The Indian tea industry is facing the harsh effects of the economic slowdown with major tea exporters facing difficulties as the fund flows from the overseas markets have slowed down significantly over the last few months. The tea industry is headed for a significant production shortfall towards the end of the season, indicating higher prices. According to the status paper released by the Indian Tea Association (ITA), consumption in 2008 is pegged at 825 million kg, exports at 200 million kg, and imports at 20 million kg and production at 962 million kg. The figures indicate a shortfall of around 43 million kg.

In 2007, the cumulative deficit was around two million kg. Aditya Khaitan, chairman, ITA said, “Tea exports have already gone up in 2008. But the recent global financial crisis particularly affecting markets like Russia, Pakistan and others have placed a doubt over maintaining buoyancy in exports, seen in August this year. Taking into consideration the prevailing trend of exports, we have projected a level of 200 mn kg as exports during 2008.”

In order to assist the tea exporters, ITA has also requested the central government to include black tea in the Vishesh Krishi Gram Udyog Yojna Scheme. ITA is also concerned over the import of inferior or substandard tea. ITA strongly feels that the prevailing rate of import duty at 100% should be maintained in order to contain the influx of cheap tea into the country and guard the domestic tea industry. The ITA status paper said: “Given the present state of WTO talks and that the Indo-Asean FTA has already been inked, reduction in import duty rates are likely in a phased manner. At a meeting with the commerce secretary in September this year, it is understood that the Asean-Indo Free Trade Agreement (FTA) has finalised reduction in import tariff for tea into India from 2009, phase-wise to 45%, with 5% reduction every year.”