The Indian tea industry is growing as its production level is rising. In spite of that, the industry is passing through a crisis.
Arun Kumar Ray, IPS, Deputy Chairman, Tea Board of India, told BE that the main problem is the demand for tea not growing commensurately with the level of production. Therefore, prices of tea had been more or less flat for some years. Actually, this is the prime problem of the tea industry in India.
Growth of production is coming, mainly, from West Bengal and Assam. This is due to the growth of small tea growers in these regions. Within two decades or more, the contribution of small tea producers has been close to 60% in West Bengal. India’s tea production grew by 6% in 201718 over the previous year and the total production reached 1,325 million kg. The Tea Board of India sources said that the annual production of tea in 2018-19 is expected to be around 1,334 million kg.
Specific problems
The tea owners’ bodies have been vocal about the ongoing stress. PK Bhattacharjee, Secretary General, Tea Association of India, said that the crisis of the tea industry would continue for some time. He pointed out that emergence of unorganised small tea growers and loss of traditional markets like the erstwhile Soviet Union is some of the prominent reasons behind this stress. Indian tea had a near monopoly over the former USSR market.
Another problem is inadequate price discovery and the problem is particularly acute for the organised tea sector. Therefore, even premium qualities of tea cannot fetch good returns. It is said that some of the big tea purchasers, in many cases, distort the tea market price. This is because they enjoy near monopoly in the market. Therefore even in auction selling, pricing is actually controlled by some of the very big tea traders of India. So proper price discovery has been a problem in the country. Actually, the prices are more or less static but cost of tea production is escalating.
Problems in exports
This story is from the April 16-30, 2019 edition of BUSINESS ECONOMICS.
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This story is from the April 16-30, 2019 edition of BUSINESS ECONOMICS.
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