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Tea industry grapples with over supply and sluggish growth of demand: TAI

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Guwahati, Jan 10:  The president of the Tea Association of India (TAI) Ajay Jallan today called for urgent steps to create proportionate demands for the rising production of tea in the country to pull the industry out of the prolonged lean phase.

Addressing the 49th Biennial General Meeting of Tea Association of India (TAI), a leading tea planters’ association in the country, the president said, “Tea prices remained stagnant over the years except in 2020 when buoyancy in prices was noted arising out of pandemic.”

The conference held at the Tollygunge Club, Kolkata, was attended as the Chief guest by B Kalyan Chakraborty, IAS, Principal Secretary labour, Govt of Assam and the Guest of Honour by Ms. Smaraki Mahapatra, IAS, from Land and Land Reforms and Refugee Relief and Rehabilitation Department  Govt of Bengal.

The TAI president further said, “The primary challenge we face is that tea prices have not kept pace with increasing  costs. This cliché has led many to question its validity, not realizing that many  estates have shut down, changed hands, or survive only through subsidies from  their group companies with other business interests. The situation is so dire that  we fear a lack of future interest in the industry.”

According to the TAI, the main reasons for this decline are:

Demand-Supply Gap:  The tea industry faces a critical challenge where increased tea  production is not met with proportional demand growth, leading to a significant imbalance between supply and demand.

Market Dynamics: The tea market is characterized by a concentration of market power among a few key players. This dynamic can often lead to situations where  the interests and well-being of producers facing financial constraints and the  broader industry are overshadowed. Addressing this imbalance is vital for the  health and sustainability of the entire tea ecosystem.

Positioning of Tea and Quality Concerns: In India, tea is perceived as the  common man’s drink, where lower price is key to gaining market share. This race  to the bottom, for cheaper and more affordable teas to gain higher market share,  has led to a decline in the quality of teas, as quality comes at a cost. The demand  for poor quality teas has changed the entire dynamics of production and  consumption, seriously impacting the sustainability of the Tea Industry.

“It’s  imperative that we reposition tea to enhance its perception and consumption  patterns. The oversupply’s impact is deeply felt with suppressed prices, struggling to meet  production costs, hitting our large organized growers particularly hard. This  challenge extends beyond economics; it directly affects the livelihoods of millions connected to our industry.

“To establish demand-supply equilibrium, we advocate for restricting supply in the  short term and creating demand for teas in the medium and long term.

“We proposed the Tea Board for early closure of  production by or before November 30th in North India ( that includes Assam, NE, North Brengal, Darjeeling etc).

“Tea Board should regulate on selling Tea waste in the  domestic market to prevent the production of low-quality teas, potentially reducing  supply by another 15-20 million kgs.

“About 30 million kgs of poor-quality teas are imported annually. Restricting these imports by imposing minimum import prices  is crucial,” the TAI chief said.

He said as the industry grapples with these pressing demand and supply issues, it is imperative that it also address various other challenges confronting the tea industry, ensuring its complete viability.

These challenges encompass:

Rising costs: Tea prices not keeping pace with rising input costs.

Rising wages: The workers’ wages have increased to 200% for the past decade, and  in contrast the prices of tea have only risen by 30%.

Productivity Matters: The declining performance of tea plantation workers is a significant challenge.

Climate change :The climate changes has led to increased incidences of  pests and diseases and has profound effects on both the quantity and quality of  tea.

 Emergence of Small Growers: This increase in production of Small Tea  Growers (STG) with different cost structure than Big Growers but competing in the  same market place creates a dichotomy in the tea industry.

Stagnant exports:  India’s export of tea has been stagnant over years  hovering around 200 million kgs.

The TAI president has opined that these challenges can be mitigated through technology intervention and policy reform

India’s Tea Production in last 15 years has increased by 39%, from 981 million kgs (mkgs) in  2008 to 1366 mkgs in 2022. In the current year, Production of Tea in India till November 2023 is 1290.18  mkgs.

It is projected that Tea Production in 2023 will be at around 1365 mkgs, almost  same as last year.

In the current year, India’s export till October 2023 is 182.mkgs which is 2% less compared to last year.

During the current year, India’s import till October 2023 is 18.69 mkgs which is  19% less than the previous year. India’s import from other countries in 2022 was 30  mkgs against 27 mkgs in 2021 and 24 mkgs in 2020.

 

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