The overseas market for India tea is changing due to demand from the U.S. and Europe for loose-leaf and fine-grade orthodox teas.
These teas bring a higher price, especially when certified organic, biodynamic, and fair trade, but yields are lower and the tea can be more difficult to process. India currently produces 80 million kilos of orthodox tea of which 95% is exported.
Subsidies help Indian tea growers meet U.S. and European demand for labor-intensive orthodox tea.
The cost of production is 13% higher than the cost of producing cut-tear-curl tea, according to the India Tea Association in a report in Business Standard.
“Orthodox tea is labor-intensive as it involves selective plucking of the leaves. Labor costs, which comprise 60% of the total costs, have gone up significantly over the past 10 years while the total cost has escalated by 10% per annum,” according to ITA.
“Increasing the subsidy would not only help the planters mitigate the rising costs but it will also boost CTC players to switch over to orthodox tea,” ITA’s chairman Azam Monem told Business Standard. Five years ago, while the conversion rate accrued by the producers to switch over from CTC production to orthodox production stood at Rs 14–15 a kg, the same rate has gone up between Rs 20 and Rs 30 per kilo.
Monem predicted if the India Tea Board, which operates under the aegis of the Union commerce ministry, increased the subsidy, the annual domestic production of orthodox teas will top 100 million kg, up from the existing 85 million kg.
Monem did not specify how much the standard 30% subsidy should increase; the rate varies by region and tea grown. In 2015, the Tea Board agreed to increase its subsidy by 25% for orthodox gardens producing organic tea and agreed to pay 50% of the cost of certifying these gardens.
Source: Business Standard, Tea Board of India