The decline in demand from European markets in the wake of Russia-Ukraine war, sharp decline in domestic buying, particularly from one of the largest buyers – Tata Consumer Products Ltd (TCPL), and cheaper imports from Nepal is costing the Darjeeling tea industry dearly as the average auction prices has dropped to ₹310-330 a kg, much below the cost of production which hovers around ₹800-850 a kg.
Industry insiders fear that if steps are not taken to address the issue on an urgent basis, then Darjeeling tea, which is among the first to get the GI tag in the country, could relinquish into history.
India produces close to 7 million kg (mkg) of Darjeeling tea every year, which accounts for 0.5 per cent of the country’s overall production of 1,300 mkg. A major share of the tea produced is exported to countries like Europe and Japan. Big packeteers like TCPL also buy the prized Darjeeling tea for blending.
According to industry insiders, while exports have been hit due to recessionary trends particularly in the European markets, the lack of buying by some of the big packeteers following a Tea Board directive last year has further exacerbated the financial condition of the garden owners who were reeling under the pressure of higher cost of production outstripping the average realization.
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The Tea Board of India, in November 2021, came out with a notification to restrict the distribution of inferior and cheap quality imports into the country. It accordingly directed packeteers to clearly indicate on the packaging that the contents of the blended tea are imported, giving the source of origin of the imported tea, irrespective of whether the imported tea has been bought directly by the seller or through an intermediary.
According to Anshuman Kanoria, Chairman, Indian Tea Exporters Association (ITEA), TCPL is one of the largest buyers of Darjeeling tea in the domestic market accounting for nearly 20 per cent of the total whole leaf produced. .
“The Tea Board notification was primarily to curb imports of cheap quality teas, however, imports have not come down drastically. But TCPL, which was buying close to 20 per cent of Darjeeling leaf produced for blending in Tata Tea Gold, has cut back buying by approximately 75 per cent. The average auction prices have declined to close to ₹310 a kg. All the associations have written to the Commerce Ministry and also to the Tea Board to highlight the issue but nothing has happened so far,” Kanoria told BusinessLine.
Cheap imports hurting prices
Tea import into India was up by around two per cent at 6.46 mkg during April-June 2022-23, as against 6.33 mkg same period last year, Tea Board data said. The country’s total imports during calendar year 2021 stood at 26.51 mkg, up by nearly 11 per cent over 23.79 mkg in 2020. During January-June 2022, imports are close to 12.36 mkg.
The average price of the imported tea is ₹167.15 a kg, lower than the average cost of production of Indian teas, which is around ₹180-230 a kg.
“Nepal tea is very akin to Darjeeling tea but minus all the qualities. It is inorganic and contains high pesticide residue and their cost of production is very low as they are not organized and do not have to incur expenses for providing social benefits to workers. Naturally, traders prefer buying such teas and blending it to lower cost,” said an industry official on conditions of anonymity.
Close to 4 mkg of Nepal tea is being imported into the country and this is adversely affecting the Darjeeling tea prices, the official said. There are 87 gardens in Darjeeling employing close to 55,000 workers. The rising cost and lower realization is making it difficult for the owners to remain afloat, he said.