A tea estate at Dooars in Jalpaiguri district was abandoned by the management last month, leaving 1,200 workers jobless. The workers woke up in the morning to find that all the managerial staff had fled the estate. The garden was in poor condition for a few years and the management could not even give salaries to its workers for the past three fortnights. The managers too were working without salaries for the past four months. In January, Tripura’s largest tea garden, the Murticherra tea estate, was shut down for an indefinite period after alleged attacks on the estate’s managers over non-payment of wages to workers following insolvency.
Industry of tea, an iconic product of India which is its largest producer after China, is under pressures in the West Bengal and the Northeast region which produce 80% of India’s tea. If strong measures are not taken, the industry could be struggling for survival. It is beset by problems on several fronts: Price, demand, production and labour. If global demand going tepid wasn’t enough, it now faces challenges from climate change,
The Tea Association of India, representing tea producers in Assam and West Bengal, has made a distress call a few days ago. It wants all stakeholders, including tea producers, industry leaders, retailers, government bodies, and experts, to come together and collaborate on finding innovative solutions to make tea a piping-hot product.
Climate change
The tea industry in Assam and North Bengal is grappling with the detrimental effects of climate change. Erratic weather patterns, extreme temperatures and insufficient rainfall have severely affected both the quantity and quality of tea production. Tea planters in Tripura have witnessed shortage in production due to a prolonged dry spell. “Our production has been hit due to drought-like conditions. There is a shortage of leaves, and the volume in the auction market has also come down. It is a difficult situation for us to get profit,” Tripura Tea Development Corporation chairman Santosh Saha told PTI two months ago.
Tea plantations are highly climate dependent. Climate change and global warming have adversely affected tea plantations in Assam for the last few years. It has reached to such a level that without irrigation, tea plantations are finding it difficult to survive. North Eastern Tea Association has organised workshops on technology-driven irrigation and fertigation.
First flush production in north West Bengal has been hit this year and can fall by 8-10%, Tea Association of India secretary general Prabir Bhattacharya told TOI last month. “Even though it rained at the beginning of the second flush season, the difference between day and night temperatures has led to an attack of insects that has affected the gardens. The shortfall in production is the highest in recent years,” he said.
The changing climate poses significant challenges to the sustainability and productivity of tea gardens, necessitating immediate measures to adapt and mitigate its impact. Developing tea varieties that can withstand higher temperatures is a solution that must be found.
Dipping demand
The industry is facing subdued demand in both international and domestic markets. Factors such as the oversupply of tea in the global market and shifting consumer preferences have contributed to the weakened demand for tea. The industry needs to create new markets around the world. For that, it also needs the right branding and marketing. Coffee has become the global drink of choice while preference for tea is going down. Innovative campaigns that promote unique teas and investing in tea lounges and boutiques that popularise tea consumption are required.
India annually produces nearly 1,400 million kg of tea, less than 20% of which is exported. Exports attained a positive growth of 15 per cent in volume of around 220 million kg in 2022, according to the Tea Board, but they have stagnated for the past several years. 2022 exports are the same as in 2016 and well below where they were in the next three years. India is the fourth largest exporter of tea after China, Kenya and Sri Lanka.
The CIS countries, including Russia, Ukraine and Kazakhstan, are the largest importer of Indian tea. The UAE is the second largest importer. Owing to economic sanctions imposed by the US on Iran, another significant importer of Indian tea, shipments to the west Asian country have failed to increase.
Rising production costs
The cost to the company (composite value of wage and social responsibility) of a man-day beyond a certain point is an economic impossibility for the industry, according to Nalin Khemani, the chairman of Bharatiya Cha Parishad (BCP), an association of tea planters and factory-owners.
“Over 60 per cent of the total budget of a tea company is allocated to wages. This should be a primary concern of the industry. But we also need to equip our workforce with the correct processes, training, technology and tools for the output to rise,” Khemani said at the Annual General Meeting of the BCP last year. The cost of labour per hectare in running a tea garden in Assam is Rs 787.5 as against Rs 341.8 in the southern state, according to Khemani.
Tea industry in India employs more than a million workers who are allowed to form unions and get minimum wages as well as other benefits. High cost of wages and benefits weighs on producers when demand as well as prices are low and weather and pests affect production. Inability to bear the cost of wages causes many tea estates to go insolvent.
Assam last year raised daily wages for tea garden workers by Rs 27, over and above other benefits to which they are entitled. Post the revision, tea workers in Assam’s Barak valley get Rs 210 per day and for that of Brahmaputra valley Rs 232. Wage rates in Assam and West Bengal have historically moved in tandem.
“In 2013, the cash component of a labourer’s wage was Rs 58 per day besides free rations and shelter. A worker’s wage has been increased to Rs 176 per day in addition to other incentives. The price of coal rose to Rs 20 per kg as compared to Rs 13 per kg three years ago. But the selling price of tea is not increasing,” Sumedha Das, owner of Shova tea estate in Tripura, told PTI recently. She pointed out that the government in neighbouring Assam disbursed Rs 63.05 crore as a financial incentive to 370 tea gardens to help them mitigate the adverse impact of the COVID-19 pandemic, but so far no incentive was given to tea planters in Tripura.
A draft tea policy in Assam, which is celebrating 200 years of tea in the state this year, proposes several kinds of financial support to the sector for cutting production costs and incentivizing direct exports. The government also plans to send a large amount of money on promotion of Assam tea. Other states must follow suit. Last year, the Tea Board had sought an assistance of Rs 1,000 crore from the Centre for the next five years.
The industry has also asked for a floor price as production costs rise and the price gets unremunerative. The industry has been caught in a low-price cycle for several years. According to the Indian Tea Association, West Bengal tea prices since 2014 have grown at a compound annual growth rate (CAGR) of around 4% only, while costs of vital inputs like coal, gas, and sulphur have grown at a CAGR of 9% to 12%.
As production costs mount up, demand dips and prices do not rise sufficiently, the tea industry needs to find innovative solutions. It must invest in branding of India’s unique teas and their popularisation both within and outside India. Saturation in traditional markets requires creating new markets.
(With inputs from TOI)