Recirculating heated exhaust conserves energy and helps to eliminate inconsistencies in drying that lower tea quality. In this installment of Frugal Innovations, Ranjit Chaliha describes Varun, a device named after the Hindu God of Wind that continuously monitors ambient air conditions in real-time and electronically computes the ideal inlet air temperature to reduce energy costs enough to pay for itself.
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Ranjit Chaliha on improving the efficiency of tea dryers. Korangani Tea Estate, Assam, India
Achieving Consistency and Efficiency in Drying Tea
By Aravinda Anantharaman
In 1961, Ranjit Chaliha arrived at his family’s Korangani Tea Estate in Assam. And never left. He had trained as a mechanical engineer and worked briefly at the Assam Electricity Board. And now, the tea factory became a place of many experiments. He eagerly adopted new technologies and tinkered with new machines. Chaliha also became a member, and later, chairman, of the engineering subcommittee of India’s Tea Research Association, involved in machinery development and tea research. It was during his tenure that the Model Tea Factory in Tocklai was constructed. Chaliha began experimenting with methods of recirculating exhaust in the factory’s tea dryers. At an engineering symposium on tea machinery in 1998, he presented a paperdescribing the benefits of recirculating exhaust air. He based his findings on experiments and filed for a patent. A dozen years later he was finally awarded recognition for his innovation, Varun, a device that reduces inconsistencies in drying tea.
Aravinda Anantharaman: Congratulations on the patents Mr. Chaliha! How long did the patent take?
Ranjit Chaliha: For me, it took 12 years. And unfortunately, the patent examiner initially was not convinced. He was not impressed. He put all sorts of other irrelevant questions and things like that. Ultimately, it came out as a very pleasant surprise.
Aravinda:So how did the idea for Varun come about? What does it do?
Ranjit: In the tea dryer, ambient air is heated to a high temperature – about 200 degrees Fahrenheit and blown through tea leaves thinly spread on perforated trays. The air goes from below the trays through the tea and up.
In Assam, weather changes from dry at the beginning of the year to very moist during the monsoons and again dry towards the end of the year. July, August, and September are moist months. The air is also heated to 200 degrees Fahrenheit and blown through the wet tea leaves until they get an acceptable result. But come November, when the atmosphere itself is dry, the air itself is dry, and this air is heated to the same 200 degrees Fahrenheit. In July, the ambient air would have a relative humidity of, let’s say, 50% to 60% or maybe more. In November, the relative humidity is maybe 30% to 40%, and it is heated at the same temperature. Instead of 4% to 5%, the relative humidity would go down to probably 2% to 3%, which you don’t need. Not only don’t you need it, it’s bad because the air becomes drier than before and you get a faster drying which is also not good. So, I thought to myself, why heat till 200 degrees?
Why not till about 190 degrees, or 180 degrees, so the relative humidity goes down to nearly what it was in July. So that was the beginning of my thought process. Then, a lot of studying and a lot of maths and things are involved in implementing the idea of making a monitor, which would tell you that this is the temperature you should dry the air to get a relatively consistent drying. I teamed up with an electronics instrument equipment manufacturer in Kolkata. I gave them the know-how, and they built this instrument. It was very good. But except for two or three gardens, people didn’t accept it. The inlet temperature must be input manually, which they didn’t want to do. They wanted it automatic. At that time, I didn’t want to invest so much money or time; the patent had also not come. So, I left it at that, but those who took the instruments were reasonably happy. But now that the patent has come and my two sons said ‘dad, we have got to have another try.’
“Tea quality is impacted by numerous things, including the drying rate. If the tea is drying too fast, some quality will be lost. And if it is dried too slow then also quality will be lost.”
– Ranjit Chaliha
Aravinda:How does monitoring the temperature and controlling the drying impact the tea itself?
Ranjit: It would be best if you got more consistent drying. The quality of tea is impacted by numerous things, including the drying rate. A drying rate of 2.8% to 3.6% moisture loss per minute is preferred. If the tea is drying faster, some quality will be lost. And if it is dried slower than that, then also quality will be lost. So, there’s a range within which the leaf drying rate of the tea should take place. This is dependent on things such as the temperature it’s heated to and the relative humidity of the hot air. That is also dependent on the ambient conditions of the air to start. Since the ambient conditions vary, the hot air conditions will also vary if you heat to the same temperature. This instrument will tell you that to keep a reasonable consistency in the condition of the drying air, to what temperature the leaves should be heated.
Aravinda:Who is this monitor most helpful for? Is it for CTC or Orthodox? Can anyone use it?
Ranjit: Yes, yes, of course, it’s got to be calibrated differently for different ways of manufacturing, different machines, different sources of heat, and mainly different dryers. Also for situations, locations… It’s a psychrometric thing. So it’s got to be adjusted for height above sea level.
Aravinda:And how difficult or easy is it to install and implement it?
Ranjit: Very easy. There’s just a meter with leads. It’s nothing complicated.
Aravinda:How quickly can a producer get a return on investment?
Ranjit: Within one year.
Aravinda:Well, that’s not a long time at all. Compared to, say, 12 years for the patent. What are your plans to go to market?
