The conversations around tea reforms continue. The Union Minister of State for Commerce and Industry, Anupriya Patel traveled to Assam last week. There she visited tea gardens and met with the stakeholders at an interactive session in Guwahati. She also visited the Guwahati auction center. The minister said that a sum of INRs 1000 crore (about $135,000) has been approved to be used exclusively for the overall development of tea garden workers in Assam and West Bengal. The focus of development was the health, education, and skill development of women workers and their children. She added that the government proposes to set up packaging and training facilities in Assam for agricultural and other commodities. The Minister asked all stakeholders to come up with a self-sustainable model for holistic development of the industry towards developing Assam as an export hub.

The Tea Association of India presented a paper to the Union Minister of State for Commerce and Industry, where they have asked the present import duty of 100% on tea to remain and not be reduced to prevent a greater influx of cheap tea into the country.

In the south, the dip in exports continues to cause concern. Local media reported the severe shortage of containers which has spiked freight rates significantly that the cost of transportation now equals the value of cargo. About 4,000 containers of tea are exported annually from Tamil Nadu. Freight charges that were $1950 to Rotterdam in December 2020 are $7,800 for a forty-foot container. Since the escalation in freight charges affects those contracted on CIF terms, it’s expected that the tea will be dumped in the auctions, affecting auction prices. 

PRICES & MARKET 

In auctions, Sale 39 saw good demand in Kolkata. Orthodox continues to lead in demand with the Middle East active. Darjeeling saw fair demand this week, with Tata Consumer Products more active than Hindustan Unilever. Prices remained similar to the previous week with Darjeelings seeing an average increase of Rs 24 this week. Guwahati saw good demand for leaf tea with prices remaining mostly unchanged. North India also saw fewer out lots as compared to the south. 

In the south, Coonoor and Coimbatore had a lower sale percentage, at under 50% for orthodox leaf and dust. CTC leaf did better. Cochin had the lowest sales percentage for orthodox dust, at 19%. Prices were not significantly different from the previous week. 109 kilos of green tea on offer in Coonoor remained unsold.

*New audio to be uploaded 10-6-2021

PHOTO CAPTION: Tea plantation in Darjeeling, West Bengal. Photo by TEJASHVI VERMA on Unsplash 

More developments are reported as the Tea Board of India launches a field mechanization subsidy scheme. This is to address the problem of labor shortage in tea gardens. The scheme will include small tea growers, apparently towards increasing the production of specialty tea. 

In further developments, the Minister of State for Commerce and Industry, Anupriya Singh Patel, announced that the Tea Development and Promotion Scheme has been extended to 2025-26. She was speaking at the annual meeting of the United Planters’ Association of South India. While the incentives for orthodox tea were discontinued, the ministry was focused on clearing pending subsidy claims. A provision of ?298.76 crore ($40 million) has been made for clearing subsidies in the tea sector. The minister also said that the government was monitoring tea imports. 

A new Coffee Act is scheduled to be announced in October, in response to planters’ demands to update the act. Whether a new Tea Act will follow suit remains to be seen.

PRICES & MARKET 

Prices did not change significantly from the previous week, the highest drop was in Darjeeling tea at the Kolkata auction, down by Rs 40 this week. Sale 38 in Guwahati saw good demand and major blenders were active for dust tea. Kolkata saw good demand for all tea types, with orthodox leading the list. Major blenders were active. The Middle East was active for orthodox tea while Hindustan Unilever and Tata Consumer Products continued to be active for Darjeeling monsoon teas. In the south, leaf tea sales volume was higher than dust. Combined leaf sales were 60-80% across Coonoor, Cochin, and Coimbatore. 233 kilos of green tea was on offer and about half of it was sold. 

