Tea industry in crisis with rising cost, stagnant price, Plantation Association seeks ban on areas expansion
The tea industry has been under severe distress due to increasing production costs and stagnating prices, which threatened the long term viability of the sector, its stakeholders claim
The tea industry has been under severe stress with increasing production costs and stagnating prices, which threatened the long term viability of the sector, its stakeholders claimed on Tuesday.
Domestic consumption and exports have not picked up with rapid increase in production, leading to an oversupply situation in the sector, they said.
"The sector is reeling under cost pressures due to price stagnation in the backdrop of increasing cost of production, mismatch between demand-supply, high transaction costs, challenges for fair price discovery at the auctions and climate change problem," Indian Tea Association (ITA) Secretary Abhijit Sharma said at a press meet here.
Providing direct employment to 1.2 million people and supports to over three million dependents of tea garden workers with women accounting for 50 per cent of the employment, the tea sector is confronted with several challenges which are threatening the long term viability of the industry, said members of the Consultative Committee of Plantations Associations (CCPA).
Sharma enumerated the challenges as stagnant tea prices vis-a-vis rising cost, causing "severe stress to the tea sector".
The average tea auction price in Assam was ₹150 per kg in 2014 and all India price was ₹130.90 per kg, Sharma said adding the price rose only to ₹ 156.43 and ₹138.83, respectively in 2018.
Wages for tea garden workers increased by around 22% in 2018 in Assam, thereby increasing the financial stress of the industry further, he added.
North Eastern Tea Association (NETA) Chairman Nepul Saikia said another challenge is oversupply of tea with country's tea production growing significantly over the last decade from 979 million kg in 2009 to 1339 million kg in 2018 with the increasing contribution from the small tea growers.
Per capita domestic consumption at 786 gms per year is low, compared to some other tea consuming countries, he said adding the consumption needs to be increased.
To deal with oversupply, he suggested there is a need to boost exports from the present level of 256 million kgs.
India's product mix is predominantly CTC (Crush, tear, curl) with orthodox production comprising 10-12% of the total production, tea planters said.
With growing global demand for orthodox or green tea varieties, a correction of the product mix is required with higher orthodox production, Saikia said, adding that the high cost of orthodox production vis-a-vis CTC and inadequate incentivisation are major deterrents.
Indian exporters also "face cost disadvantages" in the global markets by way of higher transaction costs including inland transportation costs, freight, terminal handling charges, said Bidyananda Barkakoty, Advisor to NETA.
According to a report in Economic Times, An umbrella organisation of the Tea Producers’ Associations, Consultative Committee of Plantation Associations has sought a ban on further expansions of tea areas across India for a period of five years to contain over the crisis of the tea industry.
“Although in the past we have experienced a crisis, this time the cycle seems to be too long. While the cost of production has increased, the tea prices have remained stagnant. There is a mismatch between demand-supply which is leading to oversupply. The Domestic Consumption and Exports have not kept pace with the rapid increase in production and there is an apparent oversupply in the market.” He added, “Since boosting Exports and Domestic Consumption will take some time, the Government might consider imposing an immediate ban on Expansion of Tea Areas for a period of at least 5 years to check oversupply,” said Vivek Goenka, chairman of CCPA and Indian Tea Association.
“We have sought creation of a financial aid package for the tea industry, providing them with working capital loans with interest subvention along with provision for a 2-year moratorium. The banking support should include interest subsidy of 3 per cent on these Loans for a period of at least 5 years. The Government may consider taking over the employers’ contribution to Provident Fund for a period of at least 3 years. This would be in line with the spirit of the Pradhan Mantri Rojgar Protsahan Yojana Scheme.”
with PTI inputs