Ranjit: Firstly, it’s an uphill task. People have tried to sell this instrument in the market earlier. As I said, only two or three were sold. Now that we have got the feedback that they are not interested in doing manually we know that we have to make it automatic. There are different ways gardens heat the air; gas in upper Assam with the rest of the regions using coal. With gas, it’s easier. You have a connection with the burner, and you can regulate it with the burner. With coal, some more work has to be done. But first, let me get this manually operated machine going. Also, I have to say this, it’s not a glamorous thing. It will give you savings in fuel, maybe up to 3%, and consistency in drying. A 3% savings for a big factory making 1 million kilos is INRs6-7 per kilo. Even a savings of 2% is much more than the cost of the instrument.
India Chief Correspondent Aravinda Anantharaman reviews a momentous year for the tea sector in a country that produces 20% of the world’s tea. India’s tea drinkers are projected to consume 1.3 million metric tons of tea in 2022. Consumption outside the home (except in tea lounges and airports) has returned to pre-COVID levels and at 840 grams per capita, remains well below most countries, suggesting much room for growth. Her report is the sixth in the series of TEAIN22 year-end reviews and forecasts.
There are few entry barriers to tea. It does not demand heavy infrastructure. But the complaint from smallholders selling raw leaf to large-scale tea producers operating multiple factories is that for the past decade, farmgate prices are not commensurate with costs. Now the economics of the tea trade is gradually shifting from oversupply to scarcity. At the same time, some quiet work underway in India is yielding encouraging results that lower the cost of tea production, improve quality, and ease a shortage of labor. The most powerful driver for change is revenue. Prices globally, on average, increased by $0.21 cents per kilo during 2021, according to Trading Economics. Abhijeet Hazarika, IT analyst @TeaSigma and former head of process innovation at Tata Global Beverages, observed that “Tea is not a very high profit yielding commodity and will not be so in the foreseeable future until some tech breakthrough happens.” The frugal innovations described in this series, combined with higher prices may herald that breakthrough.
Caption: Shekib Ahmed at Koliabur Tea Estate in Assam
Hear the interview (Part 2)
Abhijeet Hazarika and Shekib Ahmed on frugal innovations that scale
Tea bushes ready for a plucking round at Koliabur Tea Estate, Assam, India
Embracing Simple Technology with Scalable Impact
By Aravinda Anantharaman
Frugal innovations utilize simple technology to address some of the most vexing challenges facing the tea industry. It’s an umbrella term for innovations that do not require much capital, carry a low financial risk and can be done safely with high reliability. Abhijeet Hazarika, former head of process innovation at Tata Global Beverages, describes several innovations that have moved from the drawing board to become successful pilots at partner estates. In Part 1, Aravinda Anantharaman looked at frugal innovation in buying and selling tea. In Part 2, she explores the application of frugal innovations in the tea garden.
Shekib Ahmed of Koliabur Tea Estate in Assam talks about experimenting with frugal innovations in the field, but it’s in the factory, he says, that these simple technologies show the biggest impact.
“With data,” says Ahmed, “I have an objective source of attention to detail. I don’t have to depend on someone who has been working in the industry for 40 years, who uses his expertise and muscle memory to guide us. I have objective data. And that really helps me change the conversation in the factory. I’m not talking of vague concepts. I’m talking about numbers. I’m saying, this is the parameter that we want, and we must keep it within this threshold. It makes it scientific.
“What happens is that even the youngest boy or girl who’s joining as an executive, he or she can pick it up very quickly. She doesn’t have to be there for 20 years. Now, we have a young lady in one of our factories in Dubba. She’s running a 12-hour shift by herself and it’s just data. She has the data. She knows that we must stay within these parameters for the quality to be good.
“She’s in her 30s. Normally, guys running factories at that level, are in their late 50s and 60s, because you need to have that much experience. But if we can objectify data, we can have younger blood come in quickly. They are also not operating blind. I’m not just telling them, make good tea. I’m telling them this machine should be running from this much to this much. The sensor will inform you whether you are in that range. In our shared platforms, we have a cloud-based platform where we share the data, and we keep verifying it. There are many little things in production where we were operating blind and now, we have a certain level of clarity so that really helps us improve.”
Ahmed meters temperatures in the factory. Incidentally, this was developed by a young boy at a cost that Hazarika only will say, “is laughable”. Three machines are ready, and one of them is at Ahmed’s factory. Attention to detail, which was once subjective, has now become scientific and objective, says Ahmed. He likens processing tea to cooking, and how by tweaking the temperatures and the RPM of machines, the quality of tea changes exponentially. These innovations are sensor-based, that are already in use in other industries. Ahmed reminds me that the color sorters in orthodox tea production were derived from rice sorters.
Saurav Berlia with visitors at LR Group’s Dooars estate.
And finally, innovation in the field
During our conversation, Hazarika discusses people, welfare, and productivity. Speaking on low productivity, he says, it’s not because people are shying away from work but because of the nature of the work.
Hazarika says “There are times when I stand in the gardens in August, and it is so hot that I could not stand more than 45 minutes to an hour before I felt unwell. But these people do it day in day out. It’s difficult and I don’t think anybody talks about this. So much hype about the romance of the woman carrying the bags, how many realize what goes on in that case, it’s like a furnace!”
