Crisis of Darjeeling Tea Industry

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Recently, the Tea Board of India said it had sought a special financial package of ?1,000 crore from the Centre for the tea Industry over five years. 

Key Points

• Background: 
  • Indian tea had not been able to establish itself globally, and one of its key brands, Darjeeling Tea, was under acute stress.
• Significance of Darjeeling Tea:
  • GI Tag: Darjeeling Tea, called the ‘Champagne of Teas’, was the first Indian product to get the GI (Geographical Identification) tag in 2004 for its distinctive aroma and flavour. 
  • Employment: About 87 gardens in Darjeeling which employ about 55,000 workers produce approximately 7 million kg of tea, most of which is exported. 

Tea Industry of India

• Tea is one of the most popular and lowest cost beverages in the world and consumed by a large  number of people. 
• Owing to its increasing demand,  tea is considered to be one of the major components of world beverage market
• Indian tea is among the finest in the world owing to strong geographical indications, heavy investment in tea processing units, continuous innovation, augmented product mix and strategic market expansion.
• Climatic Conditions:

• Tropical and subtropical climate
• Deep and fertile well-drained soil, rich in humus and organic matter. 
• Warm and moist frost-free climate throughout the year.
• Rainfall: 1500mm.
• Temperature: less than 15 degree celsius

• The main tea-growing regions are in the Northeast (including Assam) and in north Bengal (Darjeeling district and the Dooars region). 
  • Tea is also grown on a large scale in the Nilgiris in south India. 
  • India is one of the world’s largest consumers of tea, with about three-fourths of the country’s total produce consumed locally.
• Control of Union Government: Tea is one of the industries, which by an Act of Parliament comes under the control of the Union Govt.

Tea Board of India

Image Courtesy: Tea Board 

• Origin: 
  • The genesis of the Tea Board India dates back to 1903 when the Indian Tea Cess Bill was passed. 
  • The Bill provided for levying a cess on tea exports – the proceeds of which were to be used for the promotion of Indian tea both within and outside India. 
• Present: 
  • The present Tea Board set up under Section 4 of the Tea Act 1953 was constituted on 1st April 1954. 
  • It has succeeded the Central Tea Board and the Indian Tea Licencing Committee which functioned respectively under the Central Tea Board Act,1949 and the Indian Tea Control Act, 1938 which were repealed. 
• Larger scope: 
  • The activities of the two previous bodies had been confined largely to regulation of tea cultivation and export of tea as required by the International Tea Agreement then in force, and promotion of tea Consumption.
• Tea Board Organisation:
  • The present Tea Board is functioning as a statutory body of the Central Government under the Ministry of Commerce. 
  • The Board is constituted of 31 members (including Chairman) drawn from Members of Parliament, tea producers, tea traders, tea brokers, consumers, and representatives of Governments from the principal tea producing states, and trade unions .
  • The Board is reconstituted every three years.
• Functions: 
  • Rendering financial and technical assistance for cultivation, manufacture and marketing of tea.
  • Export Promotion
  • Aiding Research and Development activities for augmentation of tea production and improvement of tea quality.
  • Extend financial assistance in a limited way to the plantation workers and their wards through labour welfare schemes.
  • To encourage and assist both financially and technically the unorganised small growers sector.
  • Collection and maintenance of Statistical data and publication
  • Such other activities as assigned from time to time by the Central Government.

Challenges of Tea industry in India

• High cost of production: Over the past few months a lot of gardens in the hills have changed hands because the owners were reeling under higher costs of production and other issues. 
• Nepal’s gardens: Unhampered and easy influx of substandard tea from neighbouring countries, especially Nepal” is jeopardising the tea industry of India. 
• Degraded quality sold in good name: Inferior quality tea from Nepal was being imported, and then sold and re-exported as premium Darjeeling Tea. 
• Competition: Nepal, which shares similar climatic conditions and terrain, produces tea at a lower price because of less input costs, particularly labour, and fewer quality checks. Even though the quality is no match, yet the tea from Nepal posed a serious challenge to Darjeeling Tea
• Domestic issues: The influx of tea from Nepal picked up pace in 2017, when the 107- day agitation and shutdown in the Darjeeling hills brought tea production to a halt. From June to September 2017, tea bushes in Darjeeling lay unattended during the agitation called by the Gorkha Janmukti Morcha over demand of a separate State of Gorkhaland. Tea industry in Darjeeling has not recovered from the damage it incurred in 2017. 
• Lack of land and other resources: Because of the hilly terrain of Darjeeling there is no land left for expansion of tea gardens. The tea bushes are older than other parts of the country. Uprooting and planting them is both time and cost intensive.
• Low auction price: Prices of Darjeeling Tea in the last six years have grown at a CAGR (cumulative annual growth rate) of only 1.7% against an increasing cost of input between 10% and 12% CAGR.
• Fall in global demand: Some global factors like the decline in demand from European markets in the wake of the Russia-Ukraine war have compounded the problem.

Way Ahead

• Small Tea Growers (STGs) should also be recognised as GI-registered producers on a par with the 87 tea estates which produce Darjeeling Tea to ensure better price premium. 
• The Government should review and revisit the Indo-Nepal Treaty for incorporating stringent requirements for certificate of origin on tea imports from Nepal.

Source: TH