Tea industry groups back panel's proposal for minimum sustainable price as costs outpace prices

Five tea industry associations in India have endorsed a government panel's suggestion to establish a minimum sustainable price for tea, citing that production costs are escalating significantly faster than the prices received by producers. The 10-member committee, established by the Tea Board of India, has proposed a benchmark price tied to a composite index reflecting wage movements and the consumer price index, with regular reviews to maintain alignment with costs and inflation.

The industry groups called for the Ministry of Commerce to officially announce the MSP as soon as possible. India ranks second globally in tea production, with an annual output of approximately 1,350-1,400 million kilograms. Small growers contribute roughly 55 percent of this output. According to industry bodies, tea prices have grown at an annual rate of around 2-3 percent, while input costs have increased by an estimated 10-14 percent each year.

Labor expenses constitute the largest portion of production costs, accounting for about 60 percent, and producers anticipate further hikes after central and state governments implement minimum wages under the Code on Wages. C K Dhanuka, chairman of Dhunseri Tea and Industries, expressed that the industry is grappling with mounting cost pressures while tea prices remain relatively stagnant.

Citing this, the backing associations - the Indian Tea Association, the Tea Association of India, the United Planters Association of Southern India (UPASI), the Confederation of Indian Small Tea Growers Associations, and the Federation of Indian Tea Manufacturers Association - argued that a minimum sustainable price would aid producers in absorbing wage increases, ensure returns for small growers and registered gardens, and stimulate investment in replanting and quality.

Bijoy Gopal Chakraborty, president of the small growers' confederation, emphasized that a well-structured Minimum Sustainable Price mechanism would facilitate more profitable and stable returns for small tea growers. Deven Singh, chairman of the tea manufacturers' federation, stressed that the framework must accurately reflect the operating economics of bought-leaf factories.

Industry bodies also emphasized the need to account for regional variations in climate, productivity, and costs, ensuring the framework remains adaptable to these differences, as stated by Sanjith R Nair, secretary general of UPASI.