Trouble brewing: Why the Darjeeling tea industry is facing its biggest crisis
The Darjeeling tea industry is in crisis. The Gorkhaland agitation is the most recent blow to an industry hit by declining production and increasing competitionlong reads Updated: Nov 12, 2017 16:09 IST
Swaraj Kumar Banerjee, better known as Rajah, has descended to the plains handing the reins of his ancestral Makaibari tea estate, where he was born, to a new generation entrepreneur, Rudra Chatterjee, 30 years his junior.
Back in 2014, Banerjee sold a majority stake in Makaibari Tea and Trading Co. to Chatterjee but carried on as its chairman, helming day-to-day operations at the estate from the back of his thoroughbreds. He was the last owner to live on his estate and his bungalow in Makabari was possibly the last to be overflowing with family treasures. (Estate owners mostly live in Kolkata and rent out their British-era bungalows to tourists.)
Earlier this year, the storied planter chose to hang up his boots after his bungalow at the estate was gutted. Quite deservedly, Banerjee has been the most celebrated planter of his time. His 670-hectare estate, straddling six separate ridges, was the first in Darjeeling to go organic back in 1988. Others followed suit, but much later. That was the key to establishing Darjeeling as a premium brand of tea in Europe after the erstwhile Soviet Union broke up and the industry started to hunt for new buyers.
The accidental fire swept through the 19th century bungalow and took away Banerjee’s prized possessions – hunting trophies, paintings and antiques, some dating back to the 1850s. It also singed his ties with the estate where his father, too, was born. “I sensed it was time to move on,” says Banerjee, seated in his office in Siliguri. At 70, he has launched a pursuit to replicate the “Makaibari model” in plantations elsewhere.
The change of guard at Makaibari is more than symbolic, coming at a time when estate owners and the entire community of plantation workers have plunged into an unprecedented crisis. The path out of it is uncharted, and not immediately visible from Banerjee’s perch on the horseback.
Satyajit Ray chose Darjeeling as the setting for his 1962 film Kanchenjunga. Today’s Darjeeling is a far cry from what it was then – an idyllic getaway for the Bengali elite. And the film dealt with the conflict between the elite and the emerging middle class seeking to build an identity on its own strength.
For generations, the Bengali elite have controlled Darjeeling, treating it as their preserve. The native Gorkhas have been fighting from before Independence to neutralise the influence of Kolkata’s elite, and Darjeeling’s politics has been shaped by the local community’s struggle to establish its own identity against repressions, both perceived and experienced.
There have been many flashpoints: in the mid-1980s some 1,200 people perished in mindless killings following which a new order emerged with the Gorkhas being given some autonomy in the civic development of Darjeeling.
A 20-year experiment with the Darjeeling Gorkha Hill Council ended in 2008, following which Darjeeling descended into chaos again. Clearly, the aspirations of the Gorkha community were not fulfilled and the demand for a separate state was revived.
Four more years of agitation and uncertainty led to the formation of Gorkha Territorial Administration in 2012 with greater autonomy and financial backing, but it, too, failed within five years.
Looking back, both Gorkha leaders and the administration say experiments with incremental autonomy have failed miserably. The standoff is not ending anytime soon, and each time it has intensified it has taken a huge toll on Darjeeling’s fragile economy.
The British secured Darjeeling on lease from the princely state of Sikkim in 1835 for its “cool climate”, or so says the deed of transfer. Tea cultivation started under a renegade British army officer, Captain Samler, in the 1840s. Makaibari is among the early birds: one of Banerjee’s forefathers bought over a fledgling plantation from Samler in 1859.
Estates such as Tukvar, Aloobarie, Lebong, Margaret’s Hope, Ambootia and Badamtam are of similar vintage. Plantations expanded rapidly, and according to official records from 1915, there were at that time 156 tea estates. Now there are 87 tea estates in Darjeeling that can sell their produce as Darjeeling – a registered geographical indication (GI).
Because of the large number of locals that the plantations employ – currently estimated at around 75,000 – the tea industry didn’t face much disruption due to the political unrest in Darjeeling. But it changed this year: tea garden workers spontaneously backed the strike, at least in the beginning. The plantations were hauled into the 105-day blockade, which is estimated to have cost them Rs 500 crore in lost revenue.
The bushes, too, have suffered a lot of damage, fighting with overgrown weeds for nutrients. Estate managers are racing against time to uproot the weeds and clean up the bushes, but the harvest next year is likely to be delayed by weeks, which means more losses.
It is feared that many estate owners may not survive the crisis. Many tea factories will be shut and ownership of estates will change, says Banerjee. But consolidation alone will not help.
Darjeeling produces around 9 million kg of tea a year – a minuscule fraction of India’s total tea production of 1.2 billion kg. Yield in Darjeeling has steadily fallen from 14 million kg, once the estates started to shun chemical inputs. The crop has also been impacted by climate change – drought in March is now quite common.
With tea gardens going organic, Darjeeling’s ecology has improved, and it is evident from the variety of birds seen during the summer, says Sandeep Mukherjee, a retired army officer, who now works as secretary at lobby group, Darjeeling Tea Association. But research shows annual precipitation has declined by a fifth over the past two decades, according to Mukherjee.
Contracting yield has swelled the cost of production, and the industry on average sells 40-50 per cent of the crop at unprofitable prices. Tea grown in the same estate doesn’t fetch the same price all year round – the quality changes with season. Even tea plucked on the same day may not be consistent in quality because cultivation takes place at different altitudes – the higher the better.
So don’t get swayed by the famed Mariage Freres of Paris (mariagefreres.com) selling tea from Namring at 76 Euros for 100 grams, or a whopping ~57,200 a kg. At the bottom of the same catalogue, you’ll find tea from the same estate being sold at 6 Euros for 100 grams. Leaves that survive the roasting are sold at a premium; those that break or turn into dust wind up into tea bags.
