But what has been slipping out slowly is India’s declining share in the world tea trade over the years. Domestic consumption was huge for the industry to cushion itself from a fall in its share in the internal market.

The industry had to also bear with the ups and downs of the policy framework which in many a way shaped its export curve and value-additions in the domestic market as well. The government, on its part, thought it was justified. The industry was protected and hence expectations from it was valid.

It is worthwhile here to track the mega trends in the industry on the backdrop of the trade barriers soon to give way in the post WTO regime.

Emerging trends
Purely led by compulsions of production and scales of production and costs, there has been a discernible trend towards consolidation of the existing tea plantations in the hands of a few large corporates. This has been and will be in the form of estates and companies being bought over by larger estates to have a larger corpus of tea.

This trend expected to bring in further gains has been more noticeable as proliferation of the tea estates in the plantation module has been on the wane.

Most tea companies have been sharply redefining their scales of production costs are being looked at more closely. This will be a continuing trend in the wake of increased competitiveness where companies would attempt a reorganisation of production parameters be it machinery, leaf handling, plucking standards, configurations in drying technology, etc.

Companies that will not have access to brands or be able to ride on brand vehicles in the times to come will aim at consolidation. On the other hand, those on an expansion spree through increased value-addition and multiple product forms will get into rationalising their own production processes faster.

Tendencies towards rationalisation of grades may be witnessed. There may be lesser reasons for a buyer to differentiate the appearance and flavour of tea if it were to be blended in the first place moreso for markets as it consolidates in brands and product delivery terms such as instant tea, RTD or the less premium market segmentation, where the so called perceived differences in grades is not so important. Those operating in the premium end of the market with distinct product delivery systems will treat characteristic features such as size, shape, colour and liquor of tea as important. It is perhaps difficult at this juncture to decide on which end of the spectrum they would like to service.

Production figures may see an upward movement with increased efforts on production processes like replantation, uprooting, cloning, field management, etc., leading to rising productivity standards.

The value of Indian exports in the total international trade has seen a decline over the years to Russia and the CIS countries. While the other export markets including West Asia and USA are being looked at seriously to make up for the loss in the once largest market.

Dependence on auction tea has also seen a gradual downtrend over the years with more tea being transacted directly. However, for bulk tea, auctions will still remain important.

Further, linkages between the small growers and industry will only increase. Bought leaf factories as they exist by themselves are not a part of a company's tea estates as such but linkages between the two have been on the rise in recent times. Although the trend has been towards proliferation of the bought leaf factories in Assam and in north Bengal as well, it is debatable whether it will be a long-term sustainable trend. This may be presumed in the context of established marks being sold in the auctions. Normally, an estate tea has a mark which commands a value in the auction. For tea from the bought leaf factories usually there is a gap in the inherent equity.

It appears that there may be a clouding in the quality perception in the movement towards bought leaf factories, as they find it difficult to sustain in a market which is becoming increasingly competitive. It is felt that few years down the line brand strength could assume more importance and the individual bought leaf factories may have less and less power to determine their own tea.

The fortunes: A bullish path
Tea, by virtue of it being a commodity, will have to sustain the swings in the commodity market. Very short swings where supply overstrips demand could lead to huge fluctuation in prices.

As the Indian Tea Association secretary general, Ronnie Das puts it, " The long-term fortunes of the industry are bright as the product is so much entrenched in the psyche of the Indian population, that given the potential path of the industry, there will never be a crisis in demand for the product."

However, a major concern will be the cost of production and value-addition. Integration of the Indian tea industry through improvements in productivity, cost competitiveness and adherence to quality and hygienic standards will be the key indicators to growth.

Prices may not shoot up to phenomenal levels in the current year albeit a global shortage and an estimated 30 million kg shortfall in Indian tea production, according to industry observers.

Worldwide shortage of the crop which is predicted to fall short by 120 mkgs on account of a shortfall in major tea producing countries like Kenya, Sri Lanka and India will have its effects on the prices of tea in the coming months definitely. But, it is a bit too early to predict how far the upward price swings will be, says the Indian Tea Association export sub-committee chairman, Gautam Bhalla.

It is unlikely, however, that the prices of Indian tea will skyrocket as it did in 1998. Certain corrections in low prices may definitely take place and the new year tea prices may remain firm have been the industry predictions.

Moreover, even with high prices it is unlikely that most tea companies will be able to show healthy margins in the current year. The loss in crop is hardly offset by high prices, says Calcutta Tea Traders Association secretary, Kalyan Sundaram. Moreover, mandarins of the commerce ministry have made it categorically clear that any rise in prices associated with shortfall in production will force the import of bulk tea into the country to maintain the price line.

Constraints
Growth is a definite factor. The faster it is without obstacles the better it will be. At 4,24,469 hectares, India has the second highest land under tea cultivation, after China which is first with 11,34,600 hectares. India has registered one of the slowest growth rates in terms of expansion of area under tea cultivation.

The area under tea has grown by just 6.8 per cent over the last 10 years, slowing down considerably from the 18 per cent growth in the period between 1963 to 1983 (from 3.34 lakh ha to 3.96 lakh ha).

By comparison, the area under tea has grown by 32 per cent in Kenya and over 15 per cent in Indonesia. Both these countries have powered their way into the world market in recent years.

At one level, these comparisons could be unfair since the Indian industry is years older than the business in most other countries. But that is precisely where the problems could lie. A substantial portion of India’s tea bushes are rapidly aging. Almost 80 per cent of the tea bushes in India are over 30 years old; 45 per cent are over 50 years. In most plantations in Darjeeling which have been hit hardest by low productivity bushes are 80-100 years old.

The union commerce ministry is more inclined to encourage productivity through ‘vertical expansion’, that is, improving output through replanting, infilling and extension rather than horizontal expansion. Horizontal expansion would entail setting an annual replantation target of two per cent compared to the current rate of 0.53 per cent. The pace of replantation is yet to pick up in a major way. A tea bush takes roughly four years to be ready for plucking and seven years to mature. "Who is going to supplement our production losses for three to four years," laments a noted planter.

The government contention
The tea industry has been quite conservative in expanding in non-traditional areas like Orissa, Andhra Pradesh and Bihar where there are large tracts of unused rather virgin land available for tea cultivation purposes. While the industry feels that inadequate development finance has been one of the main factors behind the industry’s lack of interest in the non-traditional areas.

In the long run, however, producers may have a compelling incentive to expand tea cultivation faster: the bogey of competitively priced tea imports.

Although factors like taxation do not impede growth, there has been some concern expressed following absence of a uniform taxation system. Moreover, the excise duty of Rs 2 on bulk tea has surmounted costs of production further. Producers are likely to ask for differential rates of excise duty on bulk tea. The trend would be then much in line with the pre-1993 levels, when excise was being charged on a zonal basis (Rs 1.50 on Assam tea and Re.0.50 on all other tea).

Whose fault?
Fiscal and non-fiscal policies of the central government in areas of production, trade and prices are the dampening factors for its growth. Producers say that India has always been portrayed as an unreliable supplier in the global markets. The fiscal and non-fiscal interventions by government has been mainly responsible for this.