We talk about harvesters. Most of the harvesting machines, he explains, are handheld machines and they tend to be noisy and heavy to carry. Therefore, men are assigned the machines. Not only is it tiring but it’s hard to keep one’s hands steady with them. This means that the quality of the plucking is not very good. Terrain poses another challenge for harvesters even in Assam’s valleys, where it is an uneven terrain. This challenge is amplified in the hills. Hazarika talks about harvesters not as a means to increase quantity but to aid quality.
He is looking at two major deliverables. One, the quality of the finely plucked should be at least 5x better than what is plucked by current machines and at least 2x better than what has been plucked by hand. Two, pest controls. The cost of pest and disease control is significant, especially where there are large areas to monitor, which is the case with estates that span many hectares. Pests can spread within two to three days offering a very small window to arrest their spread. An early warning system, says Shekib, can make an enormous difference. However, this seems to be a mammoth task — perhaps the most challenging space to build innovation — because, for every pest, Hazarika says, a year’s worth of data needs to be collected to feed the algorithms.
Nowhere does the conversation turn to machines replacing people. Instead, the conversation repeatedly brings up utilizing labor effectively to increase output but with better quality.
“I think the tea industry supply chain is completely out of sync with the way modern supply chains work. There is no concept of made-to-order.”
– Abhijeet Hazarika
From ‘make to stock’ to ‘make to order’
Ultimately, it comes down to the perennial problem of oversupply and reduced demand, and the mad scramble for markets. Indian tea producers do not make to order but make to stock, their priority is to sell. And the circle that begins with variability in the quality of tea closes with variability in price realization. Made-to-order brings other advantages, as it is collaborative and brings both technical and technological inputs as part of the process.
“I think the tea industry supply chain is completely out of sync with the way modern supply chains work,” says Hazarika. “There is no concept of made-to-order. They will say forward contracts are made to order. I beg to disagree because, when you say I will take a tea from you, I mean I will take a tea off a particular quality from you. The guy who’s making the tea, in many cases, is not even aware of what you want. So, the buyer has permission to reject it.”
“One of the most important aspects of made-to-order is to leverage the unique aspects of an estate of the factory that has consumer value. Somebody might make tea that makes good color which is preferred in Maharashtra or some may make tea with a sweet after taste which the Gujaratis like. We need to be able to treat every garden as unique and not as a commodity.”
While this is a familiar story, of not treating tea as a commodity, Hazarika offers a roadmap of sorts that is possible with frugal innovation. Once you have quality specifications, a producer can do real-time monitoring during manufacturing. All the resources are focused on producing only what meets the specs. This in turn optimizes the cost of production and increases the likelihood of the customer buying it because it’s been made to their specs.
Which brings the conversation to buyers because the change has to begin with them. If the large tea buyers are procuring 1,000 mn kilos of tea a year, assuming an average estate produces 1 mn kilos of tea, that’s 1,400 estates that can cater to one single buyer. Change can begin with one single buyer.
Frugal Innovators from left, Ratan Ghosh, Bappa Dutta, Mr. Sakil, Nayan Sarkar, SN Singh, Jamil Aktar, Prasenjit Mandal, and Sohag Mandal. Photo courtesy LR Group.
Saurav Berlia talks about how he is piloting the make-to-order model. He has partnered with a buyer who has agreed to buy his tea at a higher-than-average price. In return, Berlia assures the buyer will receive:
– quality (achieved by managing the parameters while processing in the factory)
– consistency (ensured by recording data such as temperature, moisture levels)
– safety (being done by educating growers on chemical usage and monitoring it)
There may not be certifications here, but data is being recorded digitally and analyzed. For those who have wondered about the alternative to expensive certifications, this may well be it. Because the proof is there for anyone to see.
Ahmed talks about how the conversations are changing, becoming more specific. It’s helping him build a young team who are learning, not averse to technology, and who are razor-focused on quality. Innovation, he says, is no longer just for multinationals but for everyone.
“The only way I can do something better than the much larger tea garden groups is if I can execute innovation quickly and if I can execute quality improvement better and in the most cost way,” says Ahmed. And that can only happen with teamwork.
The larger outcome is more significant. Frugal innovation will change the way the industry is run. It will no longer be about waiting for an executive to invest 30-40 years in the factory to be relied upon to run it. Frugal innovation can bring effective processes into play in a way that someone young can be trained early on. This is important in a state like Assam where migration is extremely high and the intellectually able who leave don’t return.
The work on frugal innovation is being made possible by harnessing vast industry experience, a wide network, and an active collaboration with academia. Support and partnerships have come from major tea buyers. The possibilities where tech can play are vast and are seen by both Ahmed and Berlia as the way forward.
“Come in with an open mind,” advises Ahmed. It requires a willingness to try piloting the various options. And because these innovations are frugal by design, it’s affordable even for small growers and small gardens. Berlia confesses that he didn’t buy into it readily but the potential to earn a better price for the tea was a strong pull. Within a month, he says, he could tell it was working and he’s since been advocating it.
For an industry that’s been grappling with multiple challenges, frugal innovation is a low-risk and impactful option, spearheaded by an industry veteran with an eye for innovation. For every successful experiment, there are many that fail, but these are essential to the process that begins with the question, “What if…?”
