Tea Association of India (TAI) wants State governments to restrict new lands being brought under tea cultivation for at least five years, in order to bring a balance in tea demand and supply.
Pointing out that the economic sustainability of the organised tea plantation sector was in jeopardy due to shrunken margins on account of a mismatch between production costs and tea prices, TAI said that the livelihood of over five million people, directly and indirectly employed in this sector, was threatened.
The TAI release noted that between 2008 and 2018, tea prices increased by about 4.8% CAGR whereas wage costs, which comprise about 65% of total production cost, increased by over 10% CAGR. Other input expenses have risen by over 7% CAGR.
According to TAI, prices have not risen due to the rapid increase in tea supply, especially from the small tea growers (STG) segment. In 2018, this segment accounted for a 48 % share in India’s output of 1,338 million kg against 20% in 2003.
This rapid growth of the small grower sector has led to the emergence of a dual business model, with completely different costs of production, and one in which most of the organised plantations are faced with selling teas below their cost of production. This is mainly because the STG segment is not governed by the same laws (like the Plantation Labour Act) as the large estates are.
It is this context, that TAI wants state government to stop conversion of land for tea cultivation for five years. TAI believes that such a ‘moratorium’ would temporarily slow down the growth in supply of tea, and allow tea consumption to catch up, thereby re-establishing an equilibrium.