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Market Survey

APRIL 2012

FACTS FOR YOU 11


BY: DR M. SELVAKUMAR
M. JEYASELVAM
TEA INDUSTRY: A TONIC FOR
THE INDIAN ECONOMY
Certain varieties of tea (like Darjeeling tea) are grown only in India and are in great demand
across the world . Hence the role of the government is crucial for the development of the
tea industry in the country.
Tea is always served to welcome
guests in modern homes as a sign of
hospitality.
Over the last few decades, tea
has become one of Indias most im-
portant commodities. Not only is tea
indigenous to India, it is also some-
thing that the country takes a lot of
pride in as India is the second larg-
est tea producer in the world after
China. Tea contributes greatly to
the countrys GDP growth as well as
foreign exchange earnings.
Accounting for over 30 per cent
of the global production, India is
a world leader in all aspects of tea
production, consumption as well as
exports. It is the only industry where
India has retained its leadership over
the past 150 years offering a variety
of products, from original orthodox
to CTC and now green tea, Darjeel-
ing tea, Assam tea and Nilgiris tea.
No other country has so many popu-
lar varieties of tea.
History of tea
It is said that tea was discovered
accidentally by emperor Shen Nung
back in 2700 BC. After a large meal
one day, he was relaxing in the gar-
den with a cup of boiling water. At
that time, some leaves from a nearby
tree fell into the cup. Without real-
ising it, he consumed the drink. He
enjoyed its taste very much and felt
that the drink relieved a lot of the
pain he was enduring at that time,
and thus the habit of tea drinking
was born.
The Indian legend tells of how in
the fifth year of a seven-year sleep-
less meditation, Buddha began to
feel drowsy. He immediately plucked
a few leaves from a nearby bush and
chewed them. This dispelled his tired-
ness. The bush was a wild tea tree.
The first tea used in England came
from China, and it wasnt until
the 19th century that tea growing
spread to other countries and indig-
enous tea was discovered in Assam.
T
ea is the most consumed
drink in the world after
water. It is a refreshing,
thirst-quenching bever-
age.
Tea is a natural product and vir-
tually calorie-free when drunk with-
out milk and sugar. It is served and
drunk in a number of different ways
across India. Sometimes it is brewed
and served with milk and sugar, or
the leaves are boiled with milk, wa-
ter, spices, and sugar. On railway
stations, trains and street corners,
sweet milky tea is poured from hot
kettles into disposable cups or mugs.
Market Survey
12 FACTS FOR YOU

