India Undertakes Several Initiatives to Improve Tea Quality in Assam

July 8, 2019 No Comments Analysis Aravinda Anantharaman

Tea workers near Dibrugarh, Assam, India (Getty Images/Anthony Pappone)

This is the busiest time of the year in Assam, with the summer flush underway.

The Indian tea industry, including the Tea Board of India and the region’s producers are making a concerted effort to stabilize falling prices amid rising costs. These initiatives include offering a more transparent selling platform; and, insisting on quality and adherence to minimal acceptable standards. Tech is a significant enabler of transparency and therefore encouraged. This, in conjunction with other initiatives like Trustea certification, which serves as a benchmark for Indian tea producers with few non-negotiable clauses, should bring results in coming years. Meanwhile, the biggest demand on large producers remains: how to create a level playing field with the now sizeable production from small tea growers. Steps to showcase the teas of Assam and attract a newer generation to tea drinking are shaping up. 

Digial marketplace

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Assam is the largest tea producing state in India and is finally shifting its tea marketplace online. Until now, teas produced and earmarked for auction (about 50%) were auctioned at the single center in Jorhat. But now, a new vendor has been signed on to shift the business online. The B2B e-commerce firm mjunction recently won the bid to create this marketplace. The firm will design, develop, launch, and maintain this platform. Media reports the platform will handle 200 million kilograms of tea per year.

Where the Assam e-auctions differs from the Calcutta and Siliguri auctions is that it does away with brokers as middlemen. Until now e-auctions have merely replaced the actual auction location, from a physical room to an online one. Otherwise, the auctions proceed in much the way they used to, with brokers, traders, and sellers complying with the tea board’s pan India e-auction rules.

The mjunction platform is designed to facilitate “fair price discovery in a transparent and secured manner.”  Mjunction acts as the auction organizer, facilitating transactions between producer and buyers. The mjunction marketplace is expected to launch in three months.

Mjunction promises shorter turnaround time, transparency in pricing, an online catalog, tracking transactions, reports, and analytics that improve efficiency. Both large producers and the small growers are expected to participate in this marketplace, possibly a levelling ground for tea production in India.

Minimum prices (orthodox incentives)

The Indian Tea Association (ITA), a body of tea producers, is demanding the tea board establish minimum benchmark prices by tea grade to solve the problem in cost disparity between production expenses and sales. High production costs are the recurring complaint from the producers, who struggle with high labor costs that increases year on year. The rise of small tea growers is seen as a problem. Small growers don’t contend with high labor costs are able to offer tea at low prices. Now that production from small growers, known as the unorganized sector, almost matches that from the organized sector, the balance seems skewed in favor of the small growers.

However, a lack of expertise makes the quality of production by small growers suspect. Some equal the larger estates but low price and volume seems to be trumping quality. The Tea Research Association has brought out a machine to detect fine leaf (two leaves and a bud) count, where at least 30% fine leaf count renders a tea of standard grade. The producers are also asking the board to regulate the STGs and the Bought Leaf Factories (BLF), and tackle the use of pesticides by them, and ensure traceability from production through factory processing and packaging. Better price for better quality, is what the ITA is asking for, and that is the need of the hour for them to come out of the otherwise worrying state of the industry.

Ranking Tea Gardens

The tea board has, for the second time, taken up the task of ranking the tea gardens across the country, a SWOT (strength-weakness/opportunity-threat) analysis of sorts for the 1,421 tea estates. Three years ago when the tea board last published its rankings it awarded the highest A+ ranking to eight gardens in Assam. None of Darjeeling’s estates made the cut (ageing bushes and low productivity were cited as the reason). The parameters for ranking include agricultural practices, replantation, and rejuvenation of bushes, irrigation, effective quality control, condition of the workforce. The point of the exercise is to understand the problems plaguing the gardens, leading to quality production and price realization.

As an extension of this exercise, the tea board is also proposing the return of the Tea Awards, one more avenue to support and encourage the industry.

Tea Promotion

Assam’s multi-pronged approach to promoting their teas now includes a premium tea lounge, Chai Bar. Opened June 25 by the Guwahati Tea Auction Centre at its location on Guwahati’s GS Road, Chai Bar will be a single point access to the varieties of tea produced in Assam. It is supported by the Tea Board of India, Assam Tourism, North Eastern Council, and the Industries & Commerce Department of the Government of Assam. The lounge will sell singles estate origin teas from the organized sector with both tea tasting and buying will be made available here.

Subsidies

The Indian Tea Association is pushing for incentives to promote the manufacture of orthodox teas. Until recently, the industry relied on the Merchandise Exports from India (MEIS) scheme that offered exporters a duty credit of 2-5% of their export turnover. Since MEIS was not World Trade Organization (WTO)-compliant, the ITA considered disbanding it. Hopes lay with this year’s budget for other incentives. The budget, announced on July 4, has instead brought in a new problem for the producers. The finance minister announced a 2% tax at source on cash withdrawals exceeding $146,000 (INR10 million) effective September 1. The intent is to discourage cash transactions. Since tea regions lack sufficient banking infrastructure, and few workers have checking accounts, wages are usually paid in cash. The announcement was viewed as a new burden on the already struggling producers. The ITA has appealed to the government to exempt the tea industry until personal bank accounts for individual tea garden workers are operational. With a workforce of 1.2 million, the tea industry is directly impacted by any decisions made on labor laws and welfare programs. The government already has exempted several sectors including ATM operators, bankers, post offices and similar ventures routinely handling substantial amounts of cash.

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