NEW DELHI: The perfect storm in the cost-intensive tea industry is expected to spill over into 2022, as concerns such as rising tea prices as well as subdued export demand continue to hurt the producers.
Tea production is a high-cost business, with 60-65 per cent of the input costs going into labour wages. The rest goes for coal, gas, fertilizer, and other machinery.
The rise in tea costs was led by the pandemic-led disruptions in the plucking activities initially. The leaves mature if they are left on the shrubs for too long, leading to deterioration in the quality of tea.
Later, floods in some key tea growing regions of Assam and West Bengal also damaged crops and reduced yields. These two states produce the lion's share of the beverage in the country, almost 75 per cent of the total. Then came the wage hike by both the state governments, just before the Assembly polls in the tea-growing states. Votes of tea labourers, who are sizable in numbers, play a crucial role in many pockets of these two states.
Assam raised daily wage by Rs 50 at Rs 202, while West Bengal raised it by Rs 26 at Rs 202. Production loss and rising input costs are just one side of the coin. Importantly, the export demand for Indian tea had also dampened as out-of-consumption of the commodity had tanked sharply amid the pandemic globally.
As per the latest data available on the Tea Board of India's website, Indian tea exports during January-September fell 10 per cent to 138 million kg. The data for October and November is yet to be published.
Outlook for exports is still dim with the detection of the new Covid-19 variant — Omicron, tea producers said.
"Outlook for tea exports is not very optimistic. The increased cost of production for crushed tear and curl tea as compared to African prices are hurting the Indian market. African producers are making inroads in those markets, including Iran, where Indian tea was earlier dominant," said Anshuman Kanoria, Chairman of the Indian Tea Exporters' Association. Kanoria also owns a few tea estates in Darjeeling.
Iran was predominantly a major importer of tea from India.
Besides, higher freight rates also add worries for the exporters, Kanoria said.
"Subdued out-of-home consumption of tea in the UK and Europe (two major export destinations) amid the resurgence in Covid caseload will dent our export prospects further," he said
Further, he added that the high percentage of absenteeism of tea workers from their daily work is delaying harvests, which in turn lead to deterioration in the quality crop.
To streamline absenteeism, he said daily wage should be linked with the productivity of the plantation workers.
According to Dinesh Bihani, Secretary at Guwahati Tea Auction Buyers Association: "Recently, Sri Lanka has had an agreement with the Iran government where all the tea export dues will be cleared through the barter system. They (Sri Lanka) will purchase oil from Iran against the tea exported by them. This may affect the orthodox tea prices which are mostly exported from India."
On the availability of tea in the daily auctions at the Centre, Bihani said the volume is negligible as the tea season is almost at its end.
Tea season starts typically from early or mid-March till the onset of the winter.
On the export side, he also echoed almost the same as said by Kanoria.
"Tea sector faced serious challenges in 2021 — lower crop, lower price and lower export. The low crop was due to inclement weather, low export due to Iran's payment issues, non-availability of containers, multi-fold increase in ocean freight," said Sujit Patra, Secretary at Indian Tea Association, the premier tea body founded in 1881.
"Except good quality tea that fetched higher prices, other teas fetched lower prices. Darjeeling saw an unprecedented crisis — low crop and abnormally low price," Patra said.
"There will be lower carry forward stock in 2022. Hope in the first few months, the price will remain firm."
Besides, he suggested promotion exercises for tea in both domestic and overseas markets.
India produces on an average 1,380 million kg of tea annually and is one of the top growers of the commodity.
The country's tea sector employs around 1.2 million workers and contributes 23 per cent to the global output. (IANS)
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