APRIL 2012
The UK is the largest importer of
tea.
The English quickly developed
an almost unquenchable thirst for
the drink and began searching for
a way to procure tea without hav-
ing to buy it solely from China. In
1835, the English East India Com-
pany, upon discovery of an indig-
enous variety of Camellia Sinensis
in Assam, established its first ex-
perimental tea plantation there.
It was largely unsuccessful at the
beginning.
In 1856, varieties of tea from the
Yunnan and Keemun provinces of
China were introduced in Darjeel-
ing, India, which soon thrived. Some
of the most prized and expensive In-
dian black teas still come from this
highly mountainous region.
One year later, tea was cultivat-
ed in Sri Lanka, then referred to
as Ceylon. Luckily, for tea growers
and consumers a fungus wiped out
the coffee crop in Ceylon in 1869
then its main export. This led to
a drive to increase tea production
and exports from India. By the ear-
ly 1900s tea was being cultivated
in Java and Sumatra in Indonesia,
apart from Kenya and other parts
of Africa. Presently, the United
States has been added to the list of
tea producers as there is one plan-
tation in North Carolina.
The manufacturing
process
Tea manufacture involves con-
verting young fresh tea shoots into
dry black tea. This involves a num-
ber of processes from plucking to
packing. At the plucking stage, only
the top leaf tips are picked every
six to seven days. The tip leaves
are young and tender, resulting
in a better quality tea. The fresh
green leaves then need to have the
moisture removed from them. This
is done by blowing air through the
leaves for up to 14 hours, leaving a
soft and pliable leaf.
There are then two ways of treat-
ing the tea. Tea which is to be used
as loose leaf, is normally rolled gen-
tly to create a twisted appearance.
While tea which is to be used for
tea bags, is shredded and crushed
to produce a fine granular powder.
Rolling and crushing the leaves re-
sults in rupturing of the leaf cells,
which allows oxidation. This gives
the tea its distinctive black colour
and flavour. The tea is then dried
Table I
World Tea Production
(m.kg)
Country 2006 2007 2008 2009 2010 Per cent Share
of growth
China 1028.06 1140.00 1257.60 1358.64 1370.00 0.84 33.69
India 981.81 986.43 980.82 979.00 966.40 1.29 23.76
Kenya 310.58 369.61 345.82 314.20 399.01 26.99 9.81
Sri Lanka 310.82 304.61 318.70 289.78 329.38 13.67 8.10
Vietnam 142.50 148.27 166.38 154.00 157.00 1.95 3.86
Turkey 142.00 178.00 155.00 153.00 148.00 3.27 3.64
Indonesia 146.85 137.25 137.50 136.48 129.20 5.33 3.18
Bangladesh 53.41 58.42 58.66 60.00 59.17 1.38 1.46
Malawi 45.01 48.14 41.64 52.56 51.59 1.85 1.27
Uganda 36.73 44.91 42.75 50.98 56.65 11.12 1.39
Tanzania 31.35 34.86 31.61 32.09 31.65 1.37 0.78
Others 350.67 345.58 328.31 351.25 368.55 4.93 9.06
Total 3579.79 3796.08 3864.79 3931.98 4066.60 3.42 100
Source: Tea Board
Table II
World Tea Exports
(m.kg)
Country 2006 2007 2008 2009 2010* Per cent Share
of growth
Kenya 312.16 343.70 383.44 342.48 441.02 28.77 25.44
China 286.59 289.43 296.94 302.95 302.42 0.17 17.45
Sri Lanka 314.92 294.25 298.82 279.84 298.59 6.70 17.23
India 218.73 178.75 203.12 197.90 193.29 2.33 11.15
Vietnam 105.12 110.93 104.00 95.00 98.00 3.16 5.65
Indonesia 95.34 83.66 96.21 92.30 87.10 5.63 5.03
Argentina 70.72 74.88 77.23 69.19 101.00 45.97 5.83
Malawi 41.96 46.59 40.07 46.55 48.58 4.36 2.80
Uganda 32.70 43.64 42.39 47.92 50.83 6.07 2.93
Tanzania 24.13 29.13 24.77 21.51 25.39 18.04 1.46
Zimbabwe 11.38 7.60 5.65 7.54 8.50 12.73 0.49
Bangladesh 4.79 10.56 8.39 3.15 0.91 71.11 0.05
Others 63.09 69.14 75.08 76.62 77.64 1.33 4.48
Total 1581.63 1582.26 1656.11 1582.95 1733.27 9.50
*Provisional; Source: Tea Board
Market Survey
APRIL 2012

