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It’s easy to lose track of time in Darjeeling. The beautiful weather, sunrise over Kanchenjunga, easy going people and, of course, acres and acres of tea gardens, can make you forget the purpose of your visit to the Queen of the Hills. But we were determined; determined to find the reasons behind falling tea exports from India. And we figured that the trend can reversed. Quite easily.

A leaf is like your daughter. If you treat it harshly, it will wither. Did you see any harsh handling here? It’s all done with a certain amount of love and emotional attachment, which makes the leaves bloom beautifully,” Sanjay Das, Manager, Makaibari Tea Estates, one of the oldest tea gardens in Darjeeling, explained with a glint of pride in his eyes, while taking us through the various processes at work at the Makaibari factory. Home to some of the most expensive tea, every step of tea production at the Makaibari factory, right from withering and rolling to fermentation, drying and sorting, have clear instructions tabled in Nepali and English for those at work. “We don’t want to leave any room for ambiguity,” Das added. He ensured a steady supply of black tea, as we sat down for a detailed chat. “Even if you are not a tea drinker, it will not take you long to become one,” he chuckled confidently.

Das’ words find favour in Indian tea statistics, which show increased leanings towards domestic consumption. For, though India is the world’s second biggest producer of tea, accounting for almost a quarter of global production, it is only the fourth biggest exporter, accounting for just 1/8th of global exports. The reason? Look no further than your kitchen. Other than the millions of gallons of tea we Indians gulp down every year, a reason for India’s tea exports declining for the last couple of years is crop losses in some of the high value tea producing places in the country, like Darjeeling. “Crop loss has been huge. Production has declined, sales are down. We can’t do anything to offset this loss. In fact, profitability has been coming down over the last 3-4 years. The market has become very competitive, with too many people, offering too many varieties,”

Bulk of India’s tea production takes place in Assam Valley; and in Dooars, Terai, and of course, Darjeeling, in West Bengal. Although tea is also produced in Tamil Nadu, Kerala, Karnataka and several other states, their quality is inferior and they command a significant discount to that produced in North India. In fact, in FY2014, South Indian tea prices were, on an average, 40-45% cheaper than that of North India.

In terms of tea consumption, CTC (cut, tear and curl) tea, within the black tea category, constitutes bulk of the market. Its making is a more complex process than that of other varieties and involves the use of machines to process tea leaves, which results in the tea liquor ending up looking much thicker in appearance. The other popular variety of black tea – orthodox tea – is processed by hand, to get whole leaves, and is considered superior in quality. While CTC, which is less expensive than orthodox tea, is majorly exported to countries such as Egypt, Pakistan and UK, the latter finds more of a market in Iraq, Iran and Russia.

Usually, the manufacturing process for black tea starts with plucking, wherein the plucked leaves are collected in bamboo baskets without being overloaded. This is followed by weighment, wherein each plucker gets paid as per the quantum of leaf plucked. Then withering takes care of the excess moisture content in the green leaves and this period can last anywhere between 18-24 hours. Once sufficiently withered, the leaves tend to have an aroma. Post this, is the process of rolling, wherein the withered leaves get rolled under a bit of pressure between metal plates. This is followed by the fermentation process, which helps to develop the aroma and essence of tea and can take anywhere between 30 min to four hours. These leaves are then dried for approximately 20-25 min at a temperature ranging 240-250 degree Fahrenheit (115-120 degree Celsius). Sorting or grading then follows and is done by sorting machines before the packing process, in which the different grades of tea are packaged carefully for shipment.

Commonly, in Darjeeling, you will also come across the various flushes of tea, which tell us about the tea growing seasons in the district. While the first flush typically come in between mid-March and May, the second flush come in around June, while the third flush, also known as the autumn flush, come in November-December. Similarly, while the first flush is costlier due to its small produce and is light and aromatic, the second flush brings the special flavour of Darjeeling to the fore.

Falling exports mean that the Indian tea industry, particularly that in Darjeeling, is not going through an easy time. Only those who are adapting to the times, are expected to stay afloat. Subrata Das, Deputy Manager, Happy Valley Tea Estate, Darjeeling, feels buyers are continuously expecting the quality of their tea get better. “In the current cut throat scenario, only those who produce quality tea can survive and grow,” He explained how crop loss has only made things worse and said, “Despite the crop loss last year, we have not received any subsidy from the government. It’s putting immense pressure on us.” The Happy Valley Estate, which was established in 1854 and is the oldest tea estate in Darjeeling, sprawling over approximately 437 acres of land, produces around 50,000 kg of tea annually, almost 95% of which is exported, primarily to UK, Germany and Japan. Just how superior the estate’s tea is can be gauged from the fact that as compared to a national average auction price of just $2.3/kg, Happy Valley tea is priced in the range of $60/kg and $400/kg. Yes, Darjeeling Tea fetches that kind of premium

