Exports are essential in earning foreign exchange for the nation and Indian tea has traditionally been a major contributor in this regard. In the early 1980s, Indian tea exports accounted for around 40% of domestic production. By the end of the 1980s, the share had fallen to 30%. The decline continued until 1994, when exports accounted for only 20% of domestic tea production. Thereafter, the proportion of exports improved to about 24% of national production in 2003. However, exports again decreased to 19% of production in 2007 and 21% in 2008. In 2016, exports as a proportion of production decreased by only 17.55%.

India’s tea exports peaked at around 213 million kg in 1989, but fell to a low of 151 million kg in 1994. Exports then increased to 210 million kg in 1998 before dropping to 174 million kg in 2003. Exports reached 179 million kg in 2007 and in 2016 tea exports increased to 222 million kg.

Lose the leading position

From a leading position in international markets until 1991, India lost its market share in the international market to Sri Lanka, Kenya and China. A significant loss of market share occurred in the case of the former USSR, where India had held a near monopoly position from the 1960s to 1990s.

Since the late 1990s, some recovery in export volume has occurred, but in general, India’s tea exports have followed a downward trend over the past two decades. Kenya was the world’s largest tea exporter with exports of 383 million kg in 2008, followed by Sri Lanka with exports of 299 million kg, China with exports of 297 million kg and India with exports of 203 million kg. The main destinations for Kenyan exports in 2008 were Egypt, Pakistan, the United Kingdom and Sudan. Chinese exports of 297 million kg in 2008 were mainly destined for Morocco, Uzbekistan, the United States and Japan. Green tea dominated Chinese exports, with exports estimated at 230 million kg in 2008.

Despite accounting for around 26% of global tea production, India accounts for only 12% of global tea exports. Lately, India’s international competitiveness in tea exports is seen to be in decline with a decline in its share in world exports. While a preeminent supplier of tea to the world, India has lost ground in virtually every export market.

Various reasons that have been put forward for the poor performance of tea exports by India include:

a) Decline in production;

b) Collapse of certain major markets such as Iraq;

c) Increased production in some major competitor countries such as Kenya and Turkey;

d) Switching of major buying countries to their preferred supplying countries such as UK and Pakistan from Kenya.

Reasons why India is losing in foreign markets

a) Unfavorable age profile of a significant proportion of tea plantations in India: This, it is pointed out, has led to a drop in productivity and an increase in production costs.

India’s exports are dominated by CTC tea, where it faces increased competition from Kenyan tea. The tea industry in Kenya is generally characterized by a younger bush age profile, higher yields, lower production costs and lower prices.

b)Tariff and non-tariff measures: These have been imposed by some tea importing countries. Lower levies by Russia due to changing consumer preferences and lower production of Orthodox teas, which have greater global demand, are cited as other causes for the drop. This has led to the emergence of Sri Lanka and Indonesia as major exporters, mainly due to their ability to supply good quality Orthodox tea, it has been pointed out.

c) Modification of consumer preferences: Traditionally, the standard loose BT (Broken Tea) was the most common format for consumption and import. However, since the 1990s, changing consumer preferences in major importing countries such as the UK and Russia have resulted in higher growth of bagged tea compared to loose tea. In Russia, tea bags are preferred by the working class and consumption in this form has increased. This favored Sri Lankan tea in Russia.

d) Change in production from India: The shift from orthodox tea production to CTC tea is cited as another cause. In comparison, other competing countries have continued to produce their respective traditional types of tea, maintaining consistency in the type of supply to their export destinations.

e) Decline in quality: This is said to have been caused by the rise of BLFs (bought leaf factories) which produce cheap quality tea by buying and processing green leaves from small producers. The growing share of poor quality tea produced by these players is said to not only affect domestic price levels but also harm the perception of Indian tea quality in export markets. Furthermore, the mixing of Indian teas with cheaper varieties and the export of these as Indian tea has also altered the perception of quality.

f) False varieties: It is pointed out that lower quality teas are often passed on as Darjeeling tea. Due to its proximity, some Darjeeling tea producers import green leaves from gardens in Nepal and sell them as “Darjeeling tea”, thereby undermining the geographical indication value of Darjeeling tea.

g) Lack of marketing initiatives: The lack of marketing initiatives would have led the industry not to enter new markets and to obtain preferential tariff treatment from countries. Lack of competition in the early days, remunerative prices in domestic markets and buoyant exports from the CIS provided little incentive for the Indian tea industry to develop other export markets. On the other hand, Sri Lanka markets its products aggressively and enters markets in which it had little presence before.

India is the world’s second largest tea producer after China. Eighty-five percent of the tea produced in the country is consumed (1,145 million kg in fiscal year 2021) within the country itself. Tea worth $704.36 million was exported overseas in FY21; Russia, Iran, the United Arab Emirates, the United States and China are the main export markets for Indian tea, where flavors such as Assam, Darjeeling and Nilgiri, among the best in the world, known for their strong flavors and intense aromas, are popular. Despite this reputation, India has failed to capitalize on its tea export potential. It is the fourth largest exporter (12% of world exports) after Kenya (28%), China (19%) and Sri Lanka (14%). According to observers, various reasons such as lack of access to capital, inefficient supply chains and non-adaptiveness to changing trends and technologies can be held responsible for this slide.



The opinions expressed above are those of the author.