Introduction:Darjeeling tea is world-renowned, but its high prices mask long-standing structural challenges faced by Indian tea farmers and workers. During the pandemic, auction prices in southern India hit record highs, while Darjeeling in the north saw both volume and prices plummet. This article examines how minimum tea pricing, auction dynamics, and agricultural reforms are shaping the industry, and explores whether land reform initiatives could bring a turning point for tea growers—offering an in-depth look at the true state of India’s tea sector.
The fluctuation of tea prices in India is not just a matter of supply and demand; it more deeply reflects the hardships of smallholder farmers and plantation workers. Especially during the pandemic, CTC tea prices in southern India reached historic peaks, whereas Darjeeling, affected by lockdowns, experienced declines in both production and price. The overall tea industry is shaped by the Tea Board’s minimum support price policy, auction mechanisms, and sweeping government agricultural reforms, creating a complex and intertwined landscape.
Experts suggest that to break the vicious cycle of rising wages but costs that can’t be reasonably passed on, one potential solution is to return land ownership to long-term plantation workers. Such reform proposals also prompt a rethinking of the sustainable direction for the tea industry. For consumers who love Indian tea, understanding this background allows for a deeper appreciation of the story behind each cup.
Tea is an extremely perishable agricultural product. Many smallholder farmers who do not have fresh leaf supply contracts with local plantations can only queue up at nearby buying stations, hoping for a fair price. Fresh tea leaves begin to oxidize almost immediately, with quality deteriorating rapidly within minutes and prices dropping accordingly—making timing crucial in sales.
To prevent excessive exploitation of tea farmers, the India Tea Board has set a minimum purchase price. However, this price is not fixed. For example, in January, the price per kilogram of fresh leaves dropped 23% compared to December, but over the long term, prices have shown a gradual upward trend, offering a glimmer of hope for improved income among smallholders.
The pandemic brought unexpected changes. The Coonoor Tea Trade Association (CTTA) noted that due to a combination of factors, the price of CTC tea (tea processed through cutting, tearing, and curling) reached an all-time high in 2020. That year, total transaction value surged from $73 million in 2019 to $115.2 million (approximately 846 million rupees). However, Darjeeling in the north saw auction prices drop by 60 to 100 rupees due to lockdowns, with production decreasing by about 152 million kilograms.
Arijit Raha, Secretary General of the Indian Tea Association, described the situation as “extremely worrying.” He pointed out that a sharp decline in overseas demand directly impacted both domestic sales and exports. While plantations in the south faced similar challenges, the situation was somewhat different because most of their tea comes from smallholders who also grow other crops.
Tea production in the southern regions is typically carried out by small-scale farmers on scattered plots, with pricing based on the average auction rate across India. For instance, in December 2019, the minimum support price was 12.45 rupees per kilogram; by December 2020, this had increased by 10.85 rupees, a jump of 87%. In the Nilgiris region, the average price of fresh leaves even reached 23.26 rupees per kilogram, far exceeding previous years’ levels.
This upward trend had a direct positive impact on smallholder farmers. Producing one kilogram of finished tea generally requires four kilograms of fresh leaves, meaning factories must pay local farmers an additional 44 rupees per kilogram of tea produced. Although smallholders face higher costs for fertilizers, pesticides, and energy, as well as higher transport expenses than large plantations, they rarely rely on hired labor, often operating their farms themselves.
If auction prices remain stable, processing factories without their own tea gardens are incentivized to source high-quality fresh leaves locally, thereby improving the overall quality of the final tea product. In the past, factories willing to pay premium prices for top-grade fresh leaves often struggled to get fair returns at auctions, making it difficult to offset cost pressures.
In late 2020, auction prices in Kerala once surged to 158 rupees per kilogram, while the average price of Coonoor tea exceeded 100 rupees per kilogram for several consecutive weeks, repeatedly breaking historical records. With buyers from the north shifting their focus to southern Indian teas, supply in the Coonoor region even surpassed levels seen in the same period previously.
The Indian business publication The Hindu BusinessLine reported: “In 2020, many tea processing factories received prices never seen since their establishment.” Among them, Creswick Estate successfully auctioned multiple lots of high-grade tea such as Broken Orange Pekoe Fannings at a remarkable price of $3.97 per kilogram (about 291 rupees), becoming a highlight of the auction. This historic tea factory in the small smallholder-dominated region of Darjeeling was celebrating its platinum jubilee, symbolizing the rise of smallholder production power.
Notably, smallholders now account for 50% of India’s total tea production. If this group can maintain stable incomes, poorly managed plantations may in the future sell their land to tea-picking worker families—similar to models in some parts of China where tea farmers have prospered through independent operations.
Although most of China’s tea production is concentrated in large industrial tea estates, the most valuable and flavorful teas still largely come from small-scale farmland. In local markets, high-quality teas can often achieve reasonable pricing through healthy competition, further raising overall quality standards. In some areas, villagers even hold annual competitions to select the best tea, using these as benchmark prices to avoid cutthroat bidding.
In India, the situation is vastly different. Daily wages for tea pluckers average just around 2 US dollars (about 137 rupees), in stark contrast to Chinese tea pickers who can earn up to 40 US dollars per day. This gap makes sustainable reform in India’s tea industry all the more urgent.
To improve the current situation, the Indian government has introduced a series of agricultural reforms in recent years, including amendments to the Essential Commodities Act to remove stock limits on food items, the enactment of the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act of 2020 (FAPAFS) which legalizes contract farming, and the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act of 2020 (FPTC Act) aimed at breaking the monopoly of traditional agricultural produce market committees.
However, these reforms have also sparked considerable controversy. Independent tea consultant Dharmananda Nath offers an alternative perspective. In his writings, he suggests that the tea industry needs fundamental operational model changes—one feasible direction being to allocate land ownership to plantation workers and facilitate raw material repurchase through cooperative mechanisms.
He further explains that once workers become landowners, the government should, through existing policies, provide the social welfare and infrastructure traditionally managed by plantations. This would not only reduce corporate operational costs but also ensure more comprehensive protection for workers. This approach also opens room for negotiation between the government and enterprises—for example, allowing companies to use portions of the land free from traditional restrictions.
Nath proposes that fresh leaf purchase prices could be determined using formulas based on public auction prices, and allow companies to offer additional bonuses based on final sales performance. This way, workers who own land would enjoy more stable incomes and greater security, and could even build their own homes through government-supported programs.
He concludes that reducing dependence on large plantations would not only help companies avoid rising wage pressures, but also align raw material costs more closely with market selling prices—achieving true sustainability and transparency. For a labor-intensive industry like tea, this model could be a win-win long-term solution for all stakeholders.
The above content is compiled by CoffeeHunters, a coffee news website.
