India is the second-largest tea producer in the world, after China, and provides a livelihood to millions of people. The industry has faced numerous challenges related to climate change and declining soil fertility, while the ageing of plantations and stagnation in yield levels, as well as political and labour issues, add to the gloom.
Under these circumstances, the roadmap for the industry’s survival needs policy reforms by the government and encouragement through sustainable practices like quality augmentation, rising consumption of packet tea, branding, promotional activities, focus on exports and restriction of the usage of cheap imported tea.
Hemant Bangur, chairman, Indian Tea Association (ITA), has been vocal on the issue and has highlighted the industry’s key concerns before the commerce ministry, Tea Board and various other platforms, though, unfortunately, his efforts have failed to yield any major impact. “While the industry is facing a tough time, we cannot behave like ostriches and bury our heads in the sand, assuming things will get better on their own,” he argues.
ITA has suggested that the industry must confront the immediate challenges head-on. As of now, the sector is grappling with acute financial stress. “The unviable state of commercial operations facing the organised sector has to change,” says Bangur. “Operating margins have declined by 60.2 per cent during 2020-24, while cash wages during this span increased 49.7 per cent in Assam and Bengal.” Last year, a substantial majority of about 80 per cent of the estates reported cash losses.
The once-positive EBIDTA margins have slipped into the minimum or negative slot for many tea companies. Such shrinking margins are compounded by untenable price realisations, driven by a global surplus in production that has led to price stagnation, underscoring the deepening challenges within. ITA has endeavoured to draw attention to key issues like price stability, regulated imports, climate adaptability, MRL (maximum residue limit) notifications, promotion and innovation.
India’s tea production, at 1.31 billion kg last year, has seen the volume drop by 90 million kg from the 2023 levels. But, in 2025, India’s tea production has gone higher by 77 million kg as of 31 July, signalling a possible surplus by the year-end. The rampant misuse of the provisions for tea import, leading to the entry of cheap quality tea from Kenya and Nepal, is also aiding the price crash.
Climate change strikes
The vicissitudes of climate change have added to the woes of the tea industry. The climate in the tea-growing areas in India continues to be erratic, which has led to an increase in wages, and the resultant high social cost of this labour-intensive industry has become a major concern. The wage-related costs constitute almost 65 per cent of the tea production. Of course, the organised players by and large adapt to the situation and align themselves with the standard. Also, the industry is facing a labour shortage mainly due to rural to urban migration.
Organised players have been complying with the provisions of the plantation act and ethical practices for tea growing. However, these stringent norms are not amenable to being followed by the small-time tea growers (STG), who control close to 60 per cent of India’s tea production today. However, the STG body has also written to the prime minister, seeking the introduction of a minimum sustainable price (MSP), so that small farmers are not forced to sell tea below the cost of production of the green leaf.
Then, there is the issue of residue tolerance. MRL compliance refers to the product that meets the legally established tolerance limits for pesticide residues set by food safety authorities like the FSSAI. “The pressing concern of the industry is to set the strict regulation of equality across all-organised and small growers for compliance with the food safety standards,” says Shaibal Dutt, MD, Goodricke. “This will enhance the quality of tea.” For the benefit of the industry, the watchdog also should approve some new-generation chemicals, he adds.
Large-scale and aggressive promotional activity is also important for the betterment of the product’s marketing. Today, about 34 per cent of India’s population is in the age group of 18-21 years. And, they are mostly coffee drinkers. Industry should target these young adults and shift them to be tea drinkers. Today, India’s per capita consumption of tea is only 843 gm.
For the tea industry, the need of the hour is for the government to put an end to inequality and support the industry to build a true sustainable model. Also, efforts should be made to increase the demand for good quality tea and weed out sub-standard tea from the system; that can enhance profitability.