Agri Business

Darjeeling tea sector woos the dragon

Shobha Roy Kolkata | Updated on October 06, 2021

Industry looks to enter US and China markets while boosting sales in traditional outlets

The Darjeeling tea industry, which has been reeling under rising cost and decline in production, is exploring the possibility of entering new markets such as China and the US, apart from strengthening sales in traditional markets including Germany and Japan to boost exports and improve realisation.

The industry is also looking for support from government by way of generic promotion to boost domestic consumption.

According to Anshuman Kanoria, Chairman, Indian Tea Exporters’ Association (ITEA), if Darjeeling tea can be popularised in new markets, including China and US, then it would lead to an incremental demand and help boost prices.

He, however, said that the industry has been trying to make inroads into China for the past several years, but has not had much success. The Covid-induced lockdown and travel restrictions and the inability to take part in trade shows in some of these countries has only slowed down the efforts further.

The industry, which produces close to 7.5 million kg (mkg) of tea, currently exports 3-3.5 mkg.

“China has a love for tea. If we can popularise Darjeeling in China then given the small quantity that the industry produces we can easily create substantial enough incremental demand, which might lead to an increase in prices to match the cost of production. We have been talking to them for last 10 years but very insignificant quantity has been going. Even if we make an effort promotion it is a very expensive affair and we are looking for government support,” Kanoria told BusinessLine.

Declining output, increasing cost

Production of Darjeeling tea in India has been declining gradually from 8-8.5 mkg in 2017 to 7-7.5 mkg at present.

In 2017, the Gorkhaland agitation brought the industry to a standstill for nearly three months during the peak season, impacting production. The industry was just about recovering when the Covid pandemic shutdown last year pulled down production. This year, unfavourable climatic conditions have affected the prized first flush crop.

On one hand, while production has been declining, the cost of production has been increasing due to rise in fixed costs, mainly labour. Prices at the bottom end of market are firm compared to last year (when prices had witnessed a slump). However, overall, they have not been “economically sustainable”, sources said.

The average cost of production in Darjeeling ranges from ₹550 a kg (for high yielding marginally low quality estates) to ₹1,000 a kg (for high quality low yielding estates). While the ones at the bottom end of the market have somehow been managing due to higher yield, the ones at the higher end have been finding it difficult.

“We need to be able to find a way to control cost possibly by downsizing staff and sub-staff. We need to work on improving productivity and the government has to step in and support the industry by doing generic promotion of tea to improve domestic consumption,” Kanoria said.

Quality remains a concern

According to Binod Mohan, past chairman of Darjeeling Tea Association and owner of organic tea estates in the region, the availability of labour has been an issue and this is impacting quality of production. The lack of adequate research on improving yield of organic variety has also been a hindrance to the development of the industry.

“There is shortage of labour and we are struggling to get harvesting done on time. This is affecting quality. We also need support from government for undertaking research. Also, a good quantity of Nepal tea is coming into the country and being sold as Darjeeling. We need government intervention on this,” he said.

On one hand there is a need to upgrade plantations by uprooting bushes and planting new ones. However, majority of the players are struggling for survival and hence are not too keen on undertaking the exercise.

This is likely to further impact the quality of production and thereby prices, he added.

Published on October 06, 2021

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