India Tea Price Watch – September 25, 2021

Source: India Tea Board | India Tea Auctions

*New audio to be uploaded 9-29-2021

PHOTO CAPTION: Tea plantation in Munnar, Kerala, India. Photo by Bala Karthikeya Pavan Guda on Unsplash

Concerns about imports of low-price tea from Kenya and Nepal predominate this week. Indian media reported that Indian imports were up 176% year-on-year and that between Jan-June 2021, India imported 12.2 million kilos, already set to beat the total import of 2019, which was 15.86 mn kilos. Tea imported in large quantities is required to be re-exported but it appears the bulk of these teas are blended with Indian grown tea and sold in the domestic market.  The Indian Tea Association has asked the government to introduce a minimum import price for teas imported into India, to ensure they meet the requirements of the Food Safety and Standards Authority of India and also to see that these teas are not sold in India as domestic tea. Tata Consumer Products, Ltd., has been flagged for adding Nepal tea to their blends without proper labeling. TCP says that all purchases comply with Indian law.

Also this week, the Tea Act is back in focus. On 17th September, the Tea Board of India met tea producers and manufacturers to understand the relevance of the Act. The Act, drafted in 1953 has 51 sections of which about 17 have been repealed or suspended, including seven sections that were suspended earlier this month. The meeting was welcomed by the stakeholders as the Act has been a bone of contention for too long. Producer bodies also expressed concerns about the recent decision to lift permission to plant tea, saying this would add to surplus production. 

PRICES & MARKET 

South India saw subdued demand for tea this week as both upcountry and corporate buyers have focussed on north Indian auctions. About 70% of the total leaf tea offering was sold. Green tea on offer at Coonoor remanded unsold. In the north, Kolkata auctions saw good demand with the Middle East and CIS countries active for Orthodox tea. Tata Consumer Products and Hindustan Unilever were active for Darjeeling monsoon flush, which is largely consumed in the domestic market. Prices varied marginally from the previous week. Guwahati too saw good demand for tea. 

India Tea Price Watch – September 18, 2021

Source: India Tea Board | India Tea Auctions

*New audio to be uploaded 9-21-2021

PHOTO CAPTION: Tea plantation in Munnar, Kerala, India. Photo by © Javarman | Dreamstime.com

This week the Commerce Ministry distributed additional circulars describing amendments to the Tea Act, 1953. In the most recent circular, the board has said that permission is no longer required to plant tea anywhere in the country. Plantings were previously restricted but now, this move could encourage new tea regions to add tea cultivation, increase the number of small growers cultivating tea, and possibly increase the volume of production. While some planters have expressed concerns about the possible oversupply, it’s too early to see how it will impact the industry.

Also this week, the Darjeeling Tea Association has written to the state Chief Minister calling for a ban on the import of Nepal tea into India. The Association points to the financial crisis in Darjeeling’s tea industry and says the import of sub-standard Nepal tea is adding to their problems.

AUCTIONS

In the north, Kolkata saw good demand for all tea types. The Middle East and CIS were active among export buyers. Hindustan Unilever was active. Prices were nearly the same as the previous week. 

Guwahati saw good demand, with both Hindustan Unilever and Tata Consumer Products active. Prices and sales volumes did not change significantly from the previous week. 

In the south, Coonoor saw good demand for teas and CTC leaf sold 86%, thanks to major blenders participating in it. Orthodox leaf on the other hand saw exporters in play. Some whole leaf grades sold about Rs 2 to 4 higher than the previous week. Coimbatore saw low demand for orthodox leaf while Kochi had few takers for orthodox dust. In Coonoor, 109 kgs of green tea on offer was not sold. 

India Tea Price Watch – September 11, 2021

Source: India Tea Board | India Tea Auctions

*New audio to be uploaded 9-15-2021

PHOTO CAPTION: Munnar, Idukki District in Kerala, India. Photo by © Parin Parmar | Dreamstime.com

In the south, prices were better than Sale 34 for orthodox tea across Coonoor, Coimbatore, and Cochin but the percentage of sales was lower. While dust prices were lower than the previous week they also saw lower sale volumes.

