At a time when the Indian tea industry, particularly the small tea growers (STG), have been grappling with the issue of rising costs outstripping price realisations, the Tea Board of India has set up a committee to examine the reasons behind the deterioration in the quality of green tea leaves.
STG account for nearly 52 per cent of the country’s annual tea production which is estimated to be over 1,300 million kg (mkg).
The committee, which will comprise representatives from bought leaf factories, estate factories, and STGs, will examine the issues of all tea-growing regions in the country and “arrive at a just and equitable solution”, the Tea Board said in a circular recently.
“This has reference to the deliberation held in the 248th meeting of the Board regarding the constitution of a committee... for threadbare examination of the reasons behind the deteriorating quality of green tea leaves day by day and thereby suggest necessary measures to be taken to improve the quality of the green leaf,” the circular said.
The committee would be required to investigate the matter and submit its report incorporating observations and suggestions or recommendations to the Tea Board within three months.
STG have been selling the green tea leaves at prices lower than the cost of production making it unviable for them to sustain operations. Despite a drop in production, industry insiders are worried that prices could drop further if production picks up during the monsoon.
“STG are fetching an average price of around ₹14-18 a kg for tea leaves this year as against ₹33-35 a kg during a normal year. The average cost of production is close to ₹20 a kg. We are scared that if this is the situation in the second-flush crops, then what will happen in rain flush when production increases,” Bijoygopal Chakraborty, President of Confederation of Indian Small Tea Growers’ Association, told businessline.
Unfavourable weather conditions in several tea-growing pockets in Dooars and Darjeeling have adversely affected the new tea season 2023 in West Bengal.
The region is going through a period of acute financial crisis over the last few years with tea prices not being able to keep pace with the rising production cost.
Although the official Tea Board data is awaited for March, as per available ITA membership crop data, the Darjeeling crop is estimated to be down by 39 per cent in March. Crop decline has also been reported in several pockets in the Dooars region.
Reports of widespread hail damage to second-flush crops have been received across many gardens in North Bengal. The second-flush crop is estimated to be 30-35 per cent lower in West Bengal this year. The poor weather conditions have also made the plantations more prone to pest attacks leading to a further increase in cultivation costs.
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West Bengal tea prices since 2014 have grown at a CAGR of around four per cent only while costs of vital inputs like coal, gas, MOP, sulphur, etc have grown at a CAGR of 9-12 per cent during the same period, a recent report by Indian Tea Association said.
A senior industry official said that the tea industry is also largely controlled by two large buyers and their aggressive marketing and pricing strategy is impacting sentiments and prices.
Therefore, there is an urgent need for the introduction of a floor price for green leaf (payable to STG) and made tea (payable to tea producers) indexed to the cost of production to overcome the crisis, Chakraborty said.
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