A 10-member committee constituted by the Tea Board of India has recommended the introduction of a Minimum Sustainable Price (MSP) for tea to address the widening gap between production costs and market realisations. Welcoming the recommendation, five leading industry associations have called for an appropriate pricing framework to ensure remunerative returns for tea producers, safeguard small tea growers and strengthen the long-term sustainability of the Indian tea industry.

The recommendation was welcomed by the Indian Tea Association (ITA), Tea Association of India (TAI), United Planters' Association of Southern India (UPASI), Confederation of Indian Small Tea Growers Associations (CISTA) and Federation of Indian Tea Manufacturers Association (FITMA), which collectively represent organised tea estates, small tea growers and bought-leaf factories.

India, the world's second-largest tea producer, produces approximately 1,350–1,400 million kg of tea annually, with small tea growers accounting for nearly 55 per cent of the country's total production. However, the sector has been facing mounting financial pressures as production costs continue to rise faster than tea price realisations. While tea prices have recorded an estimated compound annual growth rate (CAGR) of only 2–3 per cent, input costs have increased at an estimated CAGR of 10–14 per cent, affecting producers' ability to sustain operations, invest in replantation, improve productivity and maintain quality standards.

Speaking at a press conference attended by representatives of the five associations, C.K. Dhanuka, chairman, Dhunseri Tea and Industries, said that the industry was facing mounting cost pressures, while tea price realisations remained relatively stagnant. He pointed out that the anticipated increase in wage costs following the implementation of the Code on Wages could further affect the financial viability of tea producers.

According to Dhanuka, a Minimum Sustainable Price framework is essential to bridge the gap between production costs and market realisations. It would help producers accommodate wage revisions, protect employment and maintain the competitiveness of Indian tea.

The recommendation assumes significance as employment costs account for approximately 60 per cent of the total cost of tea production. The anticipated notification of floor wages by the Central and State Governments under the Code on Wages is expected to add to the industry's operating expenses.

To determine the benchmark MSP, the committee has recommended a composite index incorporating wage movements and the Consumer Price Index (CPI). It has also proposed periodic reviews of the benchmark to ensure that the pricing mechanism remains aligned with changes in production costs and inflation.

Suneel Singh Sikand, chairman, Indian Tea Association, said the recommendation represents an important policy intervention to address the structural challenges confronting the Indian tea industry. He emphasised that remunerative returns are essential to sustaining operations, facilitating investments in replantation and productivity enhancement, and securing the sector's long-term viability.

The proposed framework is also expected to take into account regional differences in agro-climatic conditions, production practices, productivity levels and operating costs. Industry representatives have stressed that a responsive pricing mechanism is necessary to ensure that tea producers across different regions can sustain their operations while maintaining quality and international competitiveness.

Shailja Mehta, president, Tea Association of India, said the proposed MSP framework would strengthen the economic sustainability of the sector by enabling producers to maintain quality standards, invest in modernisation and improve productivity. She added that these measures would be important in reinforcing the global standing and competitiveness of Indian tea.

Sanjith R. Nair, secretary general, UPASI, highlighted the need for a pricing mechanism that recognises the diverse economic realities of India's tea-growing regions. He said differences in agro-climatic conditions, cultivation practices and cost structures should be considered while developing the framework to ensure the sustainability and international competitiveness of the industry.

The proposed MSP is expected to have particular significance for small tea growers, who contribute nearly 55 per cent of India's tea production. Their financial sustainability largely depends on the prices received for freshly harvested green leaf, which is procured by bought-leaf factories (BLFs) and processed into made tea.

When the prices realised from made tea sales are insufficient to cover processing costs and support sustainable green-leaf procurement prices, BLFs face pressure on the prices they can offer growers. This creates a cascading impact across the tea value chain.

Bijoy Gopal Chakraborty, president, CISTA, said a properly structured MSP mechanism would help ensure more remunerative and stable returns for small tea growers, safeguarding their livelihoods and supporting the sustainable growth of the sector.

Bought-leaf factories also play an important role by providing market access to small growers and converting green leaf into made tea. Their financial viability depends on the relationship between green-leaf procurement prices, processing expenses and made-tea price realisations.

Deven Singh, chairman, FITMA, said the proposed MSP framework should adequately recognise the operating economics of bought-leaf factories while ensuring viable returns across the tea value chain.

The industry associations expect the Ministry of Commerce, Government of India, to consider the committee's recommendations favourably and notify a Minimum Sustainable Price for tea at the earliest.

The proposed intervention is expected to improve financial stability for tea producers, support better returns for small growers and registered tea gardens, and encourage investments in cultivation, processing, modernisation and quality enhancement. Industry stakeholders believe that ensuring the economic sustainability of tea production will be essential not only for maintaining the quality of Indian tea but also for protecting the livelihoods of millions of people dependent on the sector and strengthening India's position in the global tea mark.