India’s Tea Industry Should Welcome Disruption

India has declared an ambitious goal to export 300 million kilos of tea in 2020 returning to a time when the country dominated the export market. "Tea prices at the farm gate level remained stagnant" through 2017-18 said Bidyananda Barkakoty, Advisor to the North Eastern Tea Association (NETA). Given fierce competition in the global export market, either production needs to be brought down or domestic consumption increased, and exports pushed up, he explained. Indian Tea Association chairman Vivek Goenka says the tea industry needs a “disruption” leading to new ways of thinking. He listed mechanization in the field, a major upgrade in the auction system, and the introduction of the internet of things (IoT) to optimize real-time decision making in tea processing factories. “Uses of IoT, drones and artificial intelligence are needed to understand our fields and the way forward,” he said, in a speech reported by The Telegraph. “The tea industry is not sustainable as of today,” adds Tea Research Association (TRA) chairman Prabhat K. Bezboruah. Workers are not adequately compensated. “The need of the hour is to travel the path of quality,” he said Friday during the two-day Tocklai Tea Conference in Jorhat, Assam. Here is a brief on three challenges.

Increasing Exports

India is Pakistan’s largest supplier of tea, shipping mainly grown in Assam. These teas are also popular in Kashmir where they arrive via Amritsar. Exports totaled 16 million metric tons last year. The Pulwama suicide attack that killed 42 of India’s national police on Feb. 14 was followed by calls within the tea community to suspend trade with Pakistan. Anshuman Kanoria, chairman of the India Tea Exporters’ Association, said a ban has widespread support, but the industry should carefully follow the government’s lead before halting shipments. India rejected Most Favored Nation (NFN) status and slapped a 200 percent tariff on Pakistani goods following the incident. Tea shipments to Pakistan were valued at INRS155 crore in 2018 ($22 million) but exporters are confident they can find additional customers in the Middle East, CIS countries and Russia. Exports to UK and Germany declined in 2018, but Chile has proven to be a potential market and exports to China rose from 8.5 to 10.2 million kilos. Pakistan is a flashpoint drawing attention to exports that have been lagging the past several years. India competes with Sri Lanka and Kenya as the world’s top suppliers of black tea (mainly CTC cut, tear, curl processed tea). Sri Lanka announced recently that it intends to produce 315 million kilos in 2019, up 5 percent compared to 2018. Global tea production increased by 1.8 percent last year, according to ICRA, a publisher of data on the industry. Demand worldwide is expected to climb. Black tea exports from Sri Lanka declined 10 percent last year and Colombo prices, which are normally the highest in the world at auction, faltered. In Kenya tea was bountiful, setting production records, but the abundance lowered prices by 12 percent at auction. These market conditions present an opening for India. “I do not expect Africa to repeat the higher production of over 60-70 million that they did last year. There should be higher penetration by Indian exporters," former India Tea Association (ITA) past-chairman Azam Monem told The Business Standard. Early this month NETA’s Barkakoty called on India to achieve a 300 million kilo export threshold by 2020. The country exported 250 million kilos in 2018, down slightly from 2017 The tea was valued at $722 million, up from $701 million last year. Russia and the Commonwealth of Independent States (CIS) imported only 61 million kilos in 2018, down from 64 million kilos in 2017. Azam Monem told INS that raising incentives from 5 percent to 11 percent on production of orthodox (loose leaf) tea is critical. The country produces less than 100 million kilos a year. Demand worldwide is much greater for quality teas than commodity grade CTC. “We have to target exportable produce like orthodox tea. We are only making 80-100 million kilos of orthodox tea and have asked for incentivizing its production," Monem told INS. The subsidy is currently INRs3 per kilo “which is low compared to the higher cost of production” said current ITA chairman Vivek Goenka. "We believe incentives would be the key to surpass the level of 250 million kg and otherwise it would be difficult even retaining this. All depends on how we will be able to cope with the international markets, which are a little suppressed. I do not expect Africa to repeat the higher production of over 60-70 million that they did last year. There should be higher penetration by Indian exporters," Monem said.

Accommodating Labor

Since most of the tea produced in India is grown by smallholders, several initiatives are underway to both improve tea quality and their quality of life. This year Assam suspended for three years a tax paid by small growers, “which is a big financial relief,” according to Kamakhya Prasad Tasa, a member of parliament representing Jorhat, Assam. The State of Assam also increased health and welfare benefits to combat a high rate of fatalities among pregnant women and newborns. Wages are improving, but unrest remains at the surface. About 20 percent of Assam’s population is tribal, a mix of 112 tribes consisting of indigenous peoples and tribes moved from central and southern India during colonial times to work in the tea fields. In February the central government agreed to elevate 36 tribes to the status of Scheduled Tribe (ST) which affords benefits and recognition at the state and national level. The Assam Tea Tribes Students’ Association (ATTSA) immediately questioned why 76 other Assam tribes were not named to the ST list. “It was a grave mistake on the part of the state government to leave out 76 tea tribes from the ST list. For some strange reason, the state government submitted the ethnographic reports of only 36 tea tribes to the Union ministry of tribal affairs. So, these 36 tribes have found a place in the ST list. But it is a fact that that the tea tribe community, as a whole, is the most backward and neglected, be it economically, socially and in education. Therefore, it’s our request to the government to provide ST status to all tea tribes of Assam,” said ATTSA publicity secretary Lakhindra Kurmi Those defending the action say that it is not possible to include all the tribal communities without detailed ethnographic studies acceptable to the Union tribal affairs ministry. “Our government is committed to facilitate required infrastructure for ushering in a period development in the tea garden areas. The line sardars also have a crucial role to disseminate information about various schemes launched by the state government for tea community,” said chief minister Sonowal on Friday while inaugurating the second phase of Asom Sarkar Chah Bagicha Dhan Purashkar Achoni at Sarusajai Sports complex in Guwahati, Assam.

Improving Tea Quality

India once exported sizeable quantities of hand-made orthodox tea to an appreciative world market. During the years China withdrew its tea, legacy estates stepped up production as Europe developed new tea lands in Africa. To retain market share, India began shipping tea at prices averaging around $2 per kilo and only recently has doubled that average. Sri Lanka gets a much better price and Kenya ships much larger volumes of black CTC (across a range of prices). Meanwhile, China has reclaimed its standing as the tea exporter of top value orthodox green teas and significantly increased its output of black tea, including CTC grades. A growing consensus of India’s tea industry leaders recognize that with a huge and growing domestic market and per capita consumption on the rise, exporters should concentrate on the higher end of the global market. Industry leaders including ITA’s Goenka are encouraging the Tea Board of India to improve standards. India currently meets food safety and can meet export thresholds for pesticide residue for shipments to the European Union and North America. India recently canceled licenses to operate 18 factories in Assam and increased inspections at factories cited for not meeting Food Safety and Standards Authority of India (FSSAI). Perhaps the most far-reaching are setting harvest begin dates and end dates to insure plants are rested and prohibit the sale tea for less than INRs60 ($0.85) per kilo. The next step is to apply technology to increase productivity and improve taste. One recent innovation is a cell-phone app called the Tea Assistant (Chai Sahayak). The app displays current prices for farmers selling to bought leaf factories and provides weather reports, warns of infestations. Notices, tips for improving yield and proper care for tea are in both Assamese and English. Sources: The Telegraph, INS, The Times of India, The Sentinel of Assam, The Business Standard