In the north, Guwahati saw good demand for both leaf and dust teas. Prices remained almost the same as the previous week. A comparison of prices for Sale 35 between 2019 and 2020, places 2021 between the two years, higher than 2019 prices but lower than 2020. For instance, Leaf tea prices for Sale 35 were INRs 151.01 (2019), INRs 284.66 (2020), and INRs 172.83 (2021).

Among the top buyers, Tata Consumer Products (TCPL) was active for both leaf and dust while Hindustan Unilever (HUL) was active for dust teas. There were fewer out lots this week. 

Kolkata saw good demand for all teas, particularly orthodox tea. The major blenders were active. TCPL and exporters were active for Darjeeling tea. Prices remained similar to the previous week, with the exception of Darjeeling, whose average price dropped by INRs 44 from Sale 34. There were fewer out lots of the whole leaf and broken compared to fanning and secondary teas.  

India Tea Price Watch – September 4, 2021

Source: India Tea Board | India Tea Auctions

FOCUS ON EXPORTERS

This week, we spoke to members of the South India Tea Exporters Association, led by Dipak Shah, chairman of the association, about 2021, the challenges, and insights from exports.

They pointed the twin problems that have continued to be a significant challenge this year:  one is the rising cost of ocean freight, and the second is the problem of pesticides in tea.

Ocean freight has been a major cause of concern following the pandemic lockdowns and restrictions. The rates have gone up four-fold compared to rates prevailing in 2019.  This additional cost burden is largely borne by the exporters with only some buyers willing to share this cost, as most of the terms of sale are Cost and Freight (CNF). With contracts signed for one/two-year periods, they say, it’s impossible to negotiate for price revisions.

Exporters expect Government subsidies that will ease the present crisis. But that too is seeing changes. In 2009, tea was included under the VKGUY scheme wherein an incentive of 5% on FOB (Free on Board) value for bulk tea exports and  7% for value-added tea was provided.

In 2015, this scheme was replaced by the Merchandise Exports from India (MEIS) scheme, where the benefit was reduced from 5% to 3% for bulk tea and value-added tea. This incentive, which came as a duty credit scrip, has been stopped since 2020. This has been replaced by the RoDTEP scheme (said to be WTO compliant) which was launched this year, which offers an incentive of 1% of the Free on Board value. The rate of 1.7%, the exporters argue, is negligible.

Black Tea Leaf / Dust (Bulk): 1.7% with a cap of INRs. 3.60 per kg
Black Tea Leaf / Dust (Packaged Tea): 1% and there is no cap

Further adding to the problem is competition from producer-exporters who choose to sell their best teas directly to their buyers, making the auctions almost a dumping ground for lesser quality, and also lesser compliant teas. The exporters’ request is that producers bring some of their higher quality, and in particular, the teas that are certified EU-compliant to the auctions. This comes on the heels of the huge concerns of pesticides in tea and the varying requirements by country for compliance.

The members expressed their views that as merchant exporters, their entire stock is bought in auction or sourced directly from producers. The onus of testing for permissible residue levels lies with the producers. But the liability – should tea be rejected by the buyer – rests with the exporter. Since many of them buy and blend teas or create value-added products, they say it’s near impossible to identify the specific lot that was non-compliant which makes losses fairly significant. Interestingly, they also add that no certified organic tea is available to buyers as they are sold directly by the producers. The exporters would like producers to print compliance on the samples and lots that are offered in auctions so that exporters can confidently buy those teas.

The net effect of the said two problems indicates a decrease in exports – to the tune of 20-25% reduction this year; lack of price realization from high container costs, reduction in export incentives, and risk of returns because of non-compliance with residue levels – making it another tough year.

*New audio to be uploaded 9-8-2021

PHOTO CAPTION: India tea community nestled against the hills near Ooty Resorts. Photo by Aravind Teki | Dreamstime.com