Estate owners make healthy profits from the early harvests, known as first and second flush. Together they span about four months, starting in April. “For the rest of the year, it is a struggle to keep the head out of water,” says Mukherjee. And in Darjeeling there is anyhow no production at all for four-and-a-half months – during the winter the bushes fall asleep, unlike in other tea-growing regions.
The industry is heavily dependent on large buyers, who soak up the bulk of the monsoon tea from auctions, says Krishan Katyal, chairman of J Thomas and Co., the world’s biggest tea auctioneer. If they were to turn to other sources of similar tea, garden owners in Darjeeling will run aground. That essentially means tea from Darjeeling sells more as a commodity than as a premium product protected by GI, according to Katyal.
Only a handful of estates like Makaibari do not sell through auctions at all. According to the estate’s new owner Chatterjee, whose family is invested in tea through three generations, if the entire Darjeeling crop were to go to auctions, all estates would have gone belly up.
For Makaibari’s 100,000 kg-a-year crop, Chatterjee has created markets abroad. He has managed to take Makaibari into the stores of Williams-Sonoma Inc of the US, and into hotels of the Oberoi Group in India and Park Hyatt abroad. Others such as the Goodricke Group and the Ambootia Group have established their estates in catalogues and stores of Mariage Freres.
The challenge now is to expand the market for Darjeeling tea within India. Despite its hallowed image, within India, Darjeeling tea doesn’t have much following outside West Bengal. All the top producers are now trying to address this problem. Chatterjee, for instance, is looking to start a chain of stores selling Makaibari tea in upscale malls of Kolkata.
“For years, the planters expected their tea to do all the talking,” says Chatterjee. “As long as buyers from Amsterdam and Hamburg kept coming to the estates in search of quality tea, many thought it was below their dignity to create new markets for their produce.” Now these buyers have found another source of good tea: Nepal.
The quality may not be just as good as Darjeeling, but tea grown in Nepal at high altitudes is hardly distinguishable. The plantations there, which now produce five-six million kg in all, were created from scratch with clones taken from Darjeeling, says Katyal. Climatic conditions are similar, and because the bushes are young, the yield is higher.
A new brand of premium tea is emerging: Himalayan tea.
Even within India, a similar experiment has been successful. J Thomas had helped create a new plantation in Sikkim for the local government with bushes taken from Darjeeling. Tea produced by Temi in Sikkim cannot be sold as Darjeeling, but it is almost entirely exported and fetches a premium.
The disruption this year took out at least 70 per cent of the Darjeeling crop by volume, and has helped Nepalese tea make inroads into Indian homes. Sadly, a large section of inflamed Indian estate owners are focused more on lobbying for trade barriers on imports from Nepal than on expanding markets for their own produce. The GI is only a crutch unless leveraged to create a value proposition in people’s mind.
ITS TOUGH RUNNING A HOTEL IN DARJEELING
Time stands still at Hotel Mount Everest, a mute spectator of Darjeeling’s transformation from a sleepy summer resort to the epicentre of an unending political strife.
An early 20th century summer residence of a wealthy Bengali family turned into a hotel, the property was one of the Oberoi Group’s early acquisitions. After being ravaged by fire, the hotel had to be mothballed in the early 1980s. And it hasn’t reopened since. Two years ago, the Oberoi Group sold it with a heavy heart after decades of efforts to rebuild it yielded nothing.
Political unrest in the mid-1980s hobbled early efforts to restore the property. For the first time, Darjeeling was witnessing a violent movement for a separate state of Gorkhaland. It went on for years, until, in 1988, the state agreed to create a semi-autonomous body for civic development of Darjeeling.
The Gorkhas temporarily gave up their demand for a separate state and under the new order, bargain hunters rushed to Darjeeling to build hotels. Many came from neighbouring Nepal, and Darjeeling underwent a sea change in the early 1990s.
As budget hotels mushroomed, by the mid-1990s, Hotel Mount Everest was faced with a new problem: acute scarcity of water. The Oberois lobbied successive governments for a fix, but to no avail.
“We tried our best,” says S.S. Mukherji, vice chairman of EIH Ltd—the company that runs the Oberoi chain of hotels.
There are around 350 hotels and home stays in Darjeeling now, and scarcity of water is a perennial problem. All hotels, including premium properties such as Mayfair, have to buy truckloads of water from what is locally known as the “water mafia”. It is led by the same Gorkha leaders who are in control of the local civic body.
Even as the Oberois gave up on their sprawling five-acre property with a majestic view of the Himalayas, Dilip Ray, a politician and entrepreneur from Bhubaneswar, invested in the hill resort, buying out in 1997 the summer retreat of the royal family of Nazargunj. He has turned the 1875 property into a premium hotel, which is doing brisk business despite operational challenges.
Swamped with shabby budget hotels and backpackers, Darjeeling may have fallen from grace, but it continues attract investments. Harshavardhan Neotia, a leading real estate developer from Kolkata, is building a hotel on the Makaibari tea estate—the fruit of another pioneering initiative of Rajah Banerjee, the estate’s erstwhile owner, to create additional revenue streams.
Neotia’s Ambuja Realty group is building an 80-room boutique hotel at Kurseong at an elevation of around 3,800 feet, to be managed by The Indian Hotels Co. and operated under the Taj brand.
He is pursuing the project for the past seven years, and is undaunted by the frequent disruptions that he has witnessed. “Disruptions are unfortunate, but I am sure a political solution will emerge,” says Neotia, who has budgeted for an investment of Rs 88 crore.
The project is still one-and-a-half years from materialising, and if it does, it can potentially lift Darjeeling’s image and change the game for those invested in tourism in the hills.