Tea Board panel recommends minimum sustainable price for tea; industry associations welcome move

A 10-member committee constituted by the Tea Board of India has recommended the introduction of a Minimum Sustainable Price (MSP) for tea, marking an important step towards addressing the widening gap between production costs and market realisations in the Indian tea industry.

The Indian Tea Association (ITA), Tea Association of India (TAI), United Planters' Association of Southern India (UPASI), Confederation of Indian Small Tea Growers Associations (CISTA) and Federation of Indian Tea Manufacturers Association (FITMA) were among the bodies that welcomed the move.

India produces nearly 1,350-1,400 million kilograms of tea annually, and the small tea growers account for nearly 55 per cent of the country's total production. According to a statement by the industry associations, tea prices have registered a marginal compound annual growth rate (CAGR) of approximately 2 to 3 per cent over the years, compared with an estimated CAGR of 10 to 14 per cent in input costs.

The disparity has affected producers' ability to sustain operations, invest, improve productivity and maintain quality standards, it added. Also Read | ₹1 lakh leaves: India’s wildest tea secrets revealed">Tea pakoras, moon rituals and ₹1 lakh leaves: India’s wildest tea secrets revealed CK Dhanuka, chairman of Dhunseri Tea and Industries, said the tea industry was facing mounting cost pressures, while price realisations had remained relatively stagnant.

Dhanuka said, "The tea industry is confronted with mounting cost pressures, while tea price realisations have remained relatively stagnant. With further increases in wage costs anticipated pursuant to the implementation of the Code on Wages, the financial viability of tea producers is likely to face additional challenges." Dhanuka said an MSP framework was essential to bridge the widening gap between production costs and market realisations and ensure the long-term sustainability of the industry.

"A Minimum Sustainable Price framework is therefore essential to bridge the widening gap between production costs and market realisations and to ensure the long-term sustainability of the industry. A Minimum Sustainable Price will help bring realisations in line with costs, so that the industry can protect accommodate wage revisions, protect employment and the competitiveness of Indian tea," Dhanuka added.

The statement added, the recommendation for the MSP are particularly significant given the structural challenges confronting the industry. Employment costs account for approximately 60 per cent of the total cost of tea production.

With the anticipated notification of floor wages by the Central and State Governments under the Code on Wages, tea producers are expected to face further increases in operating costs, it added. To address these concerns, the committee has recommended a composite index reflecting wage movements and the Consumer Price Index (CPI) for determining the benchmark MSP.

It has also proposed periodic reviews of the benchmark to ensure that the pricing framework remains aligned with changes in production costs and inflation. Also Read | In Bengal tea garden workers’ demands ahead of polls, a mention of Raghav Chadha Suneel Singh Sikand, chairman of the ITA, said the recommendation was an important policy intervention towards addressing the structural challenges confronting the Indian tea industry.

Sikand stated, "The recommendation for a Minimum Sustainable Price is an important policy intervention towards addressing the structural challenges confronting the Indian tea industry. Ensuring remunerative returns to producers is critical to sustaining operations, facilitating investment in replantation and productivity enhancement and securing the industry's long-term sustainability." According to the statement, the key expected benefits of a Minimum Sustainable Price for the tea industry include: - Enabling the industry to better accommodate future increases in wages and salaries arising from anticipated notifications under the Code on Wages.

- Improving the financial viability and sustainability of the tea industry, creating a stronger foundation for the sustained production of quality Indian tea. - Supporting better and more stable returns for small tea growers and registered tea gardens.