The tea industry, which has been facing the pressure of rising costs outstripping price realisations over the past few years, is expecting to get some relief in the new agriculture export policy.

While the country’s tea production has been growing steadily, consumption has not kept pace. This has had a dampening effect on prices. Fixed costs of tea plantation sector have increased by around 45 per cent (largely on account of rising wages), while price realisation has increased only by about 17 per cent in the past three years.

Exports have also remained stagnant the last few years. India exported close to 240 million kg (mkg) of tea in 2017.

To promote exports, the Indian Tea Association (ITA) has been asking for a higher MEIS (Merchandise Exports from India Scheme) rate of around 10 per cent from the current 5 per cent. It has also been urging the Centre to provide incremental incentives to planters to move from CTC to orthodox to cater to the export markets.

The Union Cabinet last Thursday cleared a new agriculture export policy, which aims to double agri-exports by 2022 by boosting infrastructure and removing export restrictions on a variety of commodities. The policy seeks to diversify the country’s export basket and destinations, by boosting high value and value-added agricultural exports.

“I am yet to go through the policy document. But we had asked for the MEIS scheme to be enhanced to 10 per cent so as to allow us to explore markets such as China, the US, Iran and Iraq,” Sujit Patra, ITA Secretary, told BusinessLine .

According to Azam Monem, former ITA chairman, organic tea, green tea and orthodox tea should typically qualify to be considered as ‘value addition’. The cost of production of orthodox tea is higher by nearly ₹20 a kg compared to the CTC. According to industry insiders, producers are unwilling to convert from CTC to orthodox owing to large capital outlay, anticipated loss of revenue and uncertainty in price realisation.

For the industry to compete and produce more orthodox grade, the incentive has to increase from the present level of ₹3 a kg to ₹20. India currently produces close to 120 million kilograms (mkg) of orthodox tea, accounting for around 10 per cent of the total tea production, which stood at 1278.83 mkg in 2017.

Orthodox and green tea comprise over 50 per cent of the global export demand, so augmenting orthodox production will be essential for boosting exports, Monem said.

Higher exports of around 270-275 mkg will be able to offset higher production and lower consumption growth, he said.

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