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As the Sri Lankan tea sector begins to feel the impact of the economic crisis coupled with a wrong policy push of going organic last year, a section of the Indian tea sector believes that it is the right time to regain its market share in Europe and West Asia for Orthodox teas from the island nation.
Sri Lanka, the No 1 producer of orthodox teas, dominates the world trade in the category and gained these markets from India in the mid-seventies and eighties after the Indian exporters began focussing on CTC teas to cater to the erstwhile Soviet Union for better realisations under the rupee-rouble trade.
Later, India lost its hold on the erstwhile Soviet Union after its disintegration in the 1990s with Lanka opting to buy arms from Russia against the sale of teas.
Other woes
Trade sources said Sri Lanka’s decision last year to go organic is seen affecting not only tea output but also the quality. The prevailing economic crisis has aggravated the situation in the plantation sector. Disruption in power supply and shortage of fuel coupled with lack of synthetic fertilisers have affected production, while a sharp decline in local currency and halt in shipments to Russia, its largest buyer, has put exporters in a fix.
Sri Lanka produces over 300 million kg (mkg) of tea. About 90-95 per cent of the production is exported. The output during February was down by 20 per cent at around 18 mkg compared with 22 mkg in the year-ago period, sources said.
Tracking developments in Sri Lanka, prices of Orthodox teas have firmed up at South Indian auctions in the recent weekly sales.
“This is the right time to make a penetration into the European, North American and South American markets,” said N Lakshmanan Chettiar, an orthodox tea producer in Nilgiris. South Indian tea producers, due to the similar topography that of Sri Lanka, are better placed to take advantage of the current situation as the high grown orthodox tea in the Nilgiris and other regions are similar to that produced in the neighbouring country. “If you are able to manufacture to the Sri Lankan standards, the vaccum can be filled,” he said.
Seeking govt support
Further, the government should support the Orthodox tea producers by ensuring that there are adequate and timely supplies of fertilisers such as urea and potash to boost the output and maintain quality, Lakshmanan said.
World’s Orthodox tea exports are in the range of 585-600 mkg. Sri Lanka caters to around 43-46 per cent of this volume. “If this crisis continues, there will be a space opening up as far as orthodox teas are concerned. There could be a renewed interest among the South Indian tea manufacturers to manufacture more orthodox teas considering the emerging developments,” a Nilgiris-based producer said. He estimates that Sri Lankan production could drop by 15-20 per cent.
Scared of losing their global market share, the Ceylon Tea Exporters Association has urged their authorities to take corrective action, according to reports.
Incentivising production
South Indian Orthodox tea production is about 45 mkg, out of the total Indian production of 114 mkg. Darjeeling and Upper Assam are the other regions where Orthodox teas are produced.
Apex trade body UPASI has recently taken up the issue with the Tea Board on incentivising the Orthodox tea production. “The Government should reintroduce the subsidy scheme for Orthodox tea producers,” said MP Cherian, President, UPASI.
The cost of production of orthodox teas is higher by ₹13-15 per kg. The Centre used to provide a subsidy of ₹3 per kg for Orthodox tea, but had discontinued it from December 2021.
Drop in quality
Dipak Shah, Chairman of South India Tea Exporters Association, said besides an anticipated lower production in Sri Lanka, there is a possibility of a severe drop in quality as manufacturers are not able to run their factories properly. Because of the current scenario, there could be a possibility of Indian Orthodox teas regaining markets in Europe and West Asia from Lanka, Shah said.
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