When it comes to Darjeeling, it’s all about the traditional black tea. And Sidhant Prakash, CEO, Glenburn Tea Direct, feels that’s because of Darjeeling’s soil. “Our strength lies in black tea and I think that will always be the case,” 

But that’s bad news because the buzz now is around green tea, the demand for which, according to reports, is growing at 50% y-o-y. Validating this, Sarda of Nathmulls Tea, said, “The hype is green, though black is selling more. This is due to the rising consumer consciousness to move towards a healthier life.” Not surprisingly then, green tea, which finds its origin in China, is increasingly vying for a larger chunk of the market share in India. And catering to this demand, FMCG majors such as Hindustan Unilever and Tata Global Beverages have launched innovative variants to attract consumer fancy.

"Incentives to exporters can play a significant role in improving reduced margins"

Other than crop loss and rising popularity of green tea, are there other hindrances that the Indian tea industry faces? Of course, if you go by industry insiders in Darjeeling. Das, of Happy Valley Estate, feels rising wage rates are adding up to overall cost. “If the government can give us some support in providing housing, ration and medical facilities to tea plantation workers, it can be of big help,”

Being labour intensive, the Indian tea industry is a massive employment generator. But wages have been low for years, if not decades. Ask 28-year-old plucker Dipika Bhujel, who has been working at the Makaibari Tea Estate for the last 8-9 years. Though she is reticent in mentioning the state of wages in the industry, the plans that she has in mind for her children’s future outlines it all. “I like my job and being in a fresh environment is something that keeps me going. However, I will not encourage my children, who are studying in a convent in Kurseong, to join the tea industry when they grow up,” 

For freshness

To address the issue of low wages, estates like Makaibari have started home stay options at their estates, which are open to tourists, students and foreigners, and act as an additional source of income for their workers. Priced at Rs.700/night, home stay allows a guest to stay at the house of a tea worker and be home to the local cuisine, as well as closely experience all the activities at the tea garden. 70% of the money from the home stays go to the tea worker’s family, with the remaining 30% collected for the purpose of community development.

However, such measures are far and few and one is sure that more needs to be done to create a congenial and financially rewarding atmosphere for a workforce that is struggling to survive in this industry. A more amalgamated effort, to increase productivity and pump in more government incentives that can scale up the overall profitability for the tea industry as a whole, is the need of the hour.

Similarly, from an export stand point, better and more focused marketing strategies, improved quality controls and product diversifications can help in commanding a premium. Additional incentives to exporters by the government can play a significant role in scaling up reduced margins, thereby making it a more lucrative business and giving a much needed fillip to India’s exports of the darling beverage. Given that the per unit price of India’s tea exports have remained stagnant for the last years, and sanctions on Iran, one of our main export destinations, are being eased, these steps are needed to be taken with utmost urgency.

A living room is never complete without some hardwoods. And the world of hardwood furniture is divided between those made of teakwood and those made from everything else. But did you know India is the world’s biggest importer of teakwood, most of which is imported from Myanmar? An exclusive analysis on what makes teak imports tick...

All kinds of hardwood furniture have always been prized by the Indian society. But when it comes to those made of teakwood, the pride, respect and love rises to an altogether different high. Whether it’s giving an upscale look to one’s living room or giving that five-star touch to a luxury hotel’s lobby, teakwood has always been the cynosure of all eyes. But since teakwood is not something that can be produced in a factory, the demand for it in a country like India – just 2.8% of world’s land mass, but home to 17.5% of global population – has always outstripped supply. Add to this the fact that Supreme Court of India has imposed a ban on the felling of any tree in natural forests, and one doesn’t need to look too far to figure out the reason(s) for rising dependence on imports.

In India, teakwood, more commonly known by its trading name sagwan, is mostly imported from Myanmar, Nigeria, Ivory Coast, Ghana, Benin, Togo, Cameroon and Ecuador. Since the natural and original habitat for teak trees is the tropical forests of South-East Asia, Myanmar was, till recently, the only country producing and exporting natural forest-grown teak. But, in a bid to protect decreasing teak forests, even it has, since April 2014, restricted logging and has imposed a ban on exports. The other three major teak producers – India, Thailand and Laos – had already restricted felling and export of natural forest-grown teak logs.

