Industry associations urge government to introduce a sustainable pricing mechanism to address rising production costs, improve grower returns and strengthen the sector’s long-term viability
11 November 2026, Kolkata: Five major tea industry associations in India have called for the early introduction of a Minimum Sustainable Price (MSP) for tea, following a recommendation by a 10-member committee constituted by the Tea Board of India. The proposed mechanism aims to address the widening gap between production costs and market realisations, ensure remunerative returns for producers and strengthen the long-term sustainability of the Indian tea industry.
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) have welcomed the committee’s recommendation, emphasising the need for a pricing framework that protects small tea growers and supports organised tea estates 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 contributing nearly 55% of the country’s total production. However, the industry is facing mounting financial pressures as production costs continue to increase faster than tea price realisations.
Over the years, tea prices have registered an estimated compound annual growth rate (CAGR) of 2–3%, compared with an estimated 10–14% increase in input costs. This disparity has affected producers’ ability to sustain operations, invest in replantation, improve productivity and maintain quality standards.
C.K. Dhanuka, Chairman, Dhunseri Tea and Industries, said the industry is facing significant cost pressures, while tea price realisations have remained relatively stagnant. He added that anticipated increases in wage costs following the implementation of the Code on Wages could further challenge the financial viability of tea producers.
A Minimum Sustainable Price framework, he said, would help bridge the gap between production costs and market realisations, allowing the industry to accommodate wage revisions, protect employment and maintain the competitiveness of Indian tea.
Proposed MSP to Account for Wage and Inflation Trends
The recommendation assumes significance given the cost structure of the tea industry, where employment expenses account for approximately 60% of total production costs. The anticipated notification of floor wages by the Central and State Governments under the Code on Wages is expected to add further pressure on producers.
To determine the benchmark MSP, the Tea Board committee has recommended a composite index incorporating wage movements and the Consumer Price Index (CPI). It has also proposed periodic reviews to ensure that the benchmark remains aligned with changes in production costs and inflation.
Suneel Singh Sikand, Chairman, Indian Tea Association, described the recommendation as an important policy intervention to address structural challenges in the sector. He highlighted that remunerative returns are essential to sustaining operations, facilitating investments in replantation and productivity enhancement, and securing the industry’s long-term sustainability.
The proposed framework is expected to improve financial viability, provide more stable returns to small tea growers and registered tea gardens, and encourage investments in cultivation, processing and quality enhancement.
Regional Cost Differences Need Consideration
Industry associations have emphasised that the proposed MSP should recognise the diverse economic conditions across India’s tea-growing regions. Differences in agro-climatic conditions, production practices, productivity levels and operating costs influence the economics of tea cultivation across the country.
A responsive pricing mechanism that accounts for these variations will be important in ensuring the sustainability of tea production while maintaining India’s competitiveness in international markets.
Shailja Mehta, President, Tea Association of India, said the proposed framework could strengthen the economic sustainability of the industry by enabling producers to maintain quality standards, invest in modernisation and improve productivity in response to changing market requirements.
Sanjith R. Nair, Secretary General, United Planters’ Association of Southern India (UPASI), also stressed the importance of a pricing mechanism that reflects regional differences while supporting the overall sustainability and international competitiveness of Indian tea.
Small Tea Growers and Bought-Leaf Factories
The proposed MSP is particularly significant for small tea growers, who account for approximately 55% of India’s tea production. Their financial sustainability depends largely on the prices received for freshly harvested green leaf.
Bought-leaf factories (BLFs) play an important role in the value chain by procuring green leaves from small growers and processing them into made tea for the market. However, when the prices realised from made tea are insufficient to cover processing costs and support sustainable green-leaf procurement prices, factories face pressure on the prices they can offer growers.
This creates financial challenges across the supply chain, affecting both small growers and processing units.
Bijoy Gopal Chakraborty, President, Confederation of Indian Small Tea Growers Associations (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 this segment.
Deven Singh, Chairman, Federation of Indian Tea Manufacturers Association (FITMA), highlighted the importance of recognising the operating economics of bought-leaf factories. He noted that their financial sustainability depends on the relationship between green-leaf procurement prices, processing costs and made-tea price realisations.
Industry Calls for Early Government Action
The industry associations believe that the committee’s recommendations could provide an important policy foundation for addressing structural challenges in tea production and strengthening the sector’s economic sustainability.
They have urged the Ministry of Commerce, Government of India, to consider the recommendations favourably and notify a Minimum Sustainable Price for tea at the earliest.
A financially sustainable tea industry is essential for maintaining the production of quality Indian tea, safeguarding the livelihoods of millions of people dependent on the sector and strengthening India’s position in the global tea market.
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