The Indian tea industry, which has been facing the pressure of increasing costs outstripping price realizations in the last few years, is hoping to get some relief in the new agriculture export policy.
Although India’s tea production has been rising steadily, the consumption has not kept pace, leading to dampening effect on the prices. Moreover, fixed costs of tea plantation sector have increased by 45% whereas price realization went up by about 17% in the last three years.
Exports also remained sluggish in the past few years and India exported around 240 million kg (mkg) of tea in 2017.
The Indian Tea Association (ITA) in order to promote exports has been urging for a higher Merchandise Exports from India Scheme (MEIS) rate of around 10% from the existing 5%. It has also asked the Government to offer incremental incentives to farmers to move from CTC to orthodox to cater to the export markets.
To recall, Cabinet last week approved a new agriculture export policy that aims to double agri-exports by 2022 by increasing infrastructure and eliminating export restrictions on various commodities. The policy seeks to expand India’s export basket as well as destinations by increasing high value and value-added agricultural exports.
ITA Secretary, Sujit Patra said, “I am yet to go through the policy document. But we had asked for the MEIS scheme to be increased to 10% in order to allow us to explore international markets like China, the US, Iran and Iraq”.
Ex- ITA chairman, Azam Monem said, green tea, organic tea and orthodox tea must typically qualify to be considered as ‘value addition’. Production cost of orthodox tea is higher by Rs. 20 a kg as compared to CTC. According to industry insiders, producers are not willing to change from CTC to orthodox due to large capital outlay, estimated loss of revenue and ambiguity in price realization.
The incentive should be increased from the existing level of Rs. 3/kg to Rs. 20 so that the industry could compete and produce more orthodox grade. India at present produces nearly 120 million kilograms orthodox tea, accounting for about 10% of the total tea production that stood at 1278.83 million kilograms in 2017.
Monem said, green tea and orthodox tea comprise more than 50% of the global export demand, hence enhancing orthodox production will be necessary for boosting exports.