FACTS FOR YOU 13


at high temperatures to achieve
the correct taste. At this point,
the stalks and fibre in the tea are
removed, making it suitable to be
sold as loose tea. The tea is then
passed through meshes of varying
sizes to sort and grade it. The tea
power has to be very fine for tea
bags. This process of sorting is a
harsh one and it can cause the tea
to lose some of its flavour. That is
why loose tea usually has a better
flavour than the tea in a tea bag.
There are several types of tea:
white tea, green tea, oolong tea, black
tea, Pu-erh tea and scented tea.
World tea production
and exports
There are a fascinating vari-
ety of finely made teas from around
the world. Some very high-quality
teas are being produced at estates
in China, India, Kenya, Vietnam,
Sri Lanka, as well as in some other
countries, which are both enjoyable
and affordable. Its interesting to
see that while there are a great va-
riety of teas, formed into different
shapes and sizes, they actually all
come from the same plant, Camellia
Sinensis. Different flavours result
from different varieties, differences
in processing, different soils, climate
and elevation. As you may well know,
tea is the second most consumed
beverage in the world (especially
outside the US) next to water. Also,
tea is good for you. There have been
numerous studies that show that tea
consumption helps to prevent cancer
and heart disease.
The production of tea all over the
world during the period 2006-10 is
given in Table I.
World tea production during
2010 was 4066.60 million kg com-
pared to 3931.98 million kg reported
in the previous year (2009)a de-
cline of 134.62 million kg. This drop
in production could have been sub-
stantial but for the increase in the
crop from China, which was higher
by 11.36 million kg. India reported
a decline of 12.6 million kg, followed
by Turkeys drop of 5 million kg, and
Indonesias 7.28 million kg. Bangla-
deshs production was also margin-
ally lower by 0.83 million kg, while
Malawis dropped by 0.97 million
kg and Tanzanias by 0.44 million
kg. Countries that reported gains
in production include Kenya (85.14
million kg), Sri Lanka (39.6 million
kg), Vietnam (3 million kg), Uganda
(5.67 million kg) and others (17.3
million kg).
The table indicates the contin-
ued dominance of China in world
tea production with a share of 33.69
per cent, followed by India at 23.76
per cent, Kenya at 9.81 per cent and
Sri Lanka at 8.10 per cent. The con-
solidation in world production is also
evident from the share of the top
11 countries accounting for around
90.94 per cent of the global output.
Needless to say, production being
concentrated within a few countries
leads to greater price volatility.
Table III
Tea Production in India
(m.kg)
Year 2006 2007 2008 2009 2010 2011* Per cent Per cent
of growth of share
North India 753.2 764.7 733.9 734.9 734.0 146.7 1.62 74.81
South India 228.6 221.7 246.9 244.1 243.4 96.7 0.29 25.19
All India 981.8 986.4 980.8 979.0 966.4 243.6 1.29 100.00
*January-May; Source: Tea board
Table IV
State-wise Tea Production
(m.kg)
States 2006 2007 2008 2009 2010 2011* Per cent of growth Per cent of share
Assam 502.04 511.89 487.50 500.00 480.29 95.2 3.94 49.7
West Bengal 237.11 236.34 233.13 221.57 229.78 50.5 3.71 23.8
Others 14.09 16.51 13.29 13.30 12.96 1.0 2.56 1.3
Total North India 753.24 764.74 733.92 734.87 723.03 146.7 1.61 74.8
Tamil Nadu 163.66 160.53 170.53 169.36 170.72 67.9 0.81 17.7
Kerala 59.46 55.97 70.29 68.96 66.75 26.7 3.20 6.9
Karnataka 5.44 5.19 6.08 5.81 5.89 2.3 1.38 0.6
Total South India 228.56 221.69 246.90 244.13 243.37 96.9 0.31 25.2
Total All India 981.80 986.43 980.82 979.00 966.40 243.6 1.29 100.0
*January-May; Source: Tea board
Market Survey
14 FACTS FOR YOU

APRIL 2012
The world export of tea is given
in Table II. In line with the pat-
tern observed in world production,
tea exports during 2010 were also
higher. Globally, tea exported dur-
ing 2010 amounted to 1733.27 mkg,
compared to 1582.95 mkg in the pre-
vious yearan increase of 150.32
mkg. The increase in exports was
a result of the general macro-eco-
nomic trends in the world market.
In other words, though there was
no significant change in consump-
tion patterns, the global sourcing of
tea got affected due to the liquidity
crunch experienced in many of the
consuming countries.
In Kenya, exports were higher
by 98.54 mkg, while Chinas exports
were lower by 0.53 mkg. Sri Lankas
was higher by 18.75 mkg, and Indias
exports were lower by 4.16 mkg.
Kenya retained its first position in
world exports, with a share of 25.44
per cent, China moved to the second
spot with 17.45 per cent, Sri Lanka
moved to the third slot with 17.23
per cent, while India, with 11.15 per
cent of global exports, retained its
fourth slot.
The Indian tea industry
The tea industry has a very
prominent place in the Indian
economy. Even the poorest of the
Indian households buy tea for their
daily consumption. Tea is the coun-
trys primary beverage (almost 85
per cent of the total households in
the country buy tea), which makes
India the largest consumer of tea in
the world. Further, it is the cheapest
among all the beverages available in
India and very popular across all sec-
tions of Indian society. In terms of
employment, it is the second larg-
est industry by employing more
than a million people directly and
two million people indirectly, of
which 50 per cent are women.
The tea industry, to a large ex-
tent, drives the economies of the
regions where tea gardens are con-
centrated, for example, Assam.
The tea business in India is
about 150 years old. This agro-based
industry is a very important con-
tributor to the economy of India.
The main axis of the tea business
in India is located along the hills in
the Northeast in Assam and Darjeel-
ing, West Bengal, and in the south in
Tamil Nadu and Kerala. The regions
associated with small tea growers
are Karnataka, Tripura, Himachal
Pradesh, Uttaranchal, Arunachal
Pradesh, Manipur, Sikkim, Naga-
land, Meghalaya, Mizoram, Bihar
and Orissa.
Tea cultivation requires specific
climatic as well as soil conditions,
which is prevalent only in the afore-
said areas of India. The tea business
in India is mainly based on cultiva-
tion of tea variants like CTC, ortho-
dox tea and green tea. There is a
huge demand for green tea in devel-
oped countries for its rich aromatic
flavour and medicinal properties.
The trend of green tea consumption
is also on the rise in India due to the
rise in purchasing power and the
overall living standards of Indians.
Tea production in India
The Indian tea market is classi-
fied under North Indian and South
Indian teas. The production of tea
over the last six years is given in Ta-
ble III.
The domestic tea production
during 2010 was marginally lower
Table V
Tea Exports from India
Year 2006 2007 2008 2009 2010 2011* Per cent of growth
North India Quantity (m.kg) 98.8 102.7 116.2 110.5 102.5 33.0 7.2
Value (Rs million) 11917 12158 15924 17880 17008 6023 4.9
Unit value (Rs/kg) 120.60 118.38 137.04 161.77 165.97 182.71 2.5
South India Quantity (m.kg) 119.9 76.0 86.9 87.4 90.8 29.3 3.5
Value (Rs million) 8148 5943 8005 9978 8944 3063 10.4
Unit value (Rs/kg) 67.95 78.20 92.12 114.21 98.49 104.47 13.8
All India Quantity (m.kg) 218.7 178.7 203.1 197.9 193.3 62.3 2.9
Value (Rs million) 20065 18101 23929 27858 25952 9086 6.8
Unit value (Rs/kg) 91.73 101.29 117.82 140.77 134.26 145.88 4.6
*January-May; Source: Tea board
Notable facts about the tea industry in India
1. There are 1655 registered tea manufacturers in India.
2. A total of 2008 registered tea exporters control the export of tea from India.
3. The total number of registered tea buyers in India is 5148.
4. There are nine tea auction centres in India.
Market Survey
APRIL 2012