What’s puzzling though is the fact that despite Myanmar’s ban, Indian imports from the nation continue unabated. For, according to Ministry of Commerce, India’s teakwood (in rough) imports from Myanmar, in H1FY2015, were almost 50% of what they were in FY2014! However, going by the fact that all four major teakwood producing nations have now imposed bans of exports, Indian teakwood traders, without leaving anything to chance, have started looking out for non-traditional sources – the main one’s being Latin American and African nations. This is the reason why most teak log landings happen on India’s western coast, mostly, Mangalore, Kandla and Mumbai. However, Sanjay Agarwal, MD & CEO, Century Plyboards, thinks there’s more to why the west coast attracts most of the teakwood log landings. “Kandla and Mumbai serve a large hinterland, which includes the industrial regions of North, Central and South-Central India. Moreover, a spurt in housing projects in these regions, have also seen a rise in the demand for teakwood,” 

Moreover, the timber industry’s requirement of large areas for storage and processing has also a played a part in this phenomenon, particularly since Kandla and Mangalore are two of the only major ports which have vast stretches of vacant land near them.

International Trade Centre data reveals that China and India have been, by far, the top two importers of tropical hardwoods and logs for quite a few years. At the same time, experts feel demand is expected to remain high in the foreseeable future. Elaborating this, Dr. P. K. Thulasidas, TEAKNET Coordinator, Kerala Forest Research Institute, told us, “The global teak market has been and will continue to be governed by trends in the Asian markets. Asia holds more than 90% of the world’s teak resources, with India alone accounting for almost 38% of global planted teak forests. High international demand for general utility teak has broadened the traditional teak supply base from natural forests in Asia to fast-growing, small-diameter plantation logs from Africa and Latin America.”

Since teak primarily grows in tropical forests of Asia, it has, over centuries, evolved to adapt to extreme hot, humid and rainy weather conditions of the region. This durability, coupled with its light golden color, and texture, has made it one of the most sought after hardwoods all over the world, both for domestic as well as commercial use. Highlighting this Arun Mookken of Matrix Maritime, an authorised dealer of Mahindra Group-owned Mahindra Odyssea, which makes luxury boats and speed boats, told us, “Though now-a-days fibre-reinforced plastic is being used to build the outer body of boats, those that are built from teakwood continue to command a premium.” It’s not that teakwood is in demand only to make furniture and boats. Some of the other major usages of teakwood include sawn timber for construction, veneer and plywood, moulding, strip and block flooring, solid and flush doors, window frames, laminated boards and panels, carved articles for decoration, household utensils, and even, kitchenware.

The pricing mechanism for teakwood logs is different in different countries and is mainly dependent on the girth and length of logs. For example, in Myanmar, saw log grades are SG I, II, II, IV, V, with each grade commanding a different price. Similarly, veneer grade logs WSG I and II, having larger straight logs, without any visual defects, are suitable for veneering, and are priced higher. It’s also worth noting that in Myanmar, the government has a stranglehold over timber trade and through Myanmar Timber Enterprise (MTE) it monitors the extraction and export of timber.

Timber production from Indian forests have declined over the years, primarily due to increasing emphasis on conservation of forests and biodiversity. In fact, the situation has become so dire that current average annual domestic production of about 2.4 million cubic meters (CBM) is just about 5% of today’s demand! Though various government and private players are investing in teak plantations, the fact that teak has long rotation periods and demand is far higher than all the additional supply that plantations can generate, means imports will continue to remain high, making imports a round-the-year profitable proposition.

“Any fluctuation in  Indian demand affects global teak trade” - Kenichi Shono, Forest Resources Officer, Natural Resources and Environment Group, FAO Regional office for Asia and the Pacific (Bangkok, Thailand)

Q. What’s your opinion about timber trade, especially global teakwood trade? Also tell us how important Thailand is for global teakwood and timber trade.

A. Thailand is one of the four countries within the natural range of teak. The other three countries are Myanmar, India and Lao PDR. Myanmar is the only country, where logging of teak in natural forest is still taking place, although the amount of extraction has been declining due to the ban on export of raw logs that came into effect in March 2014. India is the main export destination of teak from Myanmar. In the other three natural teak growing countries, logging of teak in natural forest is entirely banned. Due to deforestation, land use change and unsustainable levels of harvest, natural teak from old-growth forest has become an insignificant part of the global teak market and the industry is, today, mainly relying on planted teak from countries in Asia-Pacific, Africa and Latin America. In Thailand, a complete ban on logging from natural forests, introduced in 1989, has contributed to the recovery of natural teak forests, which are reported to have increased by 2.9 million ha, according to a FAO report.

