Brewing trouble: Darjeeling tea hits 8-year low in auctions, shows data

Geopolitical headwinds leading to lower demand from export markets, coupled with lower domestic buying, have dragged the auction average of Darjeeling tea to its lowest level since 2015.

Data from Calcutta Tea Traders Association (CTTA) shows that the average price of Darjeeling tea at Kolkata auctions for January-December 2023 was Rs 319.74 per kg. The last time it dipped below this level was in 2015 at Rs 285.71 per kg.

J Kalyana Sundaram, secretary, CTTA, said the average price for Darjeeling tea in January-December 2023 was the lowest in eight years largely because of lower demand from export markets. “In any case, domestic buying has been impacted in the last few years due to the import of Nepal tea.”

CTTA organises the Kolkata auctions.

About 20-25 per cent of Darjeeling tea is routed through auctions and the balance through private sales. Market sources said the average price for private sales was also 15-20 per cent lower than 2022. “Exports have been hit. Good teas were still selling, though,” said a source.

A major producer pointed out that auction prices were impacting private sale prices.

The prized production of Darjeeling is the first and second flush. However, Anshuman Kanoria, chairman, Indian Tea Exporters Association, said demand was lower even for the first and second flush. “Prices were also lower.”

Atul Asthana, chairman, Indian Tea Association (ITA), and managing director, Goodricke Group, explained that with two wars playing out, the geopolitical atmosphere in the world was at its lowest point and hitting almost all countries. “As a result, consumers across Europe are resorting to downtrading.”

The largest producer of Darjeeling tea, Ashok Lohia of the Chamong Group, also said that international buying had been lower in 2023. “The issue is lack of demand. Unsold stocks are available with everyone as countries generating demand are under stress.”

The muted demand is despite the fact that Darjeeling produces about 0.47 per cent of total tea production in India. Production up to November 2023 stood at 6.07 million kg.

Joy Majumder, director, Teesta Valley Exports, said global demand had taken a knock. “It’s the retrospective effect of Covid combined with weak economic conditions in the European Union (EU).”

“Darjeeling tea is sold as a boutique beverage and is expensive in the EU. With a fallen economy consumers are opting for cheaper substitutes,” he added. Teesta Valley Exports is a major buyer of Darjeeling tea at the auctions.

Industry sources pointed out that in the domestic market, buyers were operating at lower prices. The offtake was also lower, they said.

Cost of production

The challenge for Darjeeling tea is that the cost of production is Rs 600-650 per kg or even higher depending on the elevation.

In the last three years, daily wages have gone up by Rs 76. “But the selling price has not moved up commensurately. The crop has also been coming down, increasing the cost of production,” Asthana said.

“At this moment, the cost of production is touching Rs 600-650 per kg and garden owners are losing more than Rs 200 per kg,” he added.

Seeking lifeline

Darjeeling needs a lifeline for survival, said Kanoria. “Of the 87 gardens, about 11-12 are closed now.”

“Two things need to be done. Either a minimum import price on Nepal tea, based on the cost of production in Darjeeling, has to be imposed or the industry needs assistance to offset the loss on account of its imports. At the same time, the government should devise a plan for generic promotion,” Kanoria said.

The industry may raise some of the points at a likely meeting with Union Commerce Minister Piyush Goyal in Kolkata on Saturday.

The ITA is understood to have sought some relief from the West Bengal government for Darjeeling tea. “Most of the Darjeeling gardens are incurring losses. We have written to the West Bengal government to help mitigate some of the losses,” Asthana said.

Nepal problem

Darjeeling’s problem dates back to 2017, when the Gorkhaland movement shut down the industry for 104 days during the peak period of June to September.

“The pipeline of the supply chain dried up. As a result, the blenders, domestic buyers and even importers discreetly replaced Darjeeling with Nepal tea, which is almost at the same altitude and just across the border. And it was available to the blenders and packeteers at half the price of Darjeeling,” Asthana said.

“When the industry came back, nobody wanted to replace Nepal tea with the costly Darjeeling. That was the beginning of the end,” he added.