by: dr m. selvakumar m. jeyaselvam tea industry: a tonic for … · by: dr m. selvakumar m....

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 India’s 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 country’s 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 wasn’t until the 19th century that tea growing spread to other countries and indig-enous tea was discovered in Assam.

Tea 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 33.69India 981.81 986.43 980.82 979.00 966.40 –1.29 23.76Kenya 310.58 369.61 345.82 314.20 399.01 26.99 9.81Sri Lanka 310.82 304.61 318.70 289.78 329.38 13.67 8.10Vietnam 142.50 148.27 166.38 154.00 157.00 1.95 3.86Turkey 142.00 178.00 155.00 153.00 148.00 –3.27 3.64Indonesia 146.85 137.25 137.50 136.48 129.20 –5.33 3.18Bangladesh 53.41 58.42 58.66 60.00 59.17 –1.38 1.46Malawi 45.01 48.14 41.64 52.56 51.59 –1.85 1.27Uganda 36.73 44.91 42.75 50.98 56.65 11.12 1.39Tanzania 31.35 34.86 31.61 32.09 31.65 –1.37 0.78Others 350.67 345.58 328.31 351.25 368.55 4.93 9.06Total 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 25.44China 286.59 289.43 296.94 302.95 302.42 0.17 17.45Sri Lanka 314.92 294.25 298.82 279.84 298.59 6.70 17.23India 218.73 178.75 203.12 197.90 193.29 –2.33 11.15Vietnam 105.12 110.93 104.00 95.00 98.00 3.16 5.65Indonesia 95.34 83.66 96.21 92.30 87.10 –5.63 5.03Argentina 70.72 74.88 77.23 69.19 101.00 45.97 5.83Malawi 41.96 46.59 40.07 46.55 48.58 4.36 2.80Uganda 32.70 43.64 42.39 47.92 50.83 6.07 2.93Tanzania 24.13 29.13 24.77 21.51 25.39 18.04 1.46Zimbabwe 11.38 7.60 5.65 7.54 8.50 12.73 0.49Bangladesh 4.79 10.56 8.39 3.15 0.91 –71.11 0.05Others 63.09 69.14 75.08 76.62 77.64 1.33 4.48Total 1581.63 1582.26 1656.11 1582.95 1733.27 9.50 —

*Provisional; Source: Tea Board

Market Survey


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. It’s 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 Turkey’s drop of 5 million kg, and Indonesia’s 7.28 million kg. Bangla-desh’s production was also margin-ally lower by 0.83 million kg, while Malawi’s dropped by 0.97 million kg and Tanzania’s 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 74.81South India 228.6 221.7 246.9 244.1 243.4 96.7 –0.29 25.19All 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 49.7West Bengal 237.11 236.34 233.13 221.57 229.78 50.5 3.71 23.8Others 14.09 16.51 13.29 13.30 12.96 1.0 –2.56 1.3Total North India 753.24 764.74 733.92 734.87 723.03 146.7 –1.61 74.8Tamil Nadu 163.66 160.53 170.53 169.36 170.72 67.9 0.81 17.7Kerala 59.46 55.97 70.29 68.96 66.75 26.7 –3.20 6.9Karnataka 5.44 5.19 6.08 5.81 5.89 2.3 1.38 0.6Total South India 228.56 221.69 246.90 244.13 243.37 96.9 –0.31 25.2Total All India 981.80 986.43 980.82 979.00 966.40 243.6 –1.29 100.0


Market Survey


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 year—an 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 China’s exports were lower by 0.53 mkg. Sri Lanka’s was higher by 18.75 mkg, and India’s 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-try’s 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 IndiaYear 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 2.5South 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 –13.8All 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


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


period January-May 2011 suggests that production was 96.7 mkg due to conducive weather patterns prevail-ing in south India, while north In-dia’s 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 year—a 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 IndiaCountry 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 12.5Kenya 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 4.5Nepal 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 8.6Indonesia 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 41.9Other 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 –23.2Total 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 flowers