Koliabur Tea Estate extracts labMicrowave monitoring qualityImage capture of tea in multiple visual wavelengths for data processing.Koliabur simplified tea sorting system
There are few entry barriers to tea. It does not demand heavy infrastructure. But the complaint from smallholders selling raw leaf to large-scale tea producers operating multiple factories is that for the past decade, farmgate prices are not commensurate with costs. Now the economics of the tea trade is gradually shifting from oversupply to scarcity. At the same time, some quiet work underway in India is yielding encouraging results that lower the cost of tea production, improve quality, and ease a shortage of labor. The most powerful driver for change is revenue. Prices globally, on average, increased by $0.21 cents per kilo during 2021, according to Trading Economics. Abhijeet Hazarika, IT analyst @TeaSigma and former head of process innovation at Tata Global Beverages, observed that “Tea is not a very high profit yielding commodity and will not be so in the foreseeable future until some tech breakthrough happens.” The frugal innovations described in this series, combined with higher prices may herald that breakthrough.
Caption: A quality assessment station. Improving quality is critical to the success of growers.
Hear the interview (part 1)
Abhijeet Hazarika on promising new Frugal Innovations
Scanning tea fields at different wavelengths to assess plant conditions. Using cameras to monitor crop conditions, in order to identify threats from disease and pests at an early stage, enables a more targeted (and effective) use of pesticides, lifting productivity and profits. Photo courtesy of Shekib Ahmed.
Bringing Technology into the Tea Value Chain
By Aravinda Anantharaman
Abhijeet Hazarika talks about technology in terms of “frugal innovation”.
What is frugal innovation? His checklist includes:
1. Low capital expenditure because the industry cannot bear additional high expense
2. Low complexity, taking into the view that skill levels on the tea estate, with people who are not very conversant with technology
3. Low upkeep cost, because tea estates have limited infrastructure. Innovations that required high maintenance have a short shelf life and soon land in the junk pile
4. Clean and safe because this is non-negotiable, and buyers ask for it, especially export buyers
5. Highly reliable, because the whole idea of innovation is to improve efficiencies
6. Impact, because the scale of impact must justify adoption of innovation
The ideas he shares are not limited to large estates but have taken cognizance of the small growers. Frugal innovation also correlates with low risk which makes it an attractive proposition. And yet, there have been few takers for it.
In Part 1, we look at how implementing frugal innovations can impact the purchase of leaf and the sale of tea.
Innovation in the procurement of leaf
Saurav Berlia is the third generation in his family’s tea business. The LR Group (Berlia Foods) has been involved in all aspects of tea, from gardens and factories to broking, packing and exports. His company produces more than 20 million kilos annually, supplying to buyers including the top three in India. Berlia decided to pilot some of Hazarika’s projects in frugal innovation.
The group procures about 500 kilos of tea every day from small growers. This process involves calling every small grower each morning for an estimate of the tea they expect to pluck. The small growers sell their leaves, but they won’t know the price they will be paid for it until the next day. They will also not receive feedback on the quality of their leaves.
Berlia is piloting an app that his growers could connect to. With this, the call every morning is made redundant. The grower’s login to the app to understand the market requirements in the morning and offer the estimated quantity of leaves right there. What’s more, because they have an insight into the market requirements, they can set their own prices. Berlia’s staff can accept the price or negotiate before they buy the leaf. Once the transaction is confirmed, the grower gets a message with the weight of the green leaf to be supplied and the price they will be paid for it.
A three-month pilot has shown a positive response and a few of the growers are very happy. However, Berlia admits that he met with resistance at both ends — growers were resistant to the new-fangled app that demanded their inputs and attention. At his factory, Berlia’s staff were convinced it wouldn’t work. They preferred the status quo. He says patience accompanied by training addressed some of this resistance. With each unit having about 50-100 growers as partners, the app can potentially transform how transactions are conducted, to everyone’s benefit.
“Technology has become much more affordable today than what it was 5-10 years ago because processing power has made it affordable. Devices are more affordable. Technology has become simpler.”
– Shekib Ahmed
Using data effectively
Another early adopter of tech is Shekib Ahmed who runs the Koliabur Tea Estate near Silghat in Assam. The 1,600-acre estate next to the Kaziranga National Park with 900 acres under tea. Low hill ranges form part of the terrain here. The garden produces exceptional single-origin CTC tea.
Ahmed chose to partner with Hazarika because of a shared desire to integrate technology in tea farming. Listen to as Ahmed talks about the two key points that attracted him to this.
“Technology has become much more affordable today than what it was 5-10 years ago because processing power has made it affordable,” says Ahmed. “Devices are more affordable. Technology has become simpler. He (Abhijeet) was reminiscing how, when he was working with data, the cost of data analytics was astronomical. But now with cloud computing and everything, it’s become a lot more affordable for companies of our size to give it a shot. That was the first part.”
“The second part was how he focused so much on frugal innovation, things that are affordable for companies of our size to try to tweak and to learn. And one of the biggest benefits of working with Abhijeet is that when we’re doing three to four projects, two or three may not give the results that we want today. They may give it later or they may not work out. However, the side benefits of all the ideas and discussions, just the access to these bright minds like Abhijeet, like the scientists really opens up a lot of little innovations, which are very groundbreaking in the sense that it’s really helped me improve quality in the last one and a half years,” said Ahmed.