FACTS FOR YOU 15


period January-May 2011 suggests
that production was 96.7 mkg due to
conducive weather patterns prevail-
ing in south India, while north In-
dias production was 146.7 mkg. The
crop all over India was reported to be
affected by wet conditions, which led
to a flare up of pests, especially tea
mosquitoes.
The state-wise production of tea
in India is given in Table IV. As can
be seen, the state-wise production of
tea increased from the year 2006 to
2007. But from year 2008 onwards,
it showed a decreasing trend. Total
north Indian production declined,
except in 2007 and 2009. It de-
creased from 753.24 mkg in 2006 to
723.03 mkg in 2010. Total south In-
dian tea production shows a decline
in the first two years and an increase
in 2008, followed by a decrease in
production from 2008 to 2010. The
overall tea production decreased
from 981.80 mkg in 2006 to 966.40
the previous yeara decline of 0.7
mkg. All the south Indian states re-
ported lower crops, while in north
India the crop was just a tad lower
by 0.9 mkg in 2010.
Regarding production in 2011,
the available information for the
by 12.6 mkg than the previous year
and was placed at 966.4 mkg. The
decline in the all-India crop was
on account of a lower output from
south India. The south Indian pro-
duction was estimated to be 243.4
mkg compared to 244.1 mkg from
Table VI
Tea Imports into India
Country January to December January to March Per cent
2006 2007 2008 2009 2010 of growth
Vietnam Quantity (000 kg) 11,807 691 1770 830 1650 98.8
Value (000 kg) 404,723 36,843 102,917 48,700 108,900 123.6
Unit value (Rs/kg) 34.28 53.33 58.16 58.65 65.99 12.5
Kenya Quantity (000 kg) 2456 2941 3320 790 420 46.8
Value (000 kg) 222,816 225,052 360,324 97,100 54,100 44.3
Unit value (Rs/kg) 90.73 76.53 108.55 122.91 128.48 4.5
Nepal Quantity (000 kg) 3373 7415 7857 1110 530 52.3
Value (000 kg) 219,385 419,353 590,344 74,300 38,400 48.3
Unit value (Rs/kg) 65.05 56.56 75.13 66.99 72.77 8.6
Indonesia Quantity (000 kg) 1596 2126 3386 790 260 67.1
Value (000 kg) 106,708 135,099 223,010 56,100 26,500 52.8
Unit value (Rs/kg) 66.84 63.56 65.86 71.01 100.77 41.9
Other Quantity (000 kg) 4578 2814 3939 1290 2160 67.4
Value (000 kg) 240,487 229,617 343,092 122,900 158,000 28.6
Unit value (Rs/kg) 52.53 81.60 87.10 95.27 73.15 23.2
Total Quantity (000 kg) 23,810 15,987 20,272 4810 5020 4.4
Value (000 kg) 1,194,119 1,045,964 1,619,687 399,100 385,900 3.3
Unit value (Rs/kg) 65.43 65.43 79.90 82.95 76.84 7.4
Source: Tea board
Tea fowers
Market Survey
16 FACTS FOR YOU