Q. What kind of impact deforestation and changing trends in the global environment can have on the industry?

A. In the future, we can have declining levels of production of teak logs from natural forests due to the continuing deforestation and depletion of natural teak resources. We are also likely to see continuing decline in the volume and quality of natural teak, accompanied by progressive loss of genetic resources. Hence, it is imperative to develop and implement a programme for genetic conservation of native teak resources in the native teak forest countries. Thailand has already taken up steps to address this issue. This was also a key recommendation that came out of the World Teak Conference held in Bangkok in 2013.

Q. India has very low levels of teakwood production. Does this give exporting countries more pricing power? How important is the Indian market for the growth of global teakwood trade?

India consumes almost 70% to 100% of teak logs exported from Africa and Latin America. The world teak trade is directed towards the Indian market, while its own considerable amount of teak production is utilised within the country. Any fluctuation in the market situation in India will affect the global teak trade. Hence, the market is volatile and other nations consider a stable Indian economy as a key factor in ensuring thriving teak investments and trade. The pricing mechanism of teak logs varies from one country to another as there is no common international log grading standard. Moreover, the use of various measuring units of log dimensions and volume differ from country to country, which further complicates the process of price determination.

“Projections indicate a 4x rise in demand for wooden products by 2020” - Dr. P. K. Thulasidas, TEAKNET Coordinator, Kerala Forest Research Institute

Q. Give us a brief overview of the global teakwood industry.

A. The world’s total teak supply from natural and planted forests adds up to about 2-2.5 million CBM, of which at least 60% is cut in India, Indonesia and Myanmar. The estimated market share of teak logs in the total round wood production is less than 2%. In value terms, the share is much higher, although there is no data to support this. Myanmar is the only country producing quality teak from natural forests and was supplying the same to international markets until March 2014. But due to dwindling teak resource base, it has restricted logging and has imposed an export ban since April 2014. This means it has now joined India, Thailand and Lao People’s Democratic Republic, in imposing such a ban. On the other hand, Indonesia exports sawn wood finished products mainly to Chinese and European markets. As far as Malaysia is concerned, it established teak plantations only in the late 1990s.

Q. Which main factors have contributed to declining teakwood supplies in recent years?

A. Till recently, while only about 0.5 million CBM was harvested in natural forests, about 1.5 to 2 million CBM was harvested in planted forests, if all teak producing countries are taken into account. But following the logging ban in Myanmar, even the 0.5 million CBM of natural forest harvest is history. According to a Food and Agriculture Organisation (FAO) global teak resources and market assessment, conducted in 60 tropical countries, natural teak forests are declining worldwide and the quality of naturally grown teakwood is also deteriorating. According to their survey, globally, between 1992 and 2010, due to anthropogenic disturbances, natural teak forests have declined by 385,000 hectares (ha) or 1.3%. Substantial declines have been particularly notable in Laos (down 68,500 ha), India (down 2.1 million ha) and Myanmar (down 1.1. million ha).

Q. Give us a sense of India’s domestic teakwood production and the dependence on imports.

A. As per FAO, in India, natural teak resources declined from 8.9 million ha in the late 19070s to 6.81 million ha in 2010. In India, teak ranks second only to Sal (Shorea robusta) in terms of growing stock, accounting for 4.59% of the total growing stock of wood in the country. Similarly, the total area under teak plantation is estimated to be about 1.67 million ha – a majority of it in the state of Maharashtra, Madhya Pradesh, erstwhile undivided Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Chhattisgarh, Gujarat, Tripura and Mizoram.

"We should adopt a policy that allows teakwood imports from only sustainable sources"

The total industrial wood demand in India is about 64.4 million CBM. Future projections, regarding the demand for wood and wooden products, indicate a 3x to 4x increase by 2020. What’s scary is that the demand-supply gap is widening even at the present levels of low per capita consumption, with the total shortage of industrial wood estimated at 47 million CBM. Sawn wood shortage, alone, is expected to be as much as 6.5 million CBM.

Q. Do you expect the import of teakwood to continue rising in the future as well?

As mentioned, the import of forest-grown natural teak, from Myanmar, ceased from April 2014. The Indian wood industry is now, mostly, relying on small dimensional plantation teakwood imported from Africa and Latin America. Almost all the teak produced in these continents is targeted towards India. Production of quality teakwood is also a big concern because the rotation age of teak has reduced to 20-25 years, particularly since it being a lucrative business, many countries are least concerned about quality teakwood production.

Q. What kind of policy changes do you think will help the growth of teakwood trade?

A. India should adopt an import policy which allows teakwood imports from only sustainable sources. This will ensure teak supply from only legally felled sources. In European countries, sawn wood products originating from illegal sources have been banned. This type of policy approach will discourage illegal felling and trading practices of valuable timber resources, which are fast depleting globally.