He adopted a simple system of data analytics for tea from the tea auction system. There’s a lot of data that comes from the tea board of India, but this is raw data. Ahmed talks about the resistance to change even here when he says the Indian tea industry is where the steel industry was 30-40 years ago. Innovation was very, very slow and the industry was loathed to move past its way of working.
Ahmed’s tea is sent to the auction every week. Data analytics helped him understand how his tea was performing but also what quality the market was seeking. Just to jump the gun a bit, in using data analytics to offer tea that the market wants, Koliabur and Dubba, both of Ahmed’s estates saw a jump of 15-25% in auction prices this year. From being in the Top 20 in the ranks, they are now in the Top 10, which, given that there are 800 gardens in Assam, is no small feat. But he is quick to add that it’s not data alone that has contributed to this.
For innovation to fully work, it must be leveraged across the value chain.
Listen next week to Part 2 when we take a look at frugal innovation in the fields and in the factory.
Determining raw leaf densityDrying in a vacuum ovenFloor fermentation Using a microwave to determine withering parameters
India’s highest levels of government are reforming the basic structure of agriculture. The intent is to loosen regulations on pricing and storage and to permit direct sales of produce. These rules have sheltered India’s farmers from the free market for decades. In September 2020 Prime Minister Narendra Modi called the reforms a “watershed moment” for Indian agriculture but a year later was forced to abandon plans to end subsidies following widespread protests.
In Part 2 of this Newsmaker Interview – Prabhat Bezboruah, Chairman of the Tea Board of India, describes a new board mission to increase consumption, promote tea exports and expand markets at home and overseas. He also addresses discussions underway to transfer regulatory oversight of India’s tea industry from the Ministry of Commerce to the Agriculture and Farmers Welfare Ministry.
Listen to the interview (Part 2)
Prabhat Bezboruah, Chairman Tea Board of India on expanding India’s domestic tea market and exports.
Prabhat Bezboruah, chairman of the Tea Board of India
Part II: Tea Board Reform and Changing Priorities
During the past few months, the Tea Board of India has shown signs of change. Stakeholders, many of whom expressed concerns, have met on several occasions to better understand the prevailing views of the Tea Act of 1953. Several amendments were proposed and sections within the Act were revised or discarded. The Minister of State for Commerce and Ministry, Anupriya Singh Patel, also visited the tea regions, meeting various groups from the tea industry. In Part II we continue our conversation with Prabhat Bezboruah, Chairman of the Tea Board of India, on the changes underway.
Aravinda: How can the plantation model stay relevant in these changing times, as the small tea grower community is growing?
Prabhat: The organized sector today is struggling because it has low productivity, low investment, large-scale theft and malpractice, and an inability to carve a niche out for itself. There are companies, even in today’s scenario, where small growers have maintained a cost of production that is half that of the organized sector, or maybe even less. There are companies that are doing well because small growers, the way they are set up, and the fact that they sell their produce to Bought Leaf Factories, cannot make very good teas. There are always exceptions. There are some Bought Leaf Factories that buy only the best quality green leaf from small growers. There are small growers who pluck very well. So there are exceptions. But the general trend in the small tea grower sector is that their quality is not as good as the organized sector. There are estates in the organized sector that make superlative teas. Their cost of production is much higher. Especially this year, they are getting huge premiums. I would like to bring to your attention that a medium Assam today is selling at INRs 180 – 200 a kilo. The best is 400 plus. So you have a quality premium of 200 plus and the cost of production differential is not 200. Therefore, people who aren’t focusing on quality – and I’m talking about really, really good quality – are going to lose out this year. They will lose out to people who are focusing on that kind of quality. And that’s the way to go. If you do go that way there would also be spinoff benefits for everyone because your volume will come down.
It would be of interest to you that there are some areas of Assam where large-scale theft and dacoity [an act of armed robbery committed by a gang] of green tea leaves is taking place. And I’ve been observing that many of the companies, the majors, tea majors, as you would call them, who’ve had to divest their units the units that they’re getting rid of and the bulk of their assets are in the areas where this green leaf theft is rampant. I feel for them.
The green leaf is sold to people who buy and there is no certificate of origin in the case of green leaf. If you have a Bought Leaf Factory and somebody brings two trucks of fairly acceptable green leaf to you, you will buy it. You don’t ask the seller where they got this from.
Aravinda: Is something being done about this?
Prabhat: The leaf is being stolen from the composite garden, estate gardens. The people who are doing the stealing are local people. And the government is doing its best to help. But it’s endemic in certain areas. I have a sneaking feeling that one of the big reasons for majors are having problems in the units is this. I started by saying that small growers can produce green leaf at half or less the cost of production of privatized gardens. But there are ways of handling it, creating niche markets for yourself. But if you have so many pressures on you and one of them is theft, then you buckle.
Aravinda: You spoke of quality being one of the things to go after, but is there enough innovation happening in the industry that you think is going to help tea get better prices?