APRIL 2012
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mkg in 2010, except for 2007, when
the production was 986.43 mkg.
Tea exports from India
Tea is a major export item for
India which contributes consider-
ably to the countrys foreign ex-
change earnings.
Table V shows the export value,
export quantities and export prices
of tea in the last six years. The ex-
port performance during 2010 was
a mixed bag. The quantity export-
ed fell from 197.9 mkg in 2009 to
193.3 mkg in 2010a decline of 4.6
mkg. The decline in the quantum
led to the total value realisation be-
ing lower at Rs 1906 million, and
the per unit price Rs 6.51 per kg.
The latest reports on exports
suggest that there is some growth in
the quantum exported and in value
realisation, possibly led by a higher
unit value. The volume of exports
during January-May 2011 was 62.3
mkg, valued at Rs 9086 million. The
unit value during this period was Rs
104.47 per kg in south India, and Rs
182.71 per kg in north India.
Tea imports
Even though India exports tea to
a large number of countries in bulk,
it imports some varieties of tea from
neighbouring countries. Table VI
shows the import details.
Even since the removal of quan-
titative restrictions in 2001, there
has been significant import of tea
into India. The majority of this is
through the duty-free route for sub-
sequent re-exports. Closer scrutiny
of tea imports into India indicates
that often the tea varieties imported
are of very low unit value, suggest-
ing relatively lower quality. When re-
exported, this amounts to tarnishing
the quality image of Indian tea in
the world market.
The government has stepped
in by formulating and implement-
Market Survey
APRIL 2012

FACTS FOR YOU 17


ing the Tea (Distribution & Export)
Controller Order in 2006, with the
objective of monitoring such im-
ports. Though this has helped in
monitoring the quality of imports, it
has not resulted in any reduction in
the quantum of imports.
During 2010, the quantum of im-
ports increased to 210 Th.kg, com-
pared with pervious year. The unit
value of these imports was Rs 76.84
per kg, which was lower by Rs 69.04
per kg, compared to the export unit
value of Indian teas, which was Rs
145.88 per kg.
Tea sales and prices in the
domestic market
The price of tea products deter-
mines the value and size of the mar-
ket. Therefore price is an important
factor in purchase decisions.
Table VII shows the sales quan-
tity and prices at different auction
centres in India. New benchmarks
were established at Indian auc-
tion centres during 2010 with the
all-India auction average showing
a decline of Rs 2.05 per kg over
the previous season, to finish at
Rs 103.55 per kg. The north In-
dian average auction price was Rs
118.20 per kg. This was higher by
Rs 3.34 per kg. The south Indian
prices were Rs 67.69 per kg show-
ing a decline of Rs 13.34 per kg
from the previous year.
The latest trends (January-May)
in domestic prices indicate that
north India and south India sus-
tained price increases. North India
saw prices increasing from Rs 99.19
per kg to Rs 106.84 per kga gain
of Rs 7.65 per kg. South India saw
prices increasing from Rs 71.81 per
kg to Rs 73.67 per kga gain of Rs
1.86 per kg. The market fundamen-
tals were strong through the first
half of 2011.
Plan of action
India is the largest manufacturer
of tea in the world (contributing 28
per cent) and an important exporter
(accounting for 13 per cent of world
exports). Certain varieties of tea (like
Darjeeling) are grown only in India
and are in great demand across the
world. Hence the role of the govern-
ment is crucial for the development
of the tea industry. A comprehensive
plan of action should be implement-
ed for its development.

Dr M. Selvakumar is assistant profes-


sor and research supervisor, PG and Re-
search Dept. of Commerce, Ayya Nadar
Janaki Ammal College, Sivakasi, while
M. Jeyaselvam is lecturer, Department
of Commerce, Government Arts College,
Ooty, Tamil Nadu