board oversees production, exports, market analysis, and consumer behavior, providing support to producers and exporters.

Climate Change Impact on Tea Globally

• Excess Rainfall: While rain is vital for tea, excessive rainfall leads to waterlogging and soil erosion, reducing plantation areas.
• Drought: Droughts can accumulate dust on tea leaves, blocking sunlight, which is crucial for growth.
• Frost and Glacier Melting: Frost can cause leaf breakage, while glacier melting increases the risk of landslides, both affecting tea-growing areas on hillsides.
• Quality and Price: Climate change is expected to reduce both the quality and quantity of tea, driving up prices globally.

Steps Needed for a Sustainable Tea Industry

Establish Minimum Benchmark Prices:

• Collaboration: The government, regulated tea gardens, and small growers should collaborate to set minimum prices based on production costs, ensuring industry growth and better export performance.

Focus on Premium Teas:

• Quality over Quantity: Shifting focus to premium tea varieties will fetch higher returns for growers, especially as demand for high-quality teas rises globally.

Diversification into Palm Oil:

• Alternative Crop: Tea estates in northeastern India could diversify into palm oil cultivation, which requires less labor and water, offering high returns.

E-Commerce Integration:

• Direct Sales: Utilizing e-commerce platforms can help tea growers sell directly to consumers, improving profit margins and market reach.

Learning from Global Examples:

• Kenya’s Farmer Field Schools: India can adopt models like Kenya’s Farmer Field Schools to train growers in sustainable and quality tea production.

Full Auction System:

• Boosting Transparency: Introducing a full auction system, where 100% of tea is sold publicly, can enhance price transparency and realisation.

Research and Development (R&D):

• Innovation for Sustainability: Increased R&D is crucial for developing climate-resilient tea varieties, organic pest solutions, and improving overall tea quality.

Mains Question:

1. “Discuss the challenges faced by the tea industry in India due to climate change and policy reforms and suggest sustainable measures to ensure its long-term viability.” (150 WORDS)