Prabhat: Innovation is there at the front end, with really fantastic tea rooms and tea boutiques. This is one area where we should move forward. In Australia and in the US there have been new methods of brewing tea, like pressure steam rather than water which brings out more of the flavor.
But we are dealing with an estimated output of 1,360 million kilos this year. These innovative methods of reaching the ultimate consumer are welcome, but they are not going to help bring that 1,360 or any sizeable percentage of that output out of the morass. It won’t.
We need to be innovative in the field, which is not coming through. You need to be open-minded to new technology in the factories, which is not happening. Basically, the tea industry remains very hidebound. I believe that we do need to come out of our shells, and we need to be receptive to new technology.
We need to be innovative in the field, which is not coming through. You need to be open-minded to new technology in the factories, which is not happening. Basically, the tea industry remains very hidebound.
– Prabhat Bezboruah
Aravinda: What’s the Tea Board’s response to challenges and concerns faced by the industry?
Prabhat: We tend to give a lot of importance to the Tea Board, but the Tea Board’s ability to really help the industry is very significant ways is limited. However, the Tea Board can change its focus. What does the Tea Board do? One, they run the auctions. The auctions are not badly run. I don’t think that they did a very, very bad job, but the whole structure of the auctions is wrong. And the Tea Board hasn’t restructured that. We just took the manual auction and converted it into a replica, an electronic replica, where the hammer was replaced by the mouse. We had the option at that time, and the opportunity of redesigning the whole platform, the whole structure of the platform. We had the opportunity, but we lost it. That was in 2007-08.
Now the Tea Board is overregulating the industry, issuing tea factory licenses, issuing licenses at its own whim. So, that’s really not the job of the Tea Board. The Tea Board should actually monitor what is being imported into the country. We can’t block imports [due to World Trade Organization rules] but we have to discourage it by having an import duty. We already have a 100% import duty but it does not apply to tea shipped here from every country.
We can ensure that the tea coming into the countries is clean. The Tea Board must monitor this, but they are not doing that. Maybe they will now. I mean, so far, they haven’t.
We talk about the young generation not being that enthusiastic about tea, moving on to other hot beverages, like coffee. What are we doing to ensure that packets are of reasonable quality?
I’m surprised that there are packets that are being launched priced below the most economy packet. You have to try and attract new customers but I fear that this kind of strategy will actually push people away from tea. The whole concept of competing on price as they do in supermarkets in Europe and America, where a lot of things are price-driven, I feel that strategy should not be aimed for in India because of the much lower segment already in place.
In supermarkets in America and Europe, the price of tea is fairly high compared to our prices. So, for them, it does make sense to compete on price. But in India, the cheapest packets are already very cheap. And if you try to offer the consumer even cheaper tea, you have to compromise on quality. And the kinds of consumers who are offered these very cheap and very poor-quality teas will get turned off from tea permanently.
The marketing wars should be fought on quality rather than on price. And that would expand the overall market for tea. And I feel that the Tea Board has a role to play there because I feel we should look at the really cheaper packets and maybe the other packets and test them. We should also test what’s coming out from our gardens and ensure that all the tea that is sold in India is as safe as that which is exported. Because we talk about other importing countries putting non-tariff barriers on our tea by reducing the maximum residue limits. But I don’t think that’s wrong on their part. If somebody wants to protect its citizens more stringently, they have the right to do so. And we should ensure that our own citizens in the country are drinking tea which is as safe as that which is exported.
Prabhat: There has been news about the various reforms underway at the Tea Board. What can we expect in the coming year?
Prabhat: The government is going to revamp the Tea Act. It’s going to be a wholesale revamp. The role of the Tea Board is also going to be redefined. That’s a work in progress and it’s already happening. Even the Plantation Labor Act is going to get subsumed once the code on wages and the occupational safety and health hazards act is implemented.
They’ve already passed this legislation but the implementation is being delayed a bit because the government is under a lot of pressure. The economy is under a lot of pressure due to the two COVID waves and the resulting huge disruption in trade. But as soon as it comes, the Plantation Labor Act will be subsumed by those two new acts. The two acts have a totally different take on the remuneration that a plantation worker should get. So that’s one big change that we foresee. It will impact the organized sector as well as the unorganized sector, as well as the small tea growers. And hopefully, create a more level playing field. The Tea Act is also being amended and once it’s amended the role of the Tea Board will change.
The government is going to revamp the Tea Act. It’s going to be a wholesale revamp. The role of the Tea Board is also going to be redefined. That’s a work in progress and it’s already happening. Even the Plantation Labor Act is going to get subsumed once the code on wages and the occupational safety and health hazards act are implemented.
– Prabhat Bezboruah
Aravinda: Will we be seeing this in 2022?
Prabhat: About the code on wages, I don’t know. If you bring in the code on wages and the occupational safety and health act now, suddenly there’ll be huge numbers of small and marginal businesses that may go under, and it will be a big disrupting factor in India. So I feel that the code on wages and the occupational safety and health hazards act will be implemented in 2023, not 2022. the Tea Act amendments and modifications will definitely come through in 2022.
Aravinda: What about speculation that the Tea Board of India will move from the Ministry of Commerce to the ministry of Agriculture and Farmer Welfare? Is that something that the industry or the board has been pushing for?
