Diversification to oil palm will help solve issues facing Assam tea industry: IDH Country Director Kandal

By Animesh Deb
New Delhi [India], March 27 : Shifting the area under tea plantation in Assam to remunerative oil palm crops could heal the ailing tea industry in India's top tea-growing state, Jagjeet Singh Kandal, Country Director in India for development agency IDH, has said.
The tea plantation sector in Assam, which reached a crucial milestone of 200 years in 2023, is not in the best of health and has been struggling with issues such as rising production costs, relatively stagnant consumption, subdued prices and crop quality issues apparently due to climate change.
It also faces the challenge of holding its ground in a competitive global market. The tea business is cost-intensive, with an estimated 60-70 per cent of the total investment being fixed in cost terms.
"The tea industry's problem is basically because there is an oversupply. Everything else what people say is all short-term, the longer-term is how we reduce production," Kandal told ANI in an interview.
Kandal was the CEO at Amalgamated Plantations Pvt Ltd (APPL), a Tata Group company, which is big in tea plantations.
Renowned globally for its richly coloured and aromatic tea, Assam's tea industry, provides livelihoods to millions, with many others directly or indirectly dependent on the plantations. The state is famous for both Orthodox as well as the CTC (Crush, Tear, Curl) varieties of tea.
In 1823, Robert Bruce discovered wild tea plants growing wild in the upper Brahmaputra Valley. Subsequently, a tea garden was started in 1833 in the erstwhile Lakhimpur district.
Assam now produces nearly 700 million kg tea annually and accounts for around half of India's overall tea production. The state also generates annual foreign exchange equivalent to Rs 3,000 crore.
India, with a share of about 11 per cent, is the fourth-largest tea exporter after China, Kenya, and Sri Lanka.
"If 20 per cent of the land use in Assam is shifted from tea to oil palm, it is going to have a double affect. Palm oil is among the highest revenue giver you can get among agricultural commodities," Kandal said.
"Also, by dropping the tea crop, the demand-supply situation for this crop will improve and its prices will also improve. There's a transition of five to six years. If you plant oil palm today, by the third or fourth year, it will give you palm oil," he added.
India meets 95 per cent of its palm oil requirements through imports, mostly from Malaysia and Indonesia.
India is the world's second-largest consumer and number one vegetable oil importer, and it meets about 60 per cent of its edible oil needs through imports. A large part of it is palm oil and its derivatives. Although oilseed production in India has grown over the years, production has lagged behind its consumption, resulting in continuous dependence on imports.
To grow oil palm, farmers may require support and the government is already providing it under the Palm Oil Mission.
Daan Wensing, the CEO of IDH which works in the agri-value chain globally, was in Assam in December 2022. He told ANI that they ran a programme in the state, creating alternative incomes next to the tea gardens through the diversification of crops.
Kandal said they are doing a programme in the Dibrugarh area of Assam. "Farmers there, because of our programme, are growing king chillies (bhoot jolokia), mushrooms, doing pig farming, and areca nuts. We connect them with markets as well. With the same farmers, we are working on the quality upgradation of their tea."
India as a whole contributes 23 per cent to the global tea output and employs around 1.2 million workers in the tea plantation sector. The tea industry in Assam, in particular, was earlier dominated by large-sized gardens operated by large corporates.
Tea plantations in Assam have come a full circle as thousands of small farmers have taken to growing the crop, primarily shifting from paddy. The tea plantation business has seen unemployed youths take up tea cultivation as a business venture. Some cultivate it in their backyards too, while many have started their tea stories through startups. This rise in the number of small tea farmers has also contributed to "supply glut".
Assam government is actively considering a proposal to make available tea at a subsidized rate to all ration card holders. This proposed move is being seen as an option to absorb some of the oversupply.
Assam Chief Minister Himanta Biswa Sarma in early November 2023 said that his government was mulling providing tea to ration card holders at Rs 100-150 per kg from 2024 onwards.
Also, parallelly, in an attempt to make Assam self-reliant in the production of edible oils, the state government in 2023 set a target to bring 3.75 lakh hectares of land under oil palm plantations.
According to a Crisil Ratings report, the tea industry in India is expected to register a 8 per cent degrowth in revenue this financial year, led by a decline in exports.
Operating profitability is also expected to fall for the second year in a row, shedding 100 basis points (1 per cent is equal to 100 basis points) to 5 per cent, due to lower tea prices, it said.
Domestic demand, which accounts for 82 per cent of sales volume, expected to remain steady this fiscal ending March 31.