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India: looks at low-quality tea imports to quench domestic thirst.

India: Looks at low-quality tea imports to quench domestic thirst

Will India, one of the world's two top tea producers and exporters, start importing tea to satisfy rising demand in this nation of 844 million people?

That question is being hotly debated in the Indian capital, New Delhi, where newly released census figures show the population has grown 166 million in the last 10 years.

The Commerce Ministry's Tea Board, which supervises the huge Indian tea industry, is saying nothing officially, according to J.K. Chawla, who's in charge of the Tea Board's New Delhi office. But behind the scenes, there's lively discussion of the possibility of importing cheaper CTC (Cut, Tear, Curl, the processing method) teas from Kenya and possibly India's biggest tea rival, Sri Lanka, in order to quench Indians' tea thirst - and to make more highgrade Indian tea available for export.

A Western diplomat in New Delhi says "tea is an industry threatened by domestic consumption," with domestic demand rising about 4% yearly while Indian tea production is barely holding its own and certainly hasn't hit the "targets" set by the Tea Board in the 80's. Indeed, the "targets" set for the first half of the 90's are even higher and are likely to be even more unreachable, given the current insurrection of the United Liberation Front of Assam in that vital northeast, tea-growing state.

The "Planters Chronicle," a trade publication of the United Planters Association of Southern India, has discussed the tea-import possibility in a recent issue. The publication notes that exports of Kenyan tea to the U.K. and Pakistan are "tending to stagnate." Therefore, it says, Kenyan tea merchants are "now looking upon India as the potential market to tap."

The "strategy," says the publication, "is to make the Indian Government to agree." And it notes that "recently Sri Lanka has begun CTC manufacture on the assumption that India's Government would permit this domestically consumed variety into the market as a response to bilateral economic cooperation."

"Planters Chronicle" is not completely happy about this development pointing out the import of "low-grade (CTC) tea, ostensibly for value addition and re-export, will not bring about a net gain in foreign exchange earnings." It says Indian exports will suffer, "we may well land up by promoting the teas of our competitors." It advocates converting possible imported tea "to instant tea, a real value addition instead of re-packing for reexport." And it notes that when India "banned CTC exports in 1983, world prices hit the ceiling... if import is now contemplated, prices would rise further and there would be no longer any cheap teas to purchase."

Nevertheless, the pressures are on India at least for India-Sri Lanka cooperation in the world tea market, with an article in New Delhi's "Tea Time" magazine suggesting that the major producing countries - India and Sri Lanka - should restrict supply based on their total export share in the world market so that export prices could be "stabilized."

"Tea Time" urges particular attention to cooperation in development of new types of teas, for which there would be a "reasonable demand," rather than simply increasing supplies. And it stresses the importance of turning to tea bags, which have become a growing market segment in tea-drinking countries in the last 20 years.

Tea bags require quick brewing of small leaf tea, typical of the tea produced through the CTC method. One kilo of CTC tea produces 600 to 700 cups against 400 cups with orthodox tea.

Through 1988, world CTC: production had risen to 861,000 metric tons, a 44.4% rise in 10 years. By contrast, the increase in production of orthodox tea in the same decade was only 20.9%.

Overall, India continues to be the world's largest tea producer, accounting for about 28% of world production of 2.48 million metric tons in 1989, according to the latst report of the US. Embassy's Foreign Agricultural Service in New Delhi.

There are about 13,400 tea "estates" or plantations, covering 418,000 hectares, in India, and the Tea Board's New Delhi chief, Chawla, says that in the northeast these are "mostly big plantations," each covering 100 hectares or more. In India's south, he says, the tea estates are much smaller, normally 10 hectares or less, and the Tea board is making an effort "to develop new bushes and get rid of 100-year-old ones by subsidizing farmers." Some effort also is being made to expand tea cultivation in non-traditional states such as east-central Orissa and Arunachal Pradesh in the mountains along the Chinese border to the far northeast. But progress has been slow.

The U.S. report says "traditional Chinese tea varieties are being gradually replaced by higher-yielding Assam clones" developed at the Tea Board's research institutes.

India's major tea types are CTC, about 71% of all production, orthodox or black, about 28% of production, and green tea, the remaining 1%. CTC is mostly for domestic consumption, the others for export, along with a dab of instant tea.

While India remains the world's biggest tea producer over all, it sometimes gives way to Sri Lanka as the world's biggest tea exporter - the reason, of course, being that so much India tea is consumed by its huge home population.

That's what happened in calendar 1990, when Sri Lanka outstripped India's tea exports by more than 10,000 metric tons. At least part of this was due to the Persian Gulf War, during which India lost its important Iraq market completely, as well as the Kuwait market, and suffered some losses in other Middle Eastern markets.

The 1990 figures show that Sri Lanka exports 215,980 metric tons of tea, an 11,000-ton increase over 1989, while Indian exports fell more than the Sri Lanka gain.

Sri Lanka exports to Iran, for example, doubled in 1990, while Indian exports dropped, and Sri Lanka increased its tea exports to Jordan by 26,000 tons. Jordan isn't even in India's "top 10" list of countries receiving tea.

Biggest Indian tea customer is the Soviet Union, which normally receives more than half of India's tea exports. In 1989, according to the U.S. report, the Soviet Union received 117,992 metric tons of Indian tea, followed by the U.K. (30,442), Iran (13,270), Egypt (11,930), Poland (6,980), United Arab Emirates (4,675), Saudi Arabia (4,320), West Germany (3,799), Irag (3,499) and Afghanistan (3,476). The US. imported 2,501 tons of India tea.

