India's tea industry is facing unprecedented challenges as extreme weather events and regulatory changes disrupt production and impact prices. According to industry experts like Prabhat Bezboruah, former chairman of India's Tea Board, the combination of excessive heat in May followed by severe flooding in Assam has led to a significant decrease in tea production. In May 2024 alone, tea production plummeted by over 30% compared to the previous year, marking the lowest output for that month in more than a decade.

The disruption continued into June, with sporadic improvements due to better rainfall relieving some of the earlier heat stress. However, renewed flooding in July has once again hampered plucking activities, particularly in Assam, which accounts for more than half of India's total tea production. This setback during peak production months is expected to result in a shortfall of 15 to 20 million kg compared to typical production levels.

The impact on prices has been significant. Kalyan Sundaram from the Calcutta Tea Traders' Association notes a nearly 20% increase in average tea prices by the end of June 2024, compared to the previous year. This price surge reflects the supply-demand imbalance exacerbated by reduced production capacities.

Further complicating the situation are recent regulatory changes, including the ban on 20 pesticides, which has added to production challenges. While intended to address environmental and health concerns, the ban has left financially strained tea producers struggling to negotiate with powerful buyers during these critical production months.

Despite these challenges, India's tea exports have shown resilience. In the first four months of 2024, exports surged by 37% compared to the previous year, reaching 92 million kg. The CTC grade, predominantly exported to Egypt and the UK, along with orthodox varieties destined for Iraq, Iran, and Russia, have seen increased demand amidst global supply uncertainties.

Looking ahead, the Indian tea industry faces a volatile landscape. Analysts predict average tea prices in 2024 could remain 16% to 20% higher than the previous year, driven by ongoing production constraints and robust export demand. While these higher prices may support the industry in the short term, the long-term sustainability will hinge on adaptive strategies to mitigate climate risks and navigate regulatory complexities.

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