Tea Scenario - 2014

TEA AREA - 2014 ( in hectares)

TEA PRODUCTION - 2014 ( in million kgs)

In today’s context, India’s Rs 10,000 Crore turnover tea industry has not only lost its pre-eminent position as the world’s largest tea producer to China, our country’s share is just about 25% of the world tea area. The share percentage of India’s tea exports had fallen to 11.6% in 2012. India now occupies the fourth position in tea exports after Kenya, China and Sri Lanka. The diminishing share and standing of India in the international tea trade amply illustrates the bleak prospects for the industry. The rapid emergence of non-traditional and new competitors to Indian tea has been witnessed over the past 2 decades. This has contributed to a large increase in the global tea production, which has resulted in a prolonged glut in the tea trade.

Status of South Indian Tea

Major Tea Producers - 2014

CHINA - 39%
INDIA - 24%
KENYA - 9%
SRI LANKA - 7%
OTHERS - 21%

Major Tea Exporters - 2014 ( in million kgs)

South Indian tea had a very secure market, until the disintegration of the USSR in the mid 90’s. After Russia became a free-market economy, the Russian buyers started sourcing their teas from markets other than India, in order to achieve the maximum cost advantage. As a result, new low cost players like Vietnam, Indonesia and Kenya, to name a few, emerged in the international tea trade scene. Besides eating away into India’s share of exports of tea, a situation arose where teas from those competing countries started being off-loaded in the Indian domestic market. Much of the teas so imported were re-exported from the country as ‘Indian Tea’, leading to a displacement of genuine Indian teas of equal volume, which might have otherwise found an export market.

Wages(Rs/day) Vs. Avg. Auction Price of Tea(Rs/kg )

Wages(Rs/day)
Avg Tea price(Rs/kg )

Soon after the year 2000, when the full impact of the financial crisis was felt, it was evident that the tea industry had to adopt a few structural adjustments to face the new economic situation and to ensure the long-term survival of the industry. It is an undeniable fact that in the tea industry, the labor costs forms the largest chunk in the total cost of production, often extending up to 55%. There was very little to be done to reduce other fixed cost elements like power, fuel, fertilizers, insecticides etc., which were largely beyond the control of the tea producers. . Mounting costs and steadily declining price realization was a sure recipe for financial disaster. The prospects of the industry sliding into sickness and the resulting unemployment of the large labour population and its social consequences were frightening. With such a high component of labor cost, South Indian tea finds it extremely difficult to compete with emerging producer countries like Vietnam, Indonesia or Malawi, where the labor cost is only around 25 to 30% of what we incur here. Under The Plantations Labor Act, 1951, employers are required to provide ‘cradle-to-grave’ welfare schemes like free housing, free medical facilities, free water supply and sanitation, free crèche facilities, education facilities etc., which in the normal course are panchayati-raj functions. Plantation employers in the other newly emerged competing countries are not burdened with these responsibilities.