Events & Issues

New Delhi, 20 May 2013

Tea Industry

NEW ORIENTATION CRUCIAL

By Dhurjati Mukherjee

The formation of the International Tea Producers’ Forum, essentially a tea cartel, by countries such as India, Sri Lanka, Indonesia, Rwanda, Malawi and Kenya recently, is, no doubt, news for the industry as it is expected to control prices and to some extent promote its interests. However, experts feel that tea being a perishable item and there being different varieties, such a cartel has slim chances of operating in a similar fashion as the major oil producing countries run OPEC. However the Forum is definitely expected to ensure that exporters receive their due price in the global market.

What is of crucial importance is the fact that prices of tea declined perceptibly during 1999 to 2006 as a result of which many gardens closed down. It was only since 2008 that prices have shown gradual improvement, but over the years the cost of production has gone up rapidly. This apart, labour cost too, has shown a perceptible increase to over Rs 300 a day, which has further offset hike in prices.

At the same time, the per capita consumption in the country has remained virtually stagnant to around 750 gms, which is much lower compared to the tea growing nations. The productivity has neither improved nor is the industry in a comfortable position today.

According to one estimate, the demand for tea during the 10-year period from 2001-2010 increased by an additional 170 million kg but the supply increased by only 150 million kg. The population growth alone is expected to create an additional demand of 20 million kg, assuming that the consumption growth remains unchanged at 3 per cent or so. By March 2017, which will be the terminal year of the 12^th Plan, domestic demand is projected to increase to 1,000 million kg, up from the current level of 800 million kg and exports to 250 million kg from the present 193 mkg in 2011.

Given the general agreement that land is a major constraint, experts believe that technological advancement and modernization are central for further programmed development of tea estates. Only the big tea companies which have surplus land available can hope to add to their capacity. While these companies would be encouraged to pursue capacity expansion vigorously, other measures need also to be taken.

The problem of ageing and senile bushes is a major challenge for the tea industry. It is estimated that around 21.2 million hectares constituting a major chunk of tea gardens are at the end of their economic life because of which the industry is running down gradually in vitality and productivity.

In Darjeeling, 75 per cent of tea bushes are between 50 and 100 years old while in South and North India 38 per cent of bushes are between 50 and 100 year of age and therefore yield levels are low compared to tea producing countries like Kenya and Sri Lanka.

A rough estimate by the Tea Board found that about 500 million kgs of tea could additionally be produced, if one were to bring the yield of each of the garden at par with the highest yield achieved in the respective district. But with ageing bushes this has not been possible. However, a section of experts are hopeful that even in this situation the potential could be tapped from the existing tea areas. It would be necessary for the managers of the low-yielding gardens to visualize their operational responsibilities in terms of the deficiencies such as land management, soil management, nutrition and water management.

The STPF, launched about six years ago to encourage re-plantation has not progressed as expected. Till March  last year, about 70,000 hectares was targeted to be covered under the scheme but reports indicate that only half the figure has been accomplished, presumably because the incentives were not attractive enough. Certain sections feel that the crop loss caused by uprooting has been a major stumbling block and current thinking is to provide cash compensation for the loss.

A significant development has been that the Tea Board has lined up Rs 1.5 billion $27.25 million) in funding research and development of which Rs 200 million would be spent on developing weather-resistant clones. Another Rs 3.5 billion has been earmarked for replanting ageing bushes that are affecting overall production of tea which has been stagnating at 980 million kgs for a couple of years.

Notably, over the past 10-15 years the emergence of the small sector had assumed the form of a socio-economic movement and served as a vehicle for social transformation in the north eastern region as also in north Bengal. In fact, 26 per cent of the country’s total tea production is now accounted for by this tiny sector. This sector has its strength in young and productive age of the plantations of the reasonably high clonal compositions, low cost of production and relatively young age of the entrepreneurs, who are receptive to improved agro techniques.

In both Kenya and Sri Lanka too, most of the success of the tea industry can be attributed to the growth of the small sector over the past two decades. The quantum of production from the small sector in these countries is interestingly at par with the volume of tea produced by small growers in India.

Despite being one of the largest producers of tea, the primary necessity for the industry at this juncture needs to gear up productivity through concerted R & D initiatives. A report a few years back had come out with certain suggestions, some of which were adopted by most gardens. However, other suggestions like replanting of bushes, tackling the behaviour of pests, use of energy-effective equipments in factories and evolving alternate method of withering that will take less space and time are expected to be considered by the gardens with the new financial package coming into place.

Simultaneously, the industry has to face market realities, redefine its business strategy and reposition its products to gain a competitive edge in the global market. The primary step is a complete restructuring of the tea industry, redefining the roles of various agencies such as the Tea Board and producers’ organizations and developing healthy partnership with labour.

There is also need to examine the decline of tea exports that has taken place over the years due to changing consumer tastes and preferences for which the main reason is the popularity of green as also orthodox tea. Accordingly production has to be geared towards manufacture of orthodox tea while, at the same time, suitable strategies have to be adopted for global market penetration.

Whether the new initiatives would help in increased production and that the Forum would help in increasing exports remains to be seen in the coming years. ---INFA   

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