Assam’s planters are responsible for more than 11% of the world’s total tea production

More people are drinking tea, but the world’s No. 2 producer is reeling

By Devjyot Ghoshal 2 hours ago

Devjyot Ghoshal is a former Southeast Asia correspondent for Business Standard. He will attend Columbia University’s journalism school as a Fulbright scholar this fall.

KOLKATA, India—Headlines about India in recent days have focused on heavy rains and a rescue mission in Uttarakhand, a northern province straddling the Himalayas. It rained 275% above normal levels last month, initially marooning more than 100,000 people and killing hundreds.But in the far east of the country, the verdant state of Assam is seeing a lack of rainfall and a resulting falloff of tea production. The region is a mainstay for India’s tea industry, the second largest producer of the commodity globally.

The Indian Tea Association, the oldest organization of tea producers in the country, says production fell 6% in May, a critical month in the season. Monsoons came late, notes A.N. Singh, the association’s chairman.

That’s bad news for Assam’s planters, who together churned out about half of the estimated 1,111 million kilograms of tea that India produced in 2012. Seen another way, that one single region in India’s east is responsible for more than 11% of the world’s total tea production.

The tea industry is no stranger to crisis. Between 1999 and 2007, global tea prices fell, even as planters struggled with high labor costs and security threats in a region also known for it insurgency movement. Tea bushes aged.

Then in 2008, tea prices suddenly spiked, supporting an industry that had been forced to trim itself during the long recession. Better management practices, extensive replantation and an ebbing insurgency returned profitability to the sector—along with rising global demand. The average price of Indian tea last year, for instance, was more than double of 2006 levels.

Today, tea is the world’s most widely consumed beverage after water, and  global consumption of the drink is likely to outstrip that of coffee in the long run, according to a 2011 report. In the US alone, about half the population drinks tea everyday, mostly black tea, of which India is the biggest producer. It is also its biggest consumer.

Yet India trails China as the world’s largest tea producer and the gulf between them is growing (the gap widened 230% between 2007 and 2010). Kenya takes the third spot, followed by Sri Lanka and Vietnam.

“It is a matter of concern to see that while the country witnessed continuous decline in tea production during 2007-10, China during the same period has increased its production every year from 1140 million kgs in the year 2007 to 1475 million kgs in the year 2010,” according to a report presented before the Indian Parliament last year.

But tea is still big business in India, employing  more than 3 million workers and raking in about $598 million in exports in 2011-12, with much of it going to Russia, Ukraine, Kazakhstan, Afghanistan and, across the border, into Pakistan.

The bigger concern for foreign buyers of Indian tea, however, has been inconsistent quality, a factor that dampens prices for producers. In the face of rising global competition and the likelihood of lower domestic production, the government-run Tea Board has swung into action. But the fate of this region still involves a bit of reading the tea leaves.