How could Indian tea industry make a model for a sustainable future? Read the expert…

How Indian Tea Industry could make a model for a sustainable future? Read the expert…

Tea is the most consumed beverage in the world and India. It offers direct employment to over 1.2 million persons in the country. Through its forward and backward linkages, another 10 million people derive their livelihood from the Indian tea industry. For these and other reasons, promoting long-term health, well-being and the environmental sustainability of our much-beloved tea sector should be a priority. However, the tea sector is experiencing a sustainability crisis, stemming from continuous low prices of tea squeezing the large and small tea producers.

Time and again, we come across theories that the smallholder tea growers (STGs) are the primary beneficiary of this growth in the production and consumption of tea. Such opinions use the logic that smallholders have young bushes, more productivity, and no social and statutory obligations. Therefore, they could produce more tea and after processing by the Bought Leaf Factories, they could sell it at cheaper rates. Unfortunately, this theory overlooks many other dimensions. The STG segment often works with their family labour and takes enormous financial risks. Even when we keep the opportunity costs aside, as per some analysts, the average cost of production for an STG would not be less than Rs 15 per kilo of green leaf in Assam. The STGs have an average landholding of less than one hectare and roughly produce an annual average of 11,000 kilos to 13,500 of green leaf per hectare.

The economic challenges are inextricably linked to the tea industry’s environmental and social challenges. According to preliminary evaluations by the Tea Research Association (TRA), climate change is having a substantial influence on tea producers since tea is mostly cultivated in rain-fed mono-cropping systems, and weather conditions affect optimal growth. According to the study, unless we adopt appropriate adaptation steps, tea may not exist on the Assam plains by 2050. Excessive rains cause topsoil erosion, which has a detrimental influence on productivity. Producers must purchase more fertilisers to maintain soil fertility and use more insecticides to combat rising pests. It not only raises the cost of tea production, but it also has an impact on food safety, which is one of the top buying concerns for most packers.

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On the social front, the north-Indian tea estates are barely meeting their statutory and wage requirements but the quantity of informal work in the tea industry is growing. The social progress of the tea workers community who have a higher aspiration due to access to global information today, has been relatively plodding. It is obvious that non-remunerative pricing in the tea-producing segment would make reaching the Sustainable Development objectives difficult in tea areas.

Stakeholders in the Indian tea industry must acknowledge the significant sustainability concerns, particularly considering the present pricing crisis and impending climate crisis, by:

Increasing tea producers’ profitability- RTGs (regulated tea gardens) and STGs (smallholder tea growers) – The structural developments in the Indian tea industry have generated new obstacles for many farmers, but they have also offered up new opportunities. The combination of STGs and RTGs, as well as the mainstreaming of e-commerce technology and mobile applications for farmers, give exceptional opportunities to depart from the traditional tea business model, which has grown more unsustainable for many tea producers. I believe that RTGs and STGs operating on the same platform should evaluate three distinct possibilities.

To begin, RTGs-STGs should work with the Indian government to establish minimum benchmark pricing for various grades of manufactured tea to stimulate sector growth and exports. Following a comprehensive analysis, the minimal benchmark price should be based on a cost-plus model. Similarly, there should be an engagement for setting up a benchmark pricing for acceptable standard of quality of green leaves. The RTGs and STGs’ collective action would transform tea in India from a buyer’s product to a seller’s product, establishing new quality and pricing norms for domestic markets.

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Secondly, RTGs and STGs should consider expanding beyond tea production and manufacturing. However, several entities handle tea between the producer and the consumer, adding and capturing value along the way. It raises the question of whether some of the intermediaries can be “cut out.” Nonetheless, the main entities throughout the value chain all provide essential functions or offer specific value that transforms green leaves into tea bags in our cups. A relevant concern is whether producers can take on more of these steps and associated efforts (such as marketing) to create and capture more value?

Thirdly, e-commerce and the internet have the potential to reduce market concentration and give a platform for producers to add and gain more value through more direct-to-consumer sales models. Direct-to-consumer models, while now niche, have the potential to expand with continued institutional support. It might entail aggregating producers to achieve economies of scale, as well as making administrative and logistical factors viable for many producers. Producer associations might perhaps provide some of the necessary institutional support. Of course, conventional offline markets will continue to be important in the coming years. However, digital traceability, as provided by the Trinitea programme, would promote product distinction, and alliances with global NGOs would allow for a different type of brand building for producers in both domestic and export markets.

As a result, as the next decade unfolds, tea producer associations will progressively become tea marketing associations.

Even efficient tea producers will struggle to stay competitive under existing and future market conditions, which include persistently low pricing, growing input costs, and destructive climate change consequences, and the SDG gap in tea-producing regions of Northern India will widen. Sustainability certificates are ill-equipped to address these problems. The way forward is sustained collective action by STGs and RTGs to establish a pre-competitive platform with a common fund to address climate-adaptive tea production, a greater role for premier producers’ organisations in marketing value-added quality tea in India and abroad. The tea industry’s growth is dependent on healthy and viable farmers, particularly smallholders; one thing is certain: this business-as-usual scenario is not sustainable for workers, brands, or the tea industry.

(Dr. Shatadru Chattopadhayay is the Managing Director of Solidaridad for Asia, an international civil society organisation. Views expressed in the article are author’s own.)

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About Dr. Shatadru Chattopadhayay

Dr. Shatadru Chattopadhayay is the Managing Director of Solidaridad for Asia, an international civil society organisation.

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