Tea industry needs a two-pronged approach, says Indian Tea Association

Guwahati: The tea industry needs to adopt a two-pronged approach to not only regain lost markets but also gain a foothold in new markets, said the president of the Indian Tea Association.

Speaking on the drop in tea exports, Nayantara Palchoudhuri said a two-pronged approach was needed. Traditional markets should be protected by periodic delegations, interaction with trade bodies and growing markets should be exploited through sustained promotional campaigns and by activating interaction with trade bodies and government agencies in these countries.

She said this recently at the 131st Annual General Meeting of the Assam branch, Indian Tea Association, held in Jorhat.

“The pandemic and unresolved payment issues regarding Iran, which is our largest Orthodox market, have significantly reduced exports over the past two years. India’s exports in 2021 are 196 mkg,” she said.

“The conflict in Eastern Europe between Russia and Ukraine forces the industry to cross its fingers since more than 45 mkg are exported to CIS countries. Russia is a traditional and largest Indian tea market for Orthodox and CTC teas. However, this is generally a lean period for exports to Russia, and it usually picks up from August/September. The Association, in a recent meeting with the Union Department of Commerce and DGFT, requested financial assistance arrangements for exporters to cover the additional costs,” she said.

“Forty percent of the global export market distribution is skewed toward Orthodoxy. So, in a scenario where the possibility of boosting CTC exports is low, India needs to produce more Orthodox to increase exports and ensure domestic market stability through product mix correction,” a- she added.

To encourage orthodox production, the orthodox incentive must not only be restored but also revised upwards from Rs 3 to at least Rs 20 per kg and our appeals to the Union Trade Ministry remain. The Association recently presented its observations to the Parliamentary Standing Committee on Commerce in Kolkata and Delhi.

The decline in Indian production for two consecutive years – 2020 and 2021 has helped to correct the mismatch between supply and demand with the elimination of the huge excess stock. In 2021, Assam experienced a decline of 8%, or almost 54 mkg, compared to 2019. In the global context, the total world production estimated at around 6470 mkg in 2021 is 3% and 5% higher than compared to 2020 and 2019 respectively.

“As production increases, prices are affected as predicted by the UN Food and Agriculture Organization some time ago,” she said.

In India, while on the one hand, the production of the organized sector shows a downward trend -(-0.7%), the production of the small tea sector has increased by nearly 200% since 2005, and exceeds 50% of global production. “The unhindered addition of new areas in tea should not be allowed so that the organized sector and the STG sectors coexist in a context of economic viability,” she said.

On the price front, she said the trajectory of tea prices over the past decade reflects a prolonged phase of stagnation and is pushing a large segment of producers into crisis.

“In the current financial year, over 50% of CTC and dust from North India sold below Rs 175 per kg at auction. In 2021, prices have fallen to 2019 levels. At current price levels, the industry cannot be sustainable. Major buyers need to lead the way in sustainable sourcing so teas are sold above the cost of production,” she said.

“The surge in imports of 48% in 2020 and 11% in 2021 worries us. The influx of mid-quality teas at cheaper prices from countries with lower production costs upsets the supply-demand balance and causes price depression. Supervision needs to be stepped up and non-FSSAI compliant teas from overseas should not be allowed at all, something we have repeatedly said,” she said.

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Andrew B. Reiter