Indian Tea Association says wage hikes make industry viability ‘daunting’ task

Guwahati: The Indian tea industry will have to set an export target of 350 Mkg in the next 3-4 years.

Addressing the 139th annual general meeting of the Indian Tea Association at Calcutta, chairperson Nayantara Palchoudhuri said it is satisfying to note that exports are showing a higher trend this year by 12.6% from January to July. 

It is good to note the increase in exports this year to Iran, Iraq and UAE. “With sustained efforts, we have made inroads into Turkey and Syria. Export in 2022 is estimated to touch 230 kg which would be a remarkable increase from 196 mkg in 2021,” she said.

“We have to target a volume of 350 Mkg within the next 3-4 years. It is well known that our scope for higher export hinges on higher production of orthodox, in tune with its popularity and demand abroad. Orthodox production is gaining momentum and in this context, I laud the recent decision of the Govt of Assam to enhance the Orthodox subsidy under the Assam Tea Industries Special Incentive Scheme (ATISIS) from Rs 7 to Rs 10 per kg from April 2022. I would urge the Tea Board and Ministry of Commerce to restore the Orthodox incentive from the Central Govt so that Orthodox tea producers, including Darjeeling, are incentivised substantially at a higher rate,” she said.

This is for the first time in the Association’s history of 141 years, a female chairperson is addressing the AGM.

Speaking on the global risk accentuated by geo-political tensions in Europe and the economic stress caused by this situation, she said the sustainability challenges continue unabated with climate change becoming an existential threat. 

“That apart, ensuring economic viability in the tea industry has become a daunting task following a steep increase in wages in successive years: 2021 and 2022,” she said.

She said tea producers are under severe financial stress for the last few years with price realisations not keeping pace with the rising cost of production putting their sustainability in question. 

Wage hikes in West Bengal and Assam pose sustainability challenges in the sense that for two years in succession, the industry has had to absorb more than usual hikes.

“The productivity of workers has to increase to keep the wages sustainable and therefore it is necessary to address these issues jointly with the unions with the active intervention of the State Govt,” she said.

At an interaction in Delhi this year, the concerns of the employers about the 15% capping of an in-kind portion of wages under the Code on Wages 2019 were submitted to the Ministry of Labour and the industry is hopeful that the concerns highlighted would be looked into. An appropriate insertion needs to be made in Rule 3 of the Code on Wages (Central) Rules, allowing adjustment of all in-kind benefits being provided to tea plantation workers.

At current production levels for the industry to be financially stable, the only way out is by an increase in prices. The Association had placed before the Union Commerce Ministry a proposal for a minimum floor price which could be a way to fair price discovery. This has been a work in progress for quite some time and I would thus urge the Tea Board and Ministry of Commerce to consider our pleas on this count.

She said for the sustainability of the industry, we need a system that will enable the producer to pass on the perpetual increase in the cost of production due to rising input and wage costs.

Production – Demand & Supply:

The decline in India’s production in 2020 and 2021 compared to 2019 by 10% and 4.5% respectively helped in correcting the demand-supply mismatch. Globally, however, the total output at 6455 mkg in 2021 which compared to the previous year was higher by 168 mkg with China and Sri Lanka registering increased production.

In India, while production is continuing to increase, the suspension in the application of Sections 12 to 15 of the Tea Act related to the control over the area of tea cultivation needs a review as without that the demand-supply balance remains exposed to a serious threat.

“Unfettered addition of new areas into tea needs to be checked so that both big and small growers coexist amidst assured economic viability,” she said.

On imports, she said the influx of average quality teas from some of the countries of late at cheap landed costs of US$1 to 1.2 is causing concern. This can compromise whatever correction of demand-supply mismatch has been achieved by production curbs and lead to depression in prices.

” Import of teas which are not FSSAI compliant should not be allowed to ensure a level playing field for the producers. This needs to be addressed immediately and I would urge the Tea Board to take it up with the Ministry,” she said.

On tea price and auction reforms, she said the Tea price trajectory of the last decade reflects a prolonged phase of stagnation in price growth which consequently has pushed a large segment of the Industry into crisis.

Coming to Auction reforms, she said while we do advocate that Tea Board with all stakeholders need to evolve a better understanding of how to strengthen the e-auction platform for an efficient system facilitating fair price discovery the Bharat Auction model which is under deliberations will need to address the concerns of the producers and our suggestions to Tea Board which in a broad sense are related to Base price, reserve price, a timeless system with a fixed number of lots per session instead of a minute, offering of lots in sequential order etc. 

 She said in due course of time we should consider a system enabled with a blockchain mechanism which would ensure traceability, better quality and higher exports amidst a stable price environment.

Consumption per capita in India despite the increase to the current level of 850 gm is less than our neighbouring countries. Globally the net retention of teas in producing countries for internal consumption has risen in the last decade while at the same time, the concurrent drop in the exported percentage of global crops indicates a surge in domestic consumption in the producing countries, mainly India and China.

She said the focus on Market Promotion in the Tea Promotion and Development Scheme is a welcome step towards boosting consumption further. I would reiterate a substantive outlay from the MoC through the Tea Board to enable a scaling up of domestic and overseas promotions and the ITA would be happy to associate with the Tea Board in taking this forward.

The State Govts of Assam and West Bengal are on course to formulate their respective Tea Policy. Such Policy – undoubtedly laudable – envisages continued sustainable growth of the tea industry by way of thrusts on incentivization, modernization, and tourism thus facilitating the upliftment of the stakeholders and rural economy of the two states while upholding the richness and uniqueness of our teas at the international level. We are hopeful that the suggestions forwarded by the Association will be duly considered.

Darjeeling

The financial stress of the Darjeeling tea industry is acute which is well known and also has been acknowledged by the Parliamentary Standing Committee of Commerce in their recent report. The tea industry in Darjeeling has not yet recovered from the financial setback of the prolonged shutdown of 2017. Production has been consistently declining due to reducing yields. Tea prices of Darjeeling in the last 6 years have grown at a compound annual growth rate of only 1.7% against an increasing cost of inputs at between 10% to 12%. Higher transportation costs due to geographical disadvantages have compounded the problems further.

For the revival, fiscal interventions by way of a special financial package for the industry need to be considered without delay so that the industry becomes sustainable and the livelihood of 55,000-plus workers and their dependents is secured.

The decision of DGFT to select Darjeeling district under District as an Export Hub scheme is a welcome step.

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