Tea industry groups back panel's proposal for minimum sustainable price as costs outpace prices

New Delhi, Five tea industry associations on Wednesday welcomed a government-appointed committee's recommendation to introduce a minimum sustainable price (MSP) for tea, saying production costs are rising far faster than the prices producers get.

The 10-member committee, set up by the Tea Board of India, has proposed a benchmark price linked to a composite index of wage movements and the consumer price index, with periodic reviews to keep it aligned with costs and inflation.

The associations urged the Ministry of Commerce to notify the MSP at the earliest.


India is the world's second-largest tea producer, with an annual output of about 1,350-1,400 million kg. Small growers account for roughly 55 per cent of the production.

Industry bodies, in a statement, said tea prices have grown at a compound annual rate of about 2-3 per cent, while input costs have risen by an estimated 10-14 per cent a year.

Labour is the biggest pressure point, accounting for about 60 per cent of production costs. Producers expect further increases once central and state governments notify floor wages under the Code on Wages.

"The tea industry is confronted with mounting cost pressures, while tea price realisations have remained relatively stagnant," said C K Dhanuka, chairman of Dhunseri Tea and Industries.

The groups that backed the proposal were the Indian Tea Association, the Tea Association of India, the United Planters' Association of Southern India (UPASI), the Confederation of Indian Small Tea Growers Associations and the Federation of Indian Tea Manufacturers Association.

They said a minimum sustainable price would help producers absorb wage increases, support returns for small growers and registered gardens, and encourage investment in replanting and quality.

Small growers sell freshly harvested green leaf to bought-leaf factories, which process it into made-tea. When made-tea prices fail to cover processing costs, factories come under pressure to pay growers less, industry groups said.

"A properly structured Minimum Sustainable Price mechanism would help ensure more remunerative and stable returns for small tea growers," said Bijoy Gopal Chakraborty, president of the small growers' confederation.

Deven Singh, chairman of the tea manufacturers' federation, said the framework must adequately reflect the operating economics of bought-leaf factories.

Industry bodies also said the framework should account for regional differences in climate, productivity and costs. "It is essential that the framework remains responsive to these differences," said Sanjith R Nair, secretary general of UPASI.