India’s 2020 tea output seen falling by 80 million kg due to pandemic lockdown

Tea production in India is estimated to drop by nearly 80 million kg in 2020 as a fallout of the nationwide lockdown following Covid-19 outbreak, the Federation of All India Tea Traders Association (FAITTA) said.

The annual tea production in India is around 1,300 million kg.

“However, because of restrictions imposed during the lockdown, fewer workers were deployed in tea plantations, affecting production in March and April. We are expecting tea production in 2020 to fall by 80 million kg which will result in Rs 2,000 crore loss in revenue for the industry,” FAITTA Chairman Viren Shah said in a statement.

In the North-East region of India, tea harvest typically takes place between March and November of the year. Of the four flush seasons during the year when tea leaves are harvested, the first flush begins from March and it is believed that the initial two flush seasons yield better quality and more expensive leaves.

This time, however, due to the lockdown and unavailability of labour, tea producers of the region say, leaves were left to grow older and thereafter pruned to make way for fresh leaves. Most tea gardens in the region are currently in a similar state having lost the more lucrative and premium tea leaves from the first flush harvest.

According to FAITTA, production costs have gone up considerably and job losses, pay cuts, and large-scale migration of workers are also serious constraints for packers and retailers. Already, tea prices at farm gates have increased by Rs 60-70 per kg. However, retail prices have not been increased.

Apart from dealing with rising costs due to lockdown, the tea industry is also facing steep fall in demand for tea from bulk segments such as hotels, restaurants, offices and industries.

Out-of-home tea consumption that amounts to about 40 percent of India’s total tea consumption has dwindled sharply, amounting to a loss of nearly 36 million kg per month.

Tea consumption in India is pegged at around 1,080 million kg per year, amounting to around 90 million kg a month therefore the loss in demand in the last two months is significant.

“Sales data of tea packers operating in the retail market confirm the significant decline in out-of-home tea consumption,” Shah said. While the consumption of tea at home would have increased during the lockdown, but it would not be adequate to compensate for the fall in out-of-home consumption.

“Tea is a staple drink of most households in India, but its consumption has been affected by declining disposable incomes. The lockdown has led to severe economic hardships among a large number of people, and a hike in retail prices to offset increased tea costs can further impact demand for tea. This has put tea packers and retailers in an extremely difficult situation,” Shah said.

Also, market analysts say that tea in India continues to sell well below the cost of production. The current fall in demand and increase in the cost of production will lead to severe distress among the producing community.

A senior official at Goodricke Group said that the tea industry has appealed to the commerce ministry and the state Governments of Assam and West Bengal for financial relief. They have asked for enhancement of working capital limit, relief in payment of electricity charges and payment of interest, etc.

The various relief packages announced by the government so far do not cover the tea industry. However, they are hoping that their issues will eventually be addressed.

Shampa Bahadur has been a business journalist for more than two decades. She has written for Business India, PTI Media TransAsia and India Infrastructure Publication Ltd among others. She has also written coffee table books. She can be reached at shampa@indoasiancommodities.in

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