Now tea industry body on anvil for setting benchmark prices of tea leaves

ITA is discussing the issue with the Tea Board

The Indian Tea Association (ITA), the apex body of tea manufacturers, is in discussion with the Tea Board of India to set minimum benchmark prices for various grades of tea leaves. The ITA feels this will help ailing tea firms survive the cost-disparity crisis plaguing the sector. 

“We have asked the Tea Board to set minimum benchmark prices across tea grades, so that the cost of production at least can be recovered. If minimum prices are set, it will help the firms better the tea quality as well”, Vivek Goenka, chairman, ITA said. Earlier, the Tea Board had discussed this, but no decision was taken.

Under this proposal, various grades of tea, determined by the fine leaf count such as under the green, whole leaf, and crush, tear & curl cannot be sold below certain prices set by the board in consultation with the industry. 

Such an initiative is likely to have an inflationary pressure on tea prices.

The Tea Research Association has come up with a machine and an app that detect fine leaf count, thereby determining the quality of tea leaves. Industry officials say a minimum of 30 per cent fine leaf count is desirable to obtain standard grade tea.

Fine leaf refers to ‘two leaf and one bud’ from the tea plant.

“Often tea is sold at Rs 80-90 a kilo to big buyers. This, in turn, has a cascading effect on the entire eco-system as prices of quality estate teas are also haemorrhaged”, said a senior executive at a leading tea producing firm.

According to this official, the Board needs to ensure a level-playing field for the now dichotomised tea industry where small tea growers (STG) account for 45 per cent of the total production and the larger estates make up for the rest.

The crisis, according to industry officials, is because of the fact that the cost of production for small growers is much lower than the estates and, hence, this set of producers can afford to sell leaves at lower prices.

On the other hand, the estates are bound by the Plantations Labour Act, 1951, under which cost of production is estimated to be around 50 per cent more than the STGs.

“The industry is already undergoing a crisis situation as prices are not rising with rise in input costs. For larger estates, it is becoming unviable to stay in the business”, said Arijit Raha, secretary general, Indian Tea Association.

Estate tea makers are of the view that the board needs to strictly monitor the quality of tea leaves not just for the export market, but also for domestic consumption.

An official from one of the larger tea firms is the view that the board needs to regulate and curb the further growth of STGs and BLFs to control overproduction and order a minimum percentage of fine leaf count for teas manufactured by BLFs to ensure superior quality.

The same official said that the board needs to enforce a system of ensuring complete traceability of tea leaves right from the production stage to factory processing and packaging.

The board is keen to address the overuse of pesticides afflicting the reputation of Indian tea abroad and has decided to revive the Tea Council of India, which will test random tea samples for compliance with FSSAI norms.

“If a producer is found to be flouting FSSAI norms, the Council will report it to the Board, which is turn will take actions against the offender”, the Board’s chairman, A K Ray said.

Industry officials widely believe that the enforcement of stringent norms would help improve tea quality, which is bound to face higher prices both in private sales as well as the auctions. In turn, following the same principle of cascading effect, estate tea prices are also expected to improve.

Causes of price stagnancy according to industry officials –

Overproduction due to unchecked growth of STGs

Domestic per capita consumption not going up

Export growth not encouraging

Tea consumers in India not quality literate therefore quality tea production not being rewarded

Most of the sourcing by packateers is through Bought Leaf Factories