The Indian tea industry has called for increase in productivity to keep the wages sustainable.

Wage hikes in West Bengal and Assam pose sustainability challenges in the sense that for 2 years in succession, the industry has had to absorb more than usual hikes.

"The productivity of workers has to increase to keep the wages sustainable and therefore it is necessary to address these issues jointly with the unions with active intervention of the State Govt" said chairperson of Indian Tea Association Nayantara Palchoudhuri at the 139th annual general meeting today in Calcutta.

She said it is necessary to address these issues jointly with the unions with active intervention of the State Govt.

Tea producers are under severe financial stress for the last few years with price realizations not keeping pace with rising cost of production putting their sustainability in question.

She called for inclusion of power and fuel, particularly Natural Gas under the purview of GST will help in reducing costs to a considerable extent as the industry would then derive input tax benefit, curtail costs and remain competitive. The price of Natural Gas having increased exorbitantly first from April, 2022 and then again from October, the production costs have sky rocketed and cost competitiveness thereby challenged.

"Additional working capital is a necessity in view of the prevailing cash crunch which can be addressed through enhancement of working capital limits of tea companies. In view of the stressed finances of the industry, interest subvention on working capital loan @ 3% to the tea plantation sector would help the industry and the tea sector may be included within the purview of benefits under the MSME schemes covering easier access to credit, lower interest rates etc.

At current production levels for the industry to be financially stable, the only way out is by increase in prices. The Association had placed before to the Union Commerce Ministry a proposal for minimum floor price which could be a way to fair price discovery. This has been work in progress for quite some time and I would thus urge the Tea Board and Ministry of Commerce to consider our pleas on this count.

She said for sustainability of the industry, we need a system that will enable the producer to pass on the perpetual increase in cost of production due to rising input and wage costs.

The Indian tea industry will have to set an export target of 350 Mkg in the next 3-4 years.

Exports are showing a higher trend this year by 12.6% during January to July. The increase in exports this year to Iran, Iraq and UAE and inroads into Turkey and Syria are good signs.

Export in 2022 is estimated to touch 230 kg which would be a remarkable increase from 196 mkg of 2021.

"We have to target a volume of 350 Mkg within the next 3-4 years. It is well known that our scope for higher export hinges on higher production of orthodox, in tune with its popularity and demand abroad. Orthodox production is gaining momentum and in this context I laud the recent decision of the Govt of Assam to enhance the Orthodox subsidy under Assam Tea Industries Special Incentive Scheme (ATISIS) from Rs 7 to Rs 10 per kg from April 2022. I would urge the Tea Board and Ministry of Commerce to restore the Orthodox incentive from the Central Govt so that Orthodox tea producers including Darjeeling are incentivised substantively at a higher rate" she said.

Production - Demand & Supply:

The decline in India’s production in 2020 and 2021 compared to 2019 by 10% and 4.5% respectively helped in correcting the demand supply mismatch. Globally however, the total output at 6455 mkg in 2021 which compared to the previous year was actually higher by 168 mkg with China and Sri lanka registering increased production.

In India while production is continuing to increase, the suspension in application of Sections 12 to 15 of the Tea Act which are related to the control over area of tea cultivation needs a review as without that the demand supply balance remains exposed to a serious threat.

"Unfettered addition of new areas into tea needs to be checked so that both big and small growers coexist amidst assured economic viability" she said.

On imports, she said Influx of average quality teas from some of the countries of late at cheap landed costs of US$1 to 1.2 is causing concern. This can compromise whatever correction of demand supply mismatch has been achieved by production curbs and lead to depression in prices.

" Import of teas which are not FSSAI compliant should not be allowed in order to ensure a level playing field for the producers. This needs to be addressed immediately and I would urge the Tea Board to take it up with the Ministry" she said.

On tea price and auction reforms, she said the Tea price trajectory of the last decade reflects a prolonged phase of stagnation in price growth which consequently has pushed a large segment of the Industry into crisis.

Coming to Auction reforms, she said while we do advocate that Tea Board with all stakeholders need to evolve a better understanding on how to strengthen the e-auction platform for an efficient system facilitating fair price discovery the Bharat Auction model which is under deliberations will need to address the concerns of the producers and our suggestions to Tea Board which in a broad sense are related to Base price, reserve price, timeless system with fixed number of lots per session instead of minute, offering of lots in sequential order etc.

She said in due course of time we should consider a system enabled with blockchain mechanism which would ensure traceability, better quality and higher exports amidst a stable price environment.

Consumption per capita in India despite the increase to the current level of 850 gm is less than our neighbouring countries. Globally the net retention of teas in producing countries for internal consumption has risen in the last decade while at the same time, the concurrent drop in exported percentage of global crop indicate a surge in domestic consumption in the producing countries, mainly India and China.

She said the move by the state Govts of Assam and West Bengal to formulate their respective Tea Policies is laudable which envisages to continue sustainable growth of the tea industry by way of thrusts on incentivization, modernization, tourism thus facilitating upliftment of the stakeholders and rural economy of the two states while upholding the richness and uniqueness of our teas at the international level.

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