PEOPLE AND THEIR PROBLEMS

New Delhi, 7 April 2006

India’s Tea Industry

SCOPE TO IMPROVE PRODUCTIVITY

By Dhurjati Mukherjee

The proposal mooted by the recent visiting Chinese delegation to set up the Asian tea confederation comprising India, China and Sri Lanka has received great appreciation in all quarters.  The Indian tea industry is of the view that such a confederation would facilitate smooth marketing of the tea produced in these countries in the international market without harming each other’s trading interest.

In fact, it is felt that such an alliance would greatly help to dictate prices and put a check to the monopoly of tea trade by the Western multinational corporations.  The Indian Tea Board has also been receptive to the idea though it remains to be seen when the confederation actually comes into being.  However, there is need for further discussion between the three parties to finalize the details of operation of the confederation in their own interest.

Apart from this, certain other development should bring cheer to the Indian tea industry, at least for this year.  The Budget announcement of the setting up of the Special Purpose Tea Fund (SPTF) with the Government pledging a Rs.100-crore support to the fund for this fiscal.  The Finance Minister said that this amount would be followed up by levelised contribution from the Centre every year, which would obviously benefit the states of Assam, Bengal, Tamil Nadu, Kerala and Uttaranchal. There is unanimous appreciation of the Government’s commitment to the proposed fund which would help the tea industry to raise resources from banks and financial institutions.

As is generally agreed, around 2.12 lakh hectares require replantation or rejuvenation with the cost of replantation being Rs.2.60 lakh per hectare with rejuvenation costs being a little lower.  This  is imperative at this juncture if the production and productivity levels have to be increased as also the quality of tea.

A few years ago, the Tea Board had estimated that about 500 million kg could additionally be produced if one were to bring the yield of each of the gardens at par with the highest yield of the respective district.  It would be necessary for the managers of the low-yielding gardens to visualize their operational responsibilities  in terms of individual factors of production such as land management, soil management, nutrition management and water management and not merely in the traditional terms of estate management.

For increasing production of such uneconomic tea areas, rejuvenation and infilling offer the best medium-term remedies.  Infilling can double the output per hectare and, considering an average vacancy of 20 per cent in 421,000 hectares in the country with double infill, the new bush population after eight years or so could be 40”80 i.e. 1:2.  While expansion of area may be another option for production growth, availability of land has become a big problem.  In fact, whatever expansion that has taken place in recent times has mainly been in the North Eastern parts of the country.

The other development favourable for our tea industry has been the widespread drought reported from Kenya.  While India has for some years faced tough competition from Sri Lanka and Keyna, because of their competitive prices, now is the turn for us to reduce our costs of production by increasing yield per hectare and make our presence felt in the international market. It may be mentioned here that the cost of tea production in India is the highest in the world and stands at $1.7 per hectare while it is as low as 0.58 in Indonesia.  Though Indian tea is synonymous with quality tea, even the cost share is to be reduced to a certain extent to compete favourably in the international market.

But the question arises, whether all these developments will be able to effectively tackle the crisis in the tea industry where increasing costs of production and the inability to boost up exports have been major impediments.  Labour costs have gone up by Rs.17 per man-day since 1998 and electricity by 167 per cent (till early 2003), petroleum products and other chemicals and fertilizers by over 60 per cent, which along with labour wage increase, have pushed up garden costs by around 70 to 75 per cent.

The all-India auction came down from Rs.76.43 to Rs.55.43 between 1998 and 2002 with export price realization down by Rs.25 per kilogram. However, the number of estates went up from 88,000 tea gardens producing 870 million kgs. In 1998, 115,250 tea gardens claimed to have produced 820-830 million kgs. Between 2002 and 2004, the drop of yield per hectare from 1995 kgs to around 1580 kgs is indicative of the reduced demand as also of the state of the small growers whose production does not figure in the official list.

The total yield as per current productivity norms should be around 1000 million kgs.  But in reality it is much less.  The official figures do not reflect the output from the bought tea leaves or the tea waste being recycled with good teas to help flood the domestic market with strong teas.  The Government loses revenue and the industry does not have any authentic basis for its calculations as something around 150 million kgs are missing from official figures.

That production costs have to be brought down by resorting to mechanization cannot be doubted. Incidentally at $1.62 per kg. the Indian cost of tea production is highest among its other competitors.  According to a study by the Indian Tea Board, the cost of production of tea in Sri Lanka is at $1.23, Kenya at $1.16, Vietnam at @0.96, Malaysia at $0.84 while Indonesia is the cheapest at $0.58.

An inter-ministerial group of the previous NDA Government, comprising the Finance, Commerce and Labour Ministers had decided that the Centre would bear 40 per cent of the social cost and the State Government would chip in 10 per cent though nothing has been done as yet. The social cost in north India was estimated at Rs.459.97 crores which is about rs.7.17 per kg of made tea while in South India it was Rs.132 crores which is Rs.3.06 per kg of made tea.  The group had also rightly suggested that the tea producing states review the high agricultural income tax imposed on the industry and rationalize the enactments keeping in view the financial health of the plantation sector.  But not much headway in this direction has yet been made.

A point that cannot be denied is that the Tea Board has initially failed in promoting Indian tea in the unexplored markets and highlighting the beneficial aspects of drinking quality tea.  A sustained campaign against cheap teas of Kenya and Sri Lanka may have to be launched along with the awareness of the medicinal values of tea on human health.  It is only in recent years that the Tea Research Association (TRA) has undertaken research on the beneficial aspects of drinking quality tea and this has to be popularized in India and abroad.

Even in an otherwise dull scenario there is no reason to believe that exports cannot be substantially increased though, of course, the demands of the specific markets have to be kept into consideration.  A modest export of around 180 million kgs should not be difficult to achieve if the industry and the Tea Board put in sincere efforts jointly.  Meanwhile, with Pakistan reducing duty and sales tax on imported tea, India can now hope to export around 25 million kgs to its neighbours.

Competitiveness and reducing costs of production have to be important aspects of the future strategy.  High-yielding varieties of seeds, which are being developed by the TRA and the UPASI Tea Institute, have to be put to use for which loans and grants have to be made available, specially for small growers. Modernization of the factory and giving ore emphasis to orthodox production, keeping an eye on exports would be needed as early as possible.

Moreover, because of high costs of labour, mechanization in farm operations and also in the factory may help in bringing down costs.  Another aspect, which has to be kept in mind, is the reduction in the use of chemicals and pesticides as the Western countries have been showing their preference for buying organic tea. ---INFA

 (Copyright, India News and Feature Alliance)