MUMBAI: Five tea industry bodies have welcomed a Tea Board of India committee’s recommendation to introduce a Minimum Sustainable Price (MSP) for tea, saying it will help close the widening gap between production costs and the prices producers get.
The 10-member committee has suggested that the benchmark MSP be set using a composite index of wage movements and the Consumer Price Index (CPI), with periodic reviews to keep it in line with costs and inflation.
The Indian Tea Association (ITA), Tea Association of India (TAI), United Planters’ Association of Southern India (UPASI), Confederation of Indian Small Tea Growers Associations (CISTA) and Federation of Indian Tea Manufacturers Association (FITMA) want the Ministry of Commerce to notify the MSP at the earliest.
Costs outpacing prices
India, the world’s second-largest tea producer, makes about 1,350–1,400 million kg of tea a year, with small growers contributing nearly 55%. Tea prices have grown at a CAGR of about 2–3%, while input costs have risen by an estimated 10–14% a year.
Wages make up around 60% of production costs, and the industry expects them to rise further once floor wages are notified under the Code on Wages.
C.K. Dhanuka, Chairman, Dhunseri Tea and Industries, said price realisations have stayed largely stagnant despite mounting costs. “A Minimum Sustainable Price framework is therefore essential to bridge the widening gap between production costs and market realisations,” he said.
Small growers and factories
The MSP matters most for small growers, who depend on green-leaf prices, and for bought-leaf factories (BLFs) that buy their leaf and process it into made tea. When made-tea prices fall short, factories have less room to pay growers.
Bijoy Gopal Chakraborty, President, CISTA, said a properly structured MSP would ensure “more remunerative and stable returns for small tea growers”. Deven Singh, Chairman, FITMA, said the framework must recognise the operating economics of BLFs.
Suneel Singh Sikand, Chairman, ITA, called it an important policy intervention, while TAI President Shailja Mehta said better finances would help producers invest in quality and modernisation. UPASI Secretary General Sanjith R. Nair said the framework must reflect differing costs across tea-growing regions.
The associations said an MSP would also help the industry absorb wage revisions, invest in replantation and improve the export competitiveness of Indian tea.