India's tea prices are skyrocketing and are anticipated to remain elevated due to heatwaves and floods during the critical harvesting season, significantly reducing output in major producing areas. This price surge could bolster the Indian tea industry, which has been grappling with escalating production costs while tea prices have barely increased over the past decade.

Extreme weather conditions are severely impacting tea production. Intense heat in May, followed by persistent flooding in Assam, is diminishing yields, according to Prabhat Bezboruah, a seasoned tea planter and former chairman of India's Tea Board. Production was further affected by the government's ban on 20 pesticides, Bezboruah added. India's tea production in May dropped by over 30% year-on-year to 90.92 million kg, the lowest for that month in over a decade, due to excessive heat and minimal rainfall.

In the northeastern state of Assam, which contributes more than half of the country's output, over 2 million people have been impacted by severe river flooding in July. The increase in tea prices began after a heatwave curtailed production from April, amidst strong demand, noted Kalyan Sundaram, secretary of the Calcutta Tea Traders' Association. In the last week of June, average tea prices soared to 217.53 rupees ($2.61) per kg, a nearly 20% rise from the previous year, according to data from the Tea Board.

Tea production improved in June following adequate rainfall, providing relief from the heatwave, but flooding in July has again restricted plucking in many districts of Assam, according to a Jorhat-based tea planter. "July is usually a peak production month, but this year we expect a deficit of 15 to 20 million kg," the planter stated. India produced a record 1.394 billion kg of tea in 2023, but production in 2024 could decline by approximately 100 million kg, predicted Bezboruah.

The production deficit is expected to significantly raise prices, but financially vulnerable and indebted producers are finding it challenging to negotiate with powerful buyers during peak production months, according to a Kolkata-based trader. More than half of India's total tea production is harvested between July and October. Average tea prices in 2024 could be 16% to 20% higher than the previous year, but the increase is not likely to curb tea exports, as many buyers are increasing their purchases following the pesticide bans, said Bezboruah. India's tea exports in the first four months of 2024 surged 37% year-on-year to 92 million kg, according to the commerce ministry. The country primarily exports CTC grade to Egypt and the United Kingdom, and the orthodox variety to Iraq, Iran, and Russia.