Prabhat: The board hasn’t been pushing for it. There was a meeting where this, among other things, was discussed, but the meeting didn’t reach any conclusion. There’s going to be another meeting and I think at the end of that meeting, we’ll have clear guidance about what’s going to happen in the future. As far as the industry is concerned, I think small tea growers are very keen that the board and the industry be brought under the agriculture ministry. As far as the larger producers are concerned and the associations are concerned, there is no consensus. I think some people would prefer to be under agriculture and others would like the status quo.
Prabhat Bezboruah
Tea came under commerce because it was India’s most important export in the 50s. Up to about 1953-54, believe it or not, it was the biggest export, earning the biggest revenue, the biggest value. So, therefore, it came under Commerce. Today tea exports are just under $1 billion in a country where the total export value is around $275 billion, it’s like 0.3%. So, it doesn’t deserve to be in the Commerce Ministry, but for historical reasons, we are. Going into agriculture might help small growers. I’m not sure how much benefit it will bring. Taking it out of commerce might bring the export focus down and as I said, exports remain a large part of our business plan. Even though domestic consumption is almost five times greater, exports are crucial in standardizing the market and sorting a better price for producers. So I wouldn’t like the export focus to go.
Aravinda: Should the Tea Board become the Tea Market Expansion Board once again, as suggested in the letter by the Guwahati Tea Auction Buyers’ Association, and focus on building the market and promoting tea? Should that be the Tea Board’s priority?
Prabhat: Definitely. That’s what I’ve been saying for the last three years. I think that same letter was sent by the ITEA, the Indian Tea Exporters Association. So, people are realizing that the Tea Board should focus on marketing rather than on regulation. They need to ensure that good tea are sold in the country. They need to ensure that the demand for tea goes up.
People are realizing that the Tea Board should focus on marketing rather than on regulation. They need to ensure that good teas are sold in the country. They need to ensure that demand for tea goes up.
– Prabhat Bezboruah
Aravinda: What about the tea brands that are coming up? What role can they play in building this market and supporting the industry? What would you like to see them do?
Prabhat: I’d like to see them compete on quality. People like Teabox have some really high-quality offerings, but I would also like them to expand their markets faster than they are doing because these innovative marketing approaches are only barely scratching the surface. When you’re talking about a production level of 1,360 million kilos, if you have 100,000 or 120,000 kilos, going into one of these premium brands, it’s not really going to make much of an impact on the entire industry, but that’s not to demean their efforts. They are very important. Although Darjeeling produces only 7 million kilos annually, it acted as the flagship of India. Even today, when you talk about premium teas, the first thing that comes to mind is Darjeeling. These brands, which have come into the market recently, as long as they focus on exclusivity and high-quality tea, are able to lift the whole category up a little bit.
Aravinda: They become a face of the industry, isn’t it? Because they showcase the best of what is available and the best of what is possible.
Prabhat: Exactly. And you see what will happen then if somebody thinks that they would like it a lot and maybe they would try another few brands, their friends who can’t afford such high-priced teas would buy something else.
Aravinda: Will the domestic market compensate for what is lost in the export market?
Prabhat: Exports are now only 20% or less of our total production, so we need to get people in India to drink more tea and better tea. If we can do that, a lot of our marketing problems will be over, but exports are important because India needs exports, without exports, you can’t establish a stable and remunerative primary market for tea. So for both those reasons, we need to focus both on exports and boosting domestic demand.
Aravinda: What about the move to organic production? Darjeeling seems to view organic cultivation as a way to survive. Do you think that’s necessary, especially coming on the back of what happened in Sri Lanka?
Prabhat: Darjeeling needs organic because in Darjeeling the difference in yield between a conventional estate and an organic one is less than it is in Assam. Assam is a hothouse. Its temperature and extremely humid conditions are like a greenhouse. Under these conditions, conventional agriculture will give you almost double the yield, compared to organic agriculture. Since you produce so much less, you need to sell organic produce at almost double the price. In the recent past, or even in the last 20, to 30 years that hasn’t been the case. There is strong demand for organic tea but it’s at a price that is 30-40% more than conventional tea. And with that kind of a price premium for organic, it won’t be sustainable. And that’s what happened in Sri Lanka. That was a bold step they took. If they had stuck to it and if the entire global industry became organic, you would be seeing huge price increases. We would see prices moving into the $7-8 [per kilo] bracket worldwide, maybe more. But the whole industry, the entire global industry would have to convert.
Aravinda: Do you remain optimistic about the future of the tea industry in India?
Prabhat: If we evolve, yes, definitely. The organized sector needs to evolve and fast. As far as small growers are concerned, they’re definitely here to stay. That combination is unbeatable.
In south India, the tea estates are doing many other things. There are tea estates that are into floriculture. There are tea estates that are making very high-quality orthodox teas, which are selling extremely well. In the Northeast particularly, and Dooars, tea over the decades has brought better returns and better profitability than the south. An easier environment breeds lethargy. In the north, especially the Northeast, we have become lethargic, and we are unable to change with the times and keep complaining all the time. And that’s really not the way to go. We have to be focused and optimistic.