Market Survey


Tabl

e VI

I

Tea

Sal

es a

t Ind

ian

auc

tion

Cen

tres

Auct

ion

Janu

ary

to D

ecem

ber

Janu

ary

to M

ay

Incr

ease

/ In

crea

se/

cent

re

2006

20

07

2008

20

09

2010

20

11

decr

ease

de

crea

se

Qu

antit

y Av

erag

e Qu

antit

y Av

erag

e Qu

antit

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e Qu

antit

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e Qu

antit

y Av

erag

e Qu

antit

y Av

erag

e

in 2

010

in 2

010

(’0

00 k

g)

pric

e (’0

00 k

g)

pric

e (’0

00 k

g)

pric

e (’0

00 k

g)

pric

e (’0

00 k

g)

pric

e (’0

00 k

g)

pric

e

over

200

9 ov

er 2

009

(Rs/

kg)

(R

s/kg

)

(Rs/

kg)

(R

s/kg

)

(Rs/

kg)

(R

s/kg

) in

qua

ntity

in

per

cen

t

Kolka

ta

134,

697

79.7

6 14

2,81

4 81

.90

147,

438

105.

12

152,

283

124.

63

154,

461

130.

38

48,0

06

114.

88

6044

7.

42

Guw

ahat

i 14

2,35

9 68

.09

152,

553

69.6

3 15

2,70

3 91

.73

138,

515

110.

42

130,

362

112.

93

32,9

48

100.

76

–725

5 1.

23

Silig

uri

87,0

58

64.9

0 86

,235

65

.92

89,9

20

85.2

7 85

,040

10

4.65

86

68

104.

43

25,4

85

99.5

7 58

93

2.52

Amrit

sar

114

30.4

2 10

5 32

.50

211

45.2

8 25

2 91

.38

—

—

—

—

—

—

Jalp

aigu

ri 28

2 62

.69

163

66.2

1 7

80.11

—

—

—

—

—

—

—

—

North

Indi

a

364,

510

71.6

2 38

1,87

0 73

.37

390,

279

95.2

7 37

6,09

0 11

4.86

37

1,51

1 11

8.20

10

6,43

9 10

6.84

46

82

4.29

Coch

in

59,0

64

54.4

1 57

,700

56

.05

61,6

31

71.0

8 57

,391

88

.56

64,2

40

77.4

5 26

,638

81

.47

8471

–1

5.51

Coon

oor

37,3

92

47.7

7 37

,736

44

.19

50,5

57

63.5

0 44

,607

75

.38

49,9

58

61.11

17

,778

67

.98

3456

–1

3.45

Coim

bato

re

23,3

04

49.3

8 23

,723

47

.49

28,0

81

63.7

6 24

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79

.23

21,1

31

63.4

9 70

29

69.9

5 –1

787

–17.

44

Tea

serv

e 14

,802

46

.21

13,3

75

41.8

1 15

,800

60

.86

15,2

75

72.0

9 16

,518

54

.98

6157

60

.63

1387

–1

8.14

Sout

h In

dia

134,

562

50.7

9 13

2,53

4 49

.70

156,

069

66.2

7 14

1,68

6 81

.03

151,

847

67.6

9 57

,602

73

.67

11,5

27

–15.

03

All I

ndia

51

4,40

4 66

.01

514,

404

67.2

7 54

6,34

8 86

.99

517,

776

105.

60

523,

358

103.

55

164,

041

95.2

0 16

,209

–2

.41

Sour

ce: T

ea B

oard

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 country’s 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 2010—a 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


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 kg—a gain of Rs 7.65 per kg. South India saw prices increasing from Rs 71.81 per kg to Rs 73.67 per kg—a 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

by: dr m. selvakumar m. jeyaselvam tea industry: a tonic for … · by: dr m. selvakumar m....

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