A study by the Rabobank International said that revival of the domestic tea industry hinged on them adopting a three-pronged strategy of increasing productivity of tea plantations, focus on production of high quality teas and concentrating on export of value-added products.

`India was the world's leading tea producer, accounting for almost 30 per cent of world production in 1997. But in recent times, the country has been reduced to the fourth place in the export markets as a result of growing domestic demand and increasing competition from other countries,' the study said. On the policy and regulatory front, the government had recently announced its intention to amend the 1953 Tea Act, which contained most of the tea regulations governing the tea industry,according to the special study. The amendments, when they come through, would no longer require tea growers to obtain permission from the Tea Board for new planting, and would grant them permanent rather than one-off export licences, according to the study. The Ninth Plan has set a production target of one million tonnes of tea by 2001-02. This would require an annual growth rate of five per cent in the coming years, the study has estimated.

However, it said that `this is an ambitious goal, given that over the past ten years the annual growth rate has been two per cent.' Opportunities to increase yields would come from non- traditional tea areas which were expected to contribute to an increase in yields as new plantations begin full production, the study stated adding that replanting was the key element in maintaining yields. The quantity of organically grown tea was expected to increase to keep pace with the demand for it in a number of export destinations and their contribution in the tea export basketshould go up to 30 per cent from the present one per cent, the study suggested. It pointed out that currently most of the processing of tea or the branding and labelling of tea is done by foreign buyers in India or in the country of destination. India's tea industry could increase its export earnings only if further processing of tea before exporting is done in the country. The Ninth Plan has identified value addition and quality control as the key elements in market development and export promotion.

The increased preference of both domestic and export markets for quality and value-added teas has resulted in the quantity of bulk tea produced decreasing and the consequent lower quantity becoming available for auction sales, the study said. This was despite a section of the Tea Act stipulating that 75 per cent of bulk tea must be sold through auctions.

`Already nearly 50 per cent of households in India consume packed tea, accounting for 40 per cent of domestic sales indicating a demand for quality andvalue added teas,' it said adding that the price elasticity of demand of the Indian middle class was very high. India has to focus on exploring opportunities to export quality value-added teas to markets in the US, Europe and the Middle East in order to achieve the export target of 265 million kg in 2002. The study has expressed confidence that the Indian tea industry could become more dynamic and vibrant with the current and forthcoming changes in regulations. The cost-price disadvantage it has in marketing plain teas could be offset by marketing quality and value-added teas, the study said.