India’s tea production in 2019 grew 3.8% from the previous year, and clocked a record 1390 million kilograms, with Assam producing 716 million of the total. The increase is attributed solely to the small tea growers (STG), whose contribution to total national production stands at 48% (growing from 20% in 2010).
Record production brings multiple concerns to the fore.
India is the world’s second-largest tea grower, producing both orthodox and CTC (cut, tear, curl) teas, with well-established export and domestic markets for both. While the local market mainly consumes CTC, these teas are also exported to Egypt, Pakistan, and the UK. Export markets for orthodox tea span Iran, Iraq, and Russia. There was some respite as bilateral relations between India and Iran sustained tea trade. Despite U.S. restrictions against Iran, the latter outranked Russia as the highest importer of Indian tea in 2019. Russian imports dropped by 3% to 46 million kilograms while Iran’s imports rose by 74% to 53.5 million kilograms last year, selling for about $4 per kilogram. But exports overall plateaued at 228 million kilograms for the period January to November 2019. Domestic consumption also remains flat, at 1,090 million kilograms in the year, a problem that the Tea Board of India is grappling to resolve.
The news of production and prices are occasionally punctuated with accounts of a specialty tea selling at never-seen-before prices. Last year, a spring white from Badamtam in Darjeeling sold for $2,500 per kilogram, and a summer black tea from Dikom in Assam sold for nearly $1,000 per kilogram. But these are seen as anomalies that distract from the crisis on the ground level. Specialty tea is a segment with volumes too small to see a cascading effect of higher prices. Tea Board of India chairman and planter Prabhat Kamal Bezbaruah said in an interview last year, “One can’t make a business model out of making these kinds of teas. The demand is artificially created for a few kilos. The INRs50,000 and INRs75,000 prices fetched for a few kilos are definitely trivializing the tea industry crisis.”
Vivek Goenka, chairman of the Indian Tea Association, explained the most pressing problems lay with the production of bulk tea, which has suffered from high production costs and low prices for the last four years.
Both the Regulated Tea Gardens (RTG) and Small Tea Growers (STG) are facing the impact of low prices. For the RTGs, the cost of production necessitates a higher sale price. According to a report, the average auction price for black tea was INRs110 ($ 1.54) at the turn of the decade. By the end of 2019, it stood at INRs148 ($2). With the cost of labor going up, along with production costs for fuel, fertilizer, and power to operate factories, the largest gardens are unable to see a way out. Registered gardens must also pay for housing and dry rations, firewood, medical care, and the educational needs of minors. For the STGs, the cost of production may be lower, but the average STG produces only 1,100 kilograms of green leaf on one hectare of cultivated land. Small growers in Assam that rely on family labor yet still incur production costs averaging INRs15 per hectare. Prices minimums are enforced in each region, but STGs earn only INRs15 ($0.20) per kilogram. At these rates, the business is not viable, yet with no alternative livelihoods, small growers are left with no choice.
And, as India’s gardens ready for the first flush next month, there is the matter of 50 million kilograms of surplus tea that needs to find a market, either domestic or export, or both.