In the second half of 1989 until late spring of 1990 Indian tea prices took a sharp upswing, reaching a record peak of $2.67 per kilo in the all-India auction. Since then prices have continued upward, with CTC retailing around $3 per kilo in stores and Darjeeling tea costing twice as much.

The take from India's tea exports in 1989 amounted to about $470 million against $410 million in 1988, though part of this is affected by a favorable rupee-ruble exchange rate with the Soviet Union. In addition, the Soviet Union is taking more Indian tea, especially lower-priced CTC, to replace lower-quality Soviet tea formerly grown in the nuclear-disaster region of Chernobyl.

The Tea Board's export "targets" - aimed at bringing more foreign exchange to the financially pressed Indian Government - have consistently been overstated. The board's 1985-86 fiscal year "target" (India's fiscal year runs from April 1 to March 31) was 235,000 tons of tea exports, while only 214,000 tons actually were exported. The following years were: 1986-87, 244,000 "target," 196,000 exports; 1987-88, 252,000 "target," 202,000 exports; 1988-89, 267,000 "target," 204,000 exports; 1989-90, 281,000 "target," 200,000 tons exported.

Nevertheless, the Tea Board is raising its sights, with the 1990-91 "target" 255,000 tons; 1991-92 265,000 tons; 1992-93, 277,000 tons; 1993-94, 291,000 tons, and 1994-95 a whopping 305,000 tons.

Some regard these "targets" as unrealistic, especially with the increasing tea consumption in India itself, with the United Liberation Front of Assam and the nascent Bodo tribal insurrection in Assam making tea plantation owners insecure, and with the lack of modernization in tea processing factories. In addition, power supplies are erratic in some regions, there is a dearth of quality woods for making tea chests (though some other packaging is now being tried) and, oddly enough, in a nation of 844 million people where the per capita income is just $300 yearly there is a shortage of labor around some tea plantations.

While India is the world's largest tea producer and consumer, the per capita tea consumption for Indians - most of whom take their tea with milk and sugar - is very low, around 630 grams compared to 860 grams in Pakistan and 2.81 kilos in the U.K. About 70% of Indian tea is traded in bulk, mostly in the countryside (where 70% of the populace lives), while 30% is traded in packets, mostly in the enormous cities. Soft drinks, fruit juices and ready-mix concentrates have made inroads in the urban market - multi-national Pepsi recently has moved in strongly, for example - but tea is still overwhelmingly popular in rural areas.

The U.S. is a major market for recently developed Indian instant tea, of which 900 metric tons were exported last year, and the Tea board and private companies are exploring the possibility of selling decaffeinated, organically grown and flavored teas to the U.S.

The Tea Board, with India's Government, has set a "target" for production of 900,000 metric tons of tea in the government's eighth Five-Year Plan, ending in 1995. The 1989 output was 684,136 metric tons - hurt somewhat by drought - and 1990 topped 1988's 701,087 tons, reaching 714,660 tons. Of the 1990 total, 76% came from India's north. Tea industry sources say the 1995 900,000-ton goal is too high and that, at best, only 825,000 tons will be produced.

The bulk of the tea trade is private, with large plantations having their own processing plants. Small tea growers sell their output to factories owned by state government or cooperatives.

Yield per hectare hit a record 1,693 kilos in 1988 but was down to 1,645 kilos in 1989, with yield around one quarter higher in India's south because of year-round plucking. In the north the tea plants become dormant during the winter.

The Tea Board, pushed by India's Government, is now focusing on productivity, because there isn't a lot more land for tea plantations, even though India is half the size of the continental U.S. Indian tea officials say that theoretically a tea plantation could produce more than 20,000 kilos per hectare, but the best yield so far has been only 6,000 kilos per hectare. The fiber waste from tea production has a high caffeine content and is being sold to soft-drink manufacturers and pharmaceutical companies. There are no government pricesupport programs for tea but the Tea Board operates a variety of financing and subsidy programs aimed at raising productivity. Tea producers are required to sell 75% of their output through auctions.

Still a Profitable Industry

The tea industry remains profitable, despite rising wages - the only way to overcome the labor shortage - and despite significantly rising costs for factory in-puts.

The Soviet Union remains an aggressive buyer of Indian teas and the end of the Persian Gulf War should ease constraints on the Middle East export market.

Some sort of cooperative agreement with Sri Lanka could give India new leverage on the world tea market and also satisfy the domestic market by holding down prices, with or without the addition of Kenyan tea. Part of this, of course, depends on the political situation within the West Virginia-sized island of Sri Lanka, whose 18 million people have been plagued for years by an uprising of Tamil separatists, some of whom have migrated to India's southernmost state, Tamil Nadu, to become tea workers. And India continues to worry about unrest in Assam and even in Darjeeling, along the Sikkim boarder, where vital tea production can be, and sometimes is, disrupted.

Those political problems - and increased productivity - are the main question marks now hovering over India's big tea industry.

High yielding tea clone

being developed in India

Indian researchers at the Tocklai Station of the country's Tea Research Association may have found the solution to increasing India's tea productivity without increasing the area planted in tea bushes.

Professor Nurul Hasan, who is West Bengal State's Governor based in Calcutta, has announced development of a high-yielding tea clone, called TV 29, which the researchers say would yield 6,500 kilos of tea per hectare after six years of growth instead of the 1,600 to 1,700 national average. The Tocklai researchers worked on the clone nine years and say it brews into a cup of good-quality CTC tea.

The association, founded in 1911, has developed more than two dozen other tea clones and 10 improved hybrid tea seeds used by India's tea industry.
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Title Annotation:includes related article on development of tea clone; domestic demand for tea
Author:Steif, William
Publication:Tea & Coffee Trade Journal
Date:Jun 1, 1991
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