Prices for India’s prized Darjeeling tea have tumbled this year after buyers including Tetley-owner Tata slashed purchases over a regulatory spat about blending different leaves, with growers warning that a financial crisis is threatening the so-called “champagne” of brews.
Tea from Darjeeling in north-east India commands a premium around the world for its fragrant aroma and delicate flavour. But prices have fallen 16 per cent so far this season to Rs372.54 ($4.58) a kilogramme, according to data from the Tea Board of India, a government body.
The drop in prices is not the result of a sudden change in supply-and-demand, but a regulatory spat. Tata Consumer Products, typically the largest Darjeeling buyer at around 18 per cent of supply, sharply scaled back purchases this year, according to officials and growers.
This came after the Tea Board last year introduced rules restricting buyers from blending ordinary teas with those such as Darjeeling from the state of West Bengal, which carries a “Geographical Indication” tag designed to protect regional produce.
Buyers like Tata, the large Indian conglomerate that owns brands including Tetley and Teapigs, had previously blended Darjeeling with cheaper teas from Nepal in some of its products, those people said. The move had concerned some growers, who lobbied for tougher rules to protect Darjeeling.
The Tea Board in October tweaked the regulation to once again allow blending, as long as the end-product was not marketed as Darjeeling. It was particularly eager that Tata start buying again, according to an official. Hindustan Unilever, the Indian subsidiary of the global consumer goods giant and a rival of Tata, is also a significant Darjeeling buyer.
But growers fear that this year’s sharp drop in price is only accelerating the terminal decline of the industry. Production of Darjeeling has trended lower due to competition from cheaper rivals, such as Nepal, and climate change, with volatile weather hurting crops.
Sujit Patra, secretary of the Indian Tea Association, said prices had fallen “far less” than the cost of production.
“There’s a need to show to the world that this is the most premium tea that India produces,” said Saurav Pahari, the Tea Board’s deputy chair. “We hope that the big buyers will go back to buying Darjeeling. They set the benchmark for the price.”
Tata declined to answer questions about whether it had reduced Darjeeling tea purchases, or whether it planned to start buying again.
It said that Nepalese tea constituted less than 1 per cent of its total procurement for the Indian market and it did not directly import the tea. Tata said it always acted “within the guardrails of the laws of the land and any regulations governing our business”.
“We continually look to improve our tea blends in line with consumer preferences across regions, brand positioning and our product development,” the company said in a statement. “We continue to remain a strong supporter of the Darjeeling tea industry.”
While growers say the Darjeeling tea industry’s troubles go back decades, many trace the current crisis to 2017. Production halved after protests by the region’s Gorkha ethnic group, which has long demanded independence from West Bengal, closed tea plantations, forcing buyers to find alternatives.
Among the biggest winners were producers in neighbouring Nepal, whose tea has parallels with Darjeeling’s thanks to similar climate conditions, but is cheaper to produce. Many buyers have ramped up purchases from Nepal as both production and demand for Darjeeling has fallen, with last year’s 1,800 tonne harvest down 30 per cent since 2015.
Sparsh Agarwal, who runs Darjeeling’s Selim Hill estate, said that many local tea gardens were struggling to survive. “We’re on the verge of bankruptcy,” he said. “In the next 15 months, if I’m not able to turn around Selim Hill we’re going to have to sell it.”
Others such as Mohan Chirimar, who owns the Singtom Tea Estate, said that he expected Tata to resume purchases of Darjeeling now that the Tea Board’s rule had been overturned.
But Chirimar argued that the longer-term outlook for the industry remained tricky. The “macro level issues . . . haven’t been resolved as yet and we don’t see any solutions in sight”.