Storm Brewing in the Indian Tea Industry: Overcoming the Challenges

Introduction: The Indian tea industry, once riding high on robust exports and improved prices in 2022, now faces a stormy period in 2023. A combination of factors, including a stalemate in Iran affecting exports and erratic weather conditions impacting production, has led to a decline in tea exports and a subsequent drop in prices. This blog will delve into the challenges faced by the Indian tea industry and discuss potential solutions to overcome them.

1. Decline in Exports: According to Tea Board data, outbound shipments of tea from India have decreased by 6 percent in the first three months of 2023 compared to the previous year. Iran, a significant market for Indian tea, has not signed any new import contracts this year, accounting for around 25 percent of total tea exports. Additionally, purchases by Ukraine have reduced due to ongoing conflicts, and Japan has bought less tea due to a weak yen. These factors contribute to the anticipation of lower shipments this year.

2. Price Volatility: The decline in exports has caused a decline in prices. The prices of Orthodox tea, which constitutes about 10 percent of India's total tea production and is primarily exported, have plummeted. Tea auction prices have dropped, with South Indian tea prices falling by an average of 12 percent from January to May, and North Indian tea prices dipping by 7 percent from April to May. This decline in prices has affected the revenue of tea producers and discouraged them from increasing production

   
   
   

3. Erratic Weather Conditions: Inclement weather, characterized by hot weather and scanty rains, has adversely affected tea production in certain regions. West Bengal has experienced a decrease in output due to weather conditions, which may impact the production of Darjeeling tea—a variety that fetches the highest prices from India. However, there is hope that a good monsoon during the main cropping season (July to October) in North India could offset the production shortfall and maintain overall production levels.
   

4. Rising Tea Imports: Tea imports to India increased by 12 percent in 2022, reaching 29.84 million kg. A significant portion of these imports came from Nepal, which enjoys duty-free access to the Indian market. The higher influx of tea imports poses a risk of depressing domestic prices, further adding to the challenges faced by the Indian tea industry.

5. Wage Hike and Labor Costs: Labor costs have risen in tea plantations, particularly in Kerala, where wages have been increased significantly. Workers in tea plantations now earn around Rs 470 per day, making it one of the highest wage rates in the world. However, the lack of a proportionate increase in revenue puts additional pressure on tea producers, affecting their profitability.

Conclusion: The Indian tea industry is currently grappling with multiple challenges, including declining exports, falling prices, erratic weather conditions, rising tea imports, and increased labor costs. However, despite these obstacles, there are opportunities for the industry to overcome them. Diversifying export markets, focusing on domestic consumption, investing in research and development for climate-resilient tea cultivation, and improving productivity through technological advancements are some potential strategies to mitigate the challenges and ensure the long-term sustainability of the Indian tea industry. By addressing these issues head-on, the industry can weather the storm and emerge stronger in the future.