Will new auction rule sink or swim Assam's tea growers? Indian Tea Association chief explains

The Indian Tea industry is facing challenges due to an oversupply of lower-quality teas and compliance issues. The government of India has long required 50 per cent of tea production to be sold via public auction, but this rule has often been ignored. Compliance with standards is crucial for increasing tea demand both domestically and internationally.

Recently, the Commerce Ministry issued Notification No. S.O. 854 (E) dated 23.02.2024, which mandates the sale of 100 per cent of dust grades tea through public auction starting April 1, 2024.

In response, the Chief Secretary of Assam, Ravi Kota, appealed to the Union Secretary of the Department of Commerce, Sunil Barthwal, expressing concerns about the impact of this notification on small tea growers and bought-leaf tea manufacturers. He highlighted that implementing the notification could pose significant challenges, affecting the livelihoods of tea growers and other stakeholders.

The Union Ministry amended the Tea Marketing Control Order, 2003, exempting 'mini tea factory' owners from participating in the auction.

This amendment, now gazetted, aims to centralize demand in a market setting, increasing competition, demand, and fair pricing for all segments of the tea industry. Similar models have been successful in other large tea-producing countries like Sri Lanka, where 100 per cent of teas are required to be sold through auctions. The order also specifies that dust grades of tea include all grades listed as dust grades in the Indian Standard IS 4541-1986.

To ensure adherence to these rules tea manufacturers are also required to report the amount of dust grades of tea manufactured each month, along with details of the dust grades of tea used for making various tea products marketed directly or exported. In an interview to Bizz Buzz, Hemant Bangur, Chairman Indian Tea Association, throws light on the effect of the Union Ministry’s notification on the Assam tea industry.

How does the recent Ministry of Commerce notification impact the tea industry in Assam, particularly in terms of revenue for small tea growers and bought-leaf tea manufacturers?

The Ministry of Commerce notification mandating 100 per cent sale of Dust Teas aims to funnel a particular grade namely dust compulsorily through a public platform where impartial testing for MRL compliance can be conducted. It will help identify and map chemical misuse in cultivation of tea. The industry is committed to providing a safe and sustainable product to the consumer. It would lead to better price realisations with a positive impact on the revenue for tea producers, both big and small. The mandate of 100 per cent sale of dust teas through auctions has been made applicable for a trial period of three months, to help identify segments, areas and chemicals which are non-compliant. In the context of the notification, the SOP for the aforesaid has been finalized and recommended to the Tea-Board. We hope that the SOP will be released soon.

What specific challenges does the Assam government foresee with the mandated sale of 100 per cent dust-grade tea through public auction, with revenue generation?

We can’t speak on the Assam government’s behalf. However, we understand that the same should be revenue neutral.

How crucial is the business turnover from tea growers and other stakeholders to the overall economy of Assam, and how might this notification affect their income?

The tea sector’s contribution to Assam’s economy needs no elaboration. More than one-fifth of Assam's population directly or indirectly depend on the tea industry's fortunes for their income and livelihood. It would be premature to surmise at this stage, any effect of this notification on income as income depends on price, which is a factor of demand and supply. We are hopeful that compliant and quality Assam teas shall see a significant increase in demand leading to sustainable tea prices.

How does the Assam government plan to engage with the Centre to ensure that the best interests of the tea industry in Assam are considered?

The approach of the Assam government with regard to the growth and development of the tea sector has been pro-active as is obvious from the various progressive schemes which have been launched for the benefit of both the management and workers. The welfare schemes of the State, aimed at improving the quality of life of workers and covering important areas such as health, education, sanitation, food security, etc. are indeed laudable.

The schemes connected to the development of the tea sector such as the Assam Tea Industries Special Incentives Scheme (ATISIS) comprising components like interest subvention at 3 per cent on working capital loan, orthodox and speciality tea production subsidy at Rs 10 per kg, subsidy at 25 per cent on orthodox and speciality tea manufacturing machinery, agricultural income tax holiday, exemption from green leaf cess have benefitted the tea sector. Besides, the Assam Tea Policy which is on the anvil is expected to consolidate the growth and development of the tea industry. The Assam government has been proactive in taking up issues with the Central government for the benefit of the tea sector.

Are there any alternative solutions or compromises that could address the objectives of the Ministry of Commerce while also safeguarding the interests of tea growers and stakeholders in Assam?

To address this challenge, we have suggested to the government that a massive awareness campaign needs to be launched educating the tea growers on the use of herbicides, pesticides and acaricides. This must be followed up with regulations including, if required, Aadhar linked sale of agro chemicals especially those chemicals which are prone to misuse. Finally, increased random sampling of manufactured tea both at origin and destination to ensure full compliance. For this, infrastructure for testing has to be adequately enhanced. Once these measures are put into place the objective of the Ministry of Commerce to ensure that safe and compliant tea are sold to consumers shall be achieved while also safeguarding the interest of tea growers and stake holders of Assam.