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V. Ramaswamy

TEA has been often described as India's finest agro-asset. The 1990s was a prosperous decade for tea producers and traders, buoyed by sustained increase in domestic consumption and strong demand from the CIS. But the industry seems to have fallen into a deep pot since.

In the past three years, tea prices, after peaking at Rs 76.43 a kg in 1998 and ruling at a healthy Rs 72.80 in 1999, dropped sharply at all the auction centres in the country.

In 2002, the average price was a disappointing Rs 55.95 and, in the South, it was only Rs 41.63, pushing 90 per cent of the tea producers into the red.

Particularly alarming is that the difference in the average price of tea between the North-East and the South, which was Rs 11.43 in 1998 (in favour of the former), has now widened to Rs 21.03.

Tea experts will tell you that in times of plenty (when supply exceeds demand), the price concertina widens with the prices of plainer teas dropping by a bigger margin than quality teas. That is the main reason for South Indian teas losing ground.

In the 1970s, the 1980s and the early 1990s, tea production rose steadily and though exports had stabilised around 200 million kg a year, the growing internal demand ensured an upward trend in prices.

But towards the end of the 20th century, domestic consumption began to plateau, leading to a marked fall in prices, down to uneconomic levels.

Unlike other industries or agricultural enterprises, tea plantations have a resident labour force and the fixed costs account for around 70 per cent of the production cost which, at present, is Rs 55-60 a kg of made tea, depending on the productivity per hectare, crop distribution, weather conditions, and so on.

In Darjeeling, the production costs, because of the low yields, is as high as Rs 150 a kg. And despite the high price realisation, most estates have been sustaining losses for many years.

Of late, the volume of tea offered at Indian auction centres has been rising only marginally; in Sri Lanka and Kenya, the increase has been phenomenal.

In 1998, all the auction centres of the world saw record tea prices; in 1999 there was a decline.

In 2000, however, there was a marked fall mainly in Indian tea prices — Bangladesh witnessed a slight drop, while Kenya surpassed the record of 1998.

In 2002, while Sri Lankan and Kenyan tea averaged almost 150 cents a kg, India's was only around 115 cents, this despite an overall improvement in quality.

Obviously, there is a switch away from India, as far as sourcing tea by the major importing countries is concerned.

Admittedly, production in Kenya, Sri Lanka, China and Vietnam moved to a higher plane from the mid-1990s, prompting these countries to step up their export promotion substantially. As regards Indian tea exports, the industry seemed to be lulled into complacency, created by the steady surge in domestic demand (which, unfortunately, started sagging from around 1997). The country has to maintain its tea exports to the CIS at 90-100 million kg a year and make a strong bid for a bigger share of the West Asian market.

Also, efforts must be made to get back the lost markets of the US, Egypt, Sudan and the UK, which had been buying huge quantities until 1980, and now appear to have switched more and more to Africa.

Before attempting to work out a strategy for reviving the industry, a look at the consumption pattern of the various States would be useful. The all-India per capita consumption of tea is only 640 gm a year, whereas it is 820 gm in Pakistan, 1.28 kg in Sri Lanka and 2.33 kg in the UK (Source: International Tea Committee, 2000).

The consumption in Maharashtra, Gujarat, Punjab, Rajasthan and Kerala is well above the national average, and there is scope for increasing the intake in other parts of the country as well.

Although it will be too simplistic to surmise that the reasons for the recession in the tea industry are surplus production (especially of common teas) the world over, the levelling off of domestic consumption and comparatively higher production costs, a multi-pronged approach on the following lines is urgently required.

Producers: Quality upgradation will have to be an ongoing process, both on the field and in the factory.

In the North-East, plucking should be stopped in the first week of December to eliminate end-season poor teas.

In the South, pruning cycles should be shortened to three years in mid-elevation estates and four years in high-elevation ones to ensure harvest of softer flush. It would also be advisable to complete the pruning work early in the season to keep May-June production under control, when comparatively plainer teas are produced.

In the small-grower sector, plucking standards will have to improve drastically. Shear plucking may be the answer, as practised in most of the progressive company estates in the South, because judicious shearing during the cropping months will ensure a more acceptable standard of leaf than the longer plucking rounds, currently necessitated by the shortage of labour.

Auctions: Standardisation of grades is sine qua non for achieving quality norms and the six tea trade associations in the country can together lay down the specifications and the auctioneers can guide the producers in this respect. Auctioning companies should focus totally on servicing their clients instead of being competitor-oriented and step up their dialogue with planters on market requirements.

Exporters: The more responsible and well-established merchant exporters have played a significant role in servicing the buyers in various parts of the world and they should seek active support from the Government for export promotion to select destinations such as the CIS, West Asia, the UK, Germany, Japan, and so on.

They should also exercise special care to ensure quality and delivery schedules and not under-quote fellow exporters.

Government and the Tea Board: In the short term, aggressive generic promotion for tea in the domestic market is the only answer, and the money spent by the Government can be recovered from the industry once it bounces back. A slight change in the promotion theme, from health to fitness (for example, `drink tea and be fit'; `anytime is tea time'; and so on), will appeal more to the younger generation.

As there is a limit to pushing up tea exports, if domestic per capita consumption can be increased to, say, 800-1000 gm, plantation employees will be smiling again. Uttar Pradesh, Madhya Pradesh, Bihar, Jharkahand and Andhra Pradesh, where per capita tea consumption is very low, could be targeted first.

In sum, as India's tea production costs are higher than in most other tea-producing countries, because of the comparatively higher labour wages, the emphasis should shift to quality.

While the more exquisite Darjeelings, Assams and Nilgiri Orthodox should be promoted in the overseas markets, the need of the hour is to promote the fitness theme aggressively.

(The author, a tea consultant based in Coonoor, has been a tea planter, taster and auctioneer for 37 years.)

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