The Production figure of North Indian Tea Industry reflect a precarious state of affairs of the industry, consequent to the constant onslaught of insufficient rainfall and excessive heat till May and excessive rainfall in June & July, hampering production of the crop to a greatextent during the current cropping season up to the month of July 2024, according to Sandeep Singhania, President Tea Association of India (TAI).
Current Status of Tea Industry
- Decline in Tea Production: Data released by the Tea Board of India shows that production has declined by about 11% in Assam and about 21% in West Bengal till July 2024 as compared to the same period last year, leading to a 13% increase in domestic prices.
- Loss of Premium Products: The lost crop primarily belongs to the first and second shower of monsoon, considered the best quality teas of the year, further affecting the industry’s profitability and cash flows.
- Export Market Decline: Export prices have fallen by 4% this year, which is a discouraging trend.
- Pending Subsidies from the Tea Board: The industry has been waiting for due subsidies from the Tea Board for developmental work carried out in recent years. The non-receipt of subsidies has added to the financial burden, especially during a year of reduced production.
Other Facts Related to Tea Industry
- Global Standing: India is the second-largest producer of tea globally after China. India ranks among the top 5 tea exporters globally, contributing approximately 10% of the total global tea exports.From April 2023-February 2024, the total value of tea exports from India stood at USD 752.85 million.
- Tea Consumption in India: India accounted for 19% of global tea consumption. India consumes approximately 81% of its total tea production domestically, in contrast to countries like Kenya and Sri Lanka which export the majority of their production.
- Producer States: Major tea growing states are Assam, West Bengal, Tamil Nadu, and Kerala that account for 97% of India’s total tea production.
- Major Export Types: Majority of the tea exported out of India is black tea which makes up about 96% of the total exports. Assam, Darjeeling, and Nilgiri tea are considered one of the finest in the world.
Key Challenges in the Tea Industry in India
- Weather-Driven Decline: India’s tea production has been significantly impacted by extreme weather events, particularly excessive heat in May 2024 followed by flooding in Assam.In May 2024, Indian tea production dropped to 90.92 million kgs from 130.56 million kgs in May 2023, marking the lowest May output in more than 10 years.
- Expected Rise in Tea Prices: The average price of tea is expected to rise by up to 20% as a result of production disruptions.In July 2024, the price of tea represented a 47% increase since the start of 2024.
- Ban on Pesticides: The Indian government banned 20 pesticides that have contributed to higher tea prices due to costly alternatives to pesticides. However, after the pesticide ban, demand for Indian tea has risen again, particularly among Russia, Ukraine, Belarus, Azerbaijan, and Kazakhstan, which are key buyers of Indian tea.Although the ban on pesticides has increased demand, it has also led to production challenges, as tea growers scramble to find alternative pest management solutions.
- Stagnant Internal Consumption: With internal consumption nearly stagnant and the exports scenario depressed, excess tea continues to flood the market, further straining price realisation.Impact on Small Tea Growers (STGs): STGs, which operate on holdings of less than one hectare, account for over 55% of India’s total tea production and 65% of West Bengal’s tea output.Loss of production and decline in export price disproportionately impact them.
- Negative Ripple Effect: It would have a negative impact on the bought leaf factories (BLFs), as STGs provide raw material for these factories.BLFs are tea factories that buy tea leaves from other growers and process them into finished tea.
- Garden Closures in North Bengal: Approximately 13 to 14 tea gardens in the Dooars, Terai, and Darjeeling regions have closed down, affecting more than 11,000 workers.North Bengal produces approximately 400 million kg of tea annually from around 300 gardens.
Global Tea Statistics
- Global Production and Consumption: In 2022, the total global tea production was 6,478 million kg, while global tea consumption amounted to 6,209 million kg.
- Exports: Total tea exports from producing countries in 2022 amounted to 1,831 million kg.
- Major Producers: China, India, Kenya, and Sri Lanka are the leading tea producers and exporters. These countries account for 82% of global tea production and 73% of global tea exports.
Tea Board of India
- Establishment: It was established in 1953 and is headquartered in Kolkata. It has 17 offices across India.
- Statutory Body: It was set up under section 4 of the Tea Act, 1953.
- Regulatory Authority: It regulates various entities including tea producers, manufacturers, exporters, tea brokers, auction organisers, and warehouse keepers.
- Functions: It conducts market surveys, analyses, identifies, tracks consumer behaviour, and provides relevant and accurate information to importers and exporters.