Tea Board Panel Recommends Minimum Sustainable Price to Address Cost Pressures

A 10-member committee constituted by the Tea Board of India has recommended introducing a Minimum Sustainable Price (MSP) for tea. This recommendation marks an important step towards addressing the widening gap between production costs and market realisations in the Indian tea industry.

India, the world's second-largest tea producer, generates around 1,350 to 1,400 million kg of tea annually. Small tea growers account for nearly 55 per cent of the country's total output. Despite this scale, the industry continues to face mounting financial pressures as production costs rise significantly faster than tea price realisations.

Over the years, tea prices have recorded a modest compound annual growth rate (CAGR) of around 2 to 3 per cent. In contrast, input costs have increased by an estimated 10 to 14 per cent. This widening gap has affected producers' ability to sustain operations, invest in replanting, improve productivity, and maintain quality standards.

According to CK Dhanuka, Chairman of Dhunseri Tea and Industries, the tea industry faces mounting cost pressures while price realisations remain relatively stagnant. With further increases in wage costs anticipated following the implementation of the Code on Wages, the financial viability of tea producers is likely to face additional pressure. An MSP framework is considered essential to bridge this gap, ensure long-term sustainability, and help the industry absorb wage revisions.

Employment costs account for approximately 60 per cent of the total cost of tea production, making producers vulnerable to wage increases. To address these concerns, the committee has recommended using a composite index that factors in wage movements and the Consumer Price Index (CPI) to determine the benchmark MSP, along with periodic reviews.

The proposed MSP framework is expected to deliver wider benefits across the tea value chain. Key stakeholders, including 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), have emphasized the need for a sustainable pricing framework.

Suneel Singh Sikand, Chairman of the Indian Tea Association, stated that the recommendation is an important policy intervention to address structural challenges, sustain operations, and facilitate investment in replantation and productivity enhancement. Shailja Mehta, President of the Tea Association of India, added that improved financial viability will enable producers to maintain quality standards and respond effectively to market requirements.

The proposed framework also needs to account for diverse economic realities across tea-growing regions, including variations in agro-climatic conditions, production practices, productivity levels, and operating expenses. Sanjith R. Nair, Secretary General of UPASI, noted that the framework must remain responsive to these regional differences.

The MSP framework holds particular significance for small tea growers and bought-leaf factories (BLFs), which procure green leaves from small growers and process them into made tea. Deven Singh, Chairman of FITMA, noted that BLFs form a critical link in the value chain by providing market access to small growers, and their sustainability is closely linked to procurement prices, processing costs, and made-tea price realisations.

Industry associations have expressed hope that the Ministry of Commerce will take favorable note of the committee's recommendations and notify the MSP for tea at the earliest.

"The introduction of a Minimum Sustainable Price addresses a critical structural imbalance in the Indian tea sector, where input costs have consistently outpaced price realisations. For an industry where employment costs make up the majority of overheads, establishing a benchmark linked to wage movements and inflation is a practical step. Ensuring financial viability across small growers, bought-leaf factories, and large estates will be vital for maintaining long-term supply chain stability and export competitiveness." — Dr. Shishir Gupta, Founder & CEO, StartupLanes