IN HOT TEA

INDIA'S TEA SECTOR FACES CHALLENGES FROM DECLINING PRICES, RISING LABOUR COSTS, LOWER EXPORTS, AND WEAK DOMESTIC DEMAND

Tea prices at various auction centres in the country have fallen in recent months. Prices are not keeping pace with the rising production costs in the sector. As a result, the industry is currently experiencing a crisis of sorts.

Average tea prices, which stood at 268 per kg in the July- September quarter of the last fiscal year, have fallen to 224 per kg in the same period of the ongoing fiscal year. Furthermore, the price trend remains unfavourable as of October. The gap between tea prices and the cost of production has been rising over the last few years. According to the trade body, the Indian Tea Association, tea prices in North India have grown at a compound annual growth rate (CAGR) of just 4% since 2014, while costs of vital inputs like coal, gas, and sulphur have grown at a CAGR of 9% to 12%.

To make matters worse, the demand scenario, both domestically and in exports, has been weak. Domestic demand accounts for approximately 80% of the sales volume in the sector, with the remaining 20% attributable to exports. Annual tea production in India totals around 135 crore kilograms. The Indian tea market in estimated to be worth 35,000 crore, with the branded business constituting more than 70% of the overall market.

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The main tea-growing regions are divided into North India (NI), primarily encompassing Assam and West Bengal, and South India (SI), which includes Kerala and Tamil Nadu. Approximately 80% of Indian tea is produced in North India.