Tea industry urges Modi government to bail it out of troubles

Goenka said the tea prices had remained stagnant over the last few years causing severe stress to the tea sector.

Published: 20th August 2019 08:12 PM  |   Last Updated: 20th August 2019 08:12 PM   |  A+A-

Tea garden in Assam. (Photo| PTI)

By Express News Service

GUWAHATI: The Indian tea industry has urged the Central government to bail it out of myriad troubles that it is grappling with.

The industry is reeling under cost pressures due to price stagnation against the backdrop of rising production cost, the mismatch between demand and supply leading to oversupply, high transaction costs and fair price discovery challenges at the auctions, climate change adversities etc.

Vivek Goenka, who is the chairman of Consultative Committee of Plantation Associations and Indian Tea Association, said the stakeholders deliberated on the challenges, which were threatening the long-term viability of the industry, and possible solutions at a meeting convened by the Ministry of Commerce & Industry in New Delhi last week.

Goenka said the tea prices had remained stagnant over the last few years causing severe stress to the tea sector.

“While tea prices have grown at a compound annual growth rate (CAGR) of around 1% over the last few years, cost of vital inputs like coal, gas, sulphur, MOP etc have increased at a CAGR of 6-7% during the same period,” Goenka said. 

He said the increase of wages of tea garden workers in Assam by around 22% in 2018 increased the financial stress further.

The industry urged the Centre to enhance the export rate of orthodox incentive from Rs.3 per kg to Rs.20 per kg to boost orthodox production and cater to growing global demand, subsidize machinery used for orthodox and green tea manufacturing, coverage of the tea sector under the Interest Equalization Scheme for Pre & Post Shipment Credit which provides 5% interest subvention on export credit.

It also urged the government to implement the recommendations of Prof. Mahadevan Report for fair price discovery, mitigation of high transaction costs involved in tea auctions, introduction of ex-estate sales, reduction in sampling, a financial aid package for the industry etc.

Stating that the per capita consumption in India at 786 gms is low when compared to some other tea consuming countries, the industry insisted the government set up a dedicated fund for undertaking vigorous generic promotion campaigns in the domestic market to boost consumption.

“Since boosting exports and domestic consumption will involve some time, the government may consider imposing a ban on the expansion of tea areas for at least five years to check oversupply. Given that the contribution of small tea growers is close to 50%, there is need for a sustainable minimum benchmark price (MBP) for green leaf which would cover the cost of production of the small tea growers,” Goenka said, adding, “The MBP should, however, be linked with minimum quality standards. The present price sharing formula of green leaf supplied by small tea growers, therefore, merits a review”.

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