Smallholders have replaced plantations it total volume of tea produced, but the tea is often low quality
Part I: Current Challenges and Expectations
The Tea Board of India has been in the news recently for various reforms now underway. We spoke to Tea Board Chairman Prabhat Bezboruah to better understand the changes that are brewing with the Board and to learn his views on how the Indian tea industry is faring this year. Bezboruah has been chairman since 2017. An alumnus of IIM Calcutta and the Wharton School of Business, he is the first tea planter to hold the position.
Listen to the interview (Part 1)
Prabhat Bezboruah, Chairman Tea Board of India on expanding India’s domestic tea market and exports.
Aravinda Anantharaman: How has 2021 been for the Indian tea industry?
Prabhat Bezboruah: It’s been quite bad. 2020, despite the lockdown and that tea gardens were shut for a while, turned out to be a pretty good year for tea. When supply is restricted, prices go up. This year, Indian volumes have recovered almost to 2019 levels, but demand is sluggish.
I personally don’t believe demand contracted over the COVID epidemic. But it’s sluggish, it’s stagnant, growing at maybe 1% or so. 2019 was a bad year for tea, and 2021 will be a pretty bad year, especially for the South Indian tea industry where the prices are lower even than 2019.
Aravinda: Are rising costs and slowing exports the primary reason?
Prabhat: The primary reason is volume output. The crop has bounced back to 2019 levels. Remember, we had record exports in 2019. Last year, exports were about 210 mkg. This year they’re likely to be lower.
[In 2020 tea production declined to 1,257 million kilos and exports dropped by 16% to 208 mkg, down from 249 mkg in calendar 2019. CTC, at 150 mkg, accounts for nearly 60% of the country’s total tea exports – Tea Board Production by Region 2019/20].
The whole logistics chain is broken. There are various reasons Indian tea is uncompetitive. Kenyan teas are still available cheaper than equivalent Indian teas. South Indian doesn’t compete with Kenya. Orthodox exports from South India are decent, they compete with Sri Lankan exports. The South Indian CTCs are much lower in the value chain. Indian CTC exports are going to be very badly affected because Kenyans are available much cheaper. Overall, the export’s scenario isn’t very bright, and the domestic demand is also sluggish, prices are down every way.
Aravinda: Will growers carry forward tea again, this year, like in 2019?
Prabhat: There might be some carry forward stock because exports are going to be much lower than 2019, but in 2019 we made 1,340 million kilos and we exported 250 million kilos. If our exports had been at the 2019 level, you wouldn’t have seen any carry forward this year.
Aravinda: India’s hospitality industry has still not recovered from the pandemic. What is the impact on tea?
Prabhat: Hospitality is a fairly large chunk of demand in India. Hospitality includes tea stalls, roadside tea stalls. That’s a big demand. But the total out-of-home (OOH) demand for tea in India is only around 15% of the total demand. In-home drinking of tea has increased to offset some of the droppings in OOH. I don’t buy the story that Indians are drinking less tea in 2021 than they were even in 2019.
I don’t think you’re really going to see a very bad last quarter as far as demand is concerned. I don’t know about prices, but I think that demand will be there.
Aravinda: You’ve spoken about the need to liberalize the market. What would you say is the current reliance on auctions as a price discovery platform? What needs to change?
The tea auction should not be the price barometer, but it is. I don’t believe that a dual system can survive.
– Prabhat Bezboruah
Prabhat: I’ve always thought that the auctions are a good place to sell your tea provided it’s the only place to sell your tea. You can’t have a system that acts as the primary price discovery mechanism – that’s the auction – and then expose it to manipulation. There’s no overt collusion among the main buyers because they are companies that are bound by very strict ethical codes and they do follow those codes. I would hasten to dispel the notion that there is any overt collusion between, at least the big boys, so to speak.
In any auction, there’s what’s known as a demand multiplier. Even the biggest buyer, to get a million kilos of tea, for example, needs to bid for 2 or 2.5 million kilos of tea because they don’t get every lot they bid for. So if you take away demand from the auction if a buyer has a total tea demand requirement of 50 million kilos, and you permit him to buy 30 million outside the auctions, the level of competition in the auction will be affected not only for the 30 million that he doesn’t buy, but another 40 or 50 million that he would have had to bid for in order to buy that 30 million. It’s actually a no-brainer that if you have parallel systems running, even if there’s no overt collusion, you’ll be weakening the auction. So, therefore, the auction should not be the price barometer, but it is. I don’t believe that a dual system can survive. Now we need to sell 50% of our teas in the auctions, but buyers don’t need to buy 50% of their purchases in the auctions. So it’s a total hodgepodge. I have brought up the issue repeatedly at the Tea Board. Now they have Mahadevan’s report (a reference to the report by Prof. Mahadevan of the IIM-Bangalore, recommending the Japanese auction model) in hand. Even that is being implemented very slowly. That’s not a panacea, that will not be a panacea unless you ensure that 100% of tea is sold through the auctions. If you can’t do that, I feel that the government and the Tea Board should withdraw from the auctions. The brokers, who sell tea on behalf of the producers to the buyers can organize their own auctions. That won’t be a price barometer. It would be like any other sale.
There would be competition. The marketing of tea, the primary marketing of tea would be liberalized in a way that would benefit everyone. The alternative, as I told you before, and I’m repeating myself, is to have everything sold in the auction.
