This is no storm in a teacup -Santanu Sanyal
-The Hindu Business Line
The entire tea industry in India faces an uncertain future. And young people don’t want to work in tea gardens anymore
After a steady run for nearly a decade, the tea industry is now facing tough times. Both, production of gardens in the organised sector and leaf prices are virtually stagnating. And exports no longer hold out much promise.
Between January and July this year, all-India production was 553.21 million kg as compared to 553.62 million kg during the same period last year. The average price, covering all varieties of tea, between January and mid-September this year was 137.02 a kg in North Indian auctions and 82.42 a kg in South Indian auctions, lower than prices during the same period last year.
The export picture is equally dismal. Between 2005 and 2014, exports increased marginally from 199 million kg to 201 million kg. Between January and July this year, total export was 107.92 million kg compared to 112.89 million kg in the same period last year; the average price realisation from export was 175.26 a kg (191.12 per kg).
Why has this happened? Experience shows that the domestic price of tea is often influenced by the export demand. If export demand is strong and the price high, domestic demand and price too will be on the higher side; the reverse is also true. Right now, the export price is on the lower side for various reasons, leading to lower domestic prices.
There has also been a tectonic shift in the production scenario with the steadily rising share of BLFs or bought leaf factories (mostly processing produce of small tea-growers) in the total production. A few years ago, their share was around 20 per cent. Now, according to the Confederation of Indian Small Tea Growers’ Associations, it is as high as 37-38 per cent.
The bulk of the production of BLFs attracts a low price due to various reasons. The overall price is bound to be depressed when there is more of the low-priced variety in the market. Only small quantities of the production of BLFs are sold through the auction system. The payment at auction takes three to four weeks to materialise but small growers cannot afford the wait. As a result, the right price discovery is often not possible. In 2014, BLFs processed close to 400 million kg and only around 150 million kg (around 28 per cent) were sold through the auction system.
Meanwhile, in April 2015, the Tea (Marketing) Control Order 2003 was amended by the commerce ministry directing all registered BLFs to sell not less than 70 per cent of the total tea manufactured by them in a year through the public auction system. A section of BLFs in Assam has gone to court complaining of discrimination, more so when there is no such stipulation for gardens in the organised sector. The implementation of the order will hit their cash flow and throw up a host of other problems.
The changing weather pattern has posed new challenges to tea growers in the organised sector, with scanty rainfall in March, April and May hitting both first flush and second flush crops in North India. Production in Assam’s Brahmaputra and Barak valleys has been particularly vulnerable. Assam accounts for nearly 52 per cent of the country’s total tea production.
Different kinds of pest incidence and drought management too have emerged as key issues, more so because pest attacks create panic among overseas buyers, resulting in knee-jerk reactions with regard to pesticide applications. A major quality issue relates to the use of pesticides. In this context, maximum residue limits (MRLs) of pesticides have been a debatable issue for many years, with a satisfactory solution still eluding producers. A government notification on the revision of existing MRLs and fixation of MRLs for some of the other pesticides in the list approved by the Tea Board under the Plant Protection Code is expected soon.
There is yet another reason for production stagnating. No new gardens are being developed, nor is the rejuvenation and replantation of bushes progressing at the desired pace. Assam bushes generally have a life of 40 years while for Darjeeling bushes, it’s 50 years. But there are older bushes in these places, resulting in lower yields. Production of Darjeeling tea has dropped from 11.31 million kg in 2005 to 8.5 million kg last year with the number of gardens having remained unchanged at 87.
The tea-growing States have been advised by the Centre to remove restrictions on land acquisition to augment acreage under tea cultivation and the Tea Act is being amended to remove potential regulatory hurdles. As for exports, demand is low due to a weakening global economy and the political situation in West Asia. In the first seven months, there has been no change in demand from the UK and Germany, the major buyers of Indian tea, while UAE, Iran and Egypt, other major buyers, bought less than they did in the same period last year; however, the CIS countries, including the Russian Federation, marginally stepped up import.
The industry needs to come out with a comprehensive export strategy keeping in view of the changing dynamics of the market. The Tea Board has some funds to help the industry although overdependence on the regulator is not healthy in the long term. Tea parks could be developed for blending and packaging for the overseas market.
The organised tea sector complains of high labour cost — it accounts for more than 60 per cent of the total cost currently. The West Bengal and Assam governments have proposed a minimum wage for tea workers — West Bengal at 153 a day, only cash component, and Assam at 177 a day, cash and non-cash components taken together. Currently the minimum wage in West Bengal is 122.50 per day and in Assam, 115. The industry feels the proposed rates are too high and therefore unacceptable.
However, little do industry captains realise that the children of tea-garden workers no longer want to stay in the gardens. Even a housemaid in a metro earns much more than a tea worker in a remote place, not to speak of the attraction of city life. The problem, already visible in South Indian gardens, has started showing up in the north also. The recent agitation by women workers in Kerala is a case in point.
Long-term, some feel that mechanised plucking is the answer. But can machines be the perfect substitute for human discretion?
The writer is a senior journalist
The Hindu Business Line, 18 October, 2015, http://www.thehindubusinessline.com/opinion/this-is-no-storm-in-a-teacup/article7777451.ece?homepage=true