Indian tea producers fear for future

Falling quality has hit tea exports

Tea barons in India, the world's largest producer, have warned the survival of their industry is threatened by plunging auction prices, a slump in export, and falling quality.

The scenario is grim, with India losing export share to other tea-producing countries selling at a price much lower than us

O.P. Chokhani
ATPA

"There is no sign of revival in the immediate future and the current slump has been prolonged to such an extent that the survival of the tea industry is at stake," said OP Chokhani, chairman of the Assam Tea Planters' Association (ATPA).

This year, a kilogram of top-quality Assam tea, which accounts for 55% of the country's total annual production, has sold for 12 to 15 rupees (17-21 pence) less than three years ago.

Exports for the first three months of 2002 were up almost 6% on the year, an official of the state-run Tea Board told Reuters, but export earnings fell nearly 6% to 3.38bn rupees (£46.9m).

Quality falling

Plantation owners say urgent steps are needed to improve tea quality and lift prices.

"A decline in domestic quality has led to a crash in prices, triggering off the worst ever crisis in the past century for the Indian tea industry," said Aboni Borgohain, chairman of the Tea Research Association and a leading planter in Assam.

"The backbone of the industry could be broken if we don't take corrective steps to reduce the higher cost of production and check declining prices."

India's market share of about 30% of global tea production has been threatened by fierce competition.

Tough market

"Last year, we lost Libya completely due to the supply of inferior and sub-standard quality teas, and the scenario is grim with India losing export share to other tea-producing countries selling at a price much lower than us," Mr Chokhani said.

India exported 179.7 million kilogrammes in 2001, 13% less than the previous year, with rival producers Sri Lanka, Kenya, and Bangladesh taking up the slack.

Indian growers want the Commerce Ministry to fix a minimum floor price at auction, with producers having some say in the pricing.

The ministry has brought in global consultancy Accenture to come up with measures to help the industry.

In February, Finance Minister Yashwant Sinha cut excise duty by 50% and raised customs duty from 70% to 100% to keep out foreign competitors.