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Dark Phase of Tea Industry  |

Dark Phase of Tea Industry 

Context

∙ India’s tea industry is experiencing challenges reminiscent of the “dark phase” of 2002-07, calling for introspection and resilience.

Challenges faced by Indian Tea Industry

∙ Increased input cost: The tea prices increased at a compound annual growth rate (CAGR) of around 4% over the past decade, however the cost of inputs like gas and coal grew at a CAGR of 9-15%.

∙ Demand-supply gap: The rise in small tea growers and so on production, is not in proportion with the domestic consumption and exports, leading to surplus production.

∙ Weak exports: The Iran market constitutes nearly 20% of total tea exports from India and there is decline of exports to Iran due to the payment issues causing financial stress to the exporters

∙ A decline in overall export demand due to surplus in the global markets, led to an international price crash.

∙ Nepal’s gardens: Unhampered and easy influx of substandard tea from neighboring countries, especially Nepal” is jeopardizing the tea industry of India.

∙ Other factors: Stagnant prices, concentration of market power among a few key players, and a decline in the quality of teas to make the beverage more affordable etc. have been identified as major factors.

Steps taken by Indian Government

∙ The Tea Board of India had devised a scheme of “Assistance of education stipend to the wards of Small Tea Growers” to improve their livelihood and education needs.

∙ The Government of India through the Tea Board had helped in the formation of 352 Self Help Group (SHG), 440 Farmer Producer Organisation (FPO) and 17 Farmer Producer Companies (FPCs).

∙ A mobile app “Chai Sahyog”, is being developed to help Small Tea Growers in terms of better price realization and information.

Indian Tea Industry

∙ India is the 2nd largest tea producer and largest black tea producer.

∙ Indian teas are exported to various destinations like Iran, Iraq, Syria, Saudi Arabia, Russia etc. and is the 4th largest tea exporter in the World.

∙ The Indian tea Industry is employing 1.16 million workers directly and an equal number of people are associated with it indirectly.

∙ Assam grows about 55% of the teas produced in India. India’s tea production has increased by 39% in 2022 from 2008.

∙ Major tea producing states are Assam, hills of Darjeeling and Jalpaiguri districts in West Bengal, Tamil Nadu and Kerala. Apart from these, Himachal Pradesh, Uttarakhand, Meghalaya, Andhra Pradesh  and  Tripura  are  also tea-producing states in the country.

Way Ahead

∙ The Government needs to intervene by providing better export infrastructure, fully defraying State duties by increasing the RoDTEP (Remission of Duties or Taxes on Export Products) rate and reducing the interest rate on borrowings to make Indian tea producers/exporters more competitive in the international market.∙ Steps are needed to regulate tea waste sold in the domestic market at lower prices, restricting import of poor-quality teas, and promotion of tea emphasizing its health benefits.

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