Leading planters' body, Indian Tea Association (ITA), is making a fresh pitch for a floor price for tea in the wake of an adverse impact of unfavourable weather conditions on the crop and stagnating auction prices.
ITA secretary general, Arijit Raha, said that the association had first submitted a proposal for floor price to the Union ministry of commerce in March 2022.“Subsequently, we had also written to the government of Assam and West Bengal. Both state governments endorsed our proposal and wrote to the central government.”
“There is a need to revisit the issue of floor price. With inclement weather, rising cost of production, proposal to increase wages, it is becoming extremely unsustainable for us,” Raha added.
The industry had proposed to the Ministry of Commerce for declaration of a floor price for green leaf (payable to small tea growers) and made tea (payable to tea producers) indexed to cost of the production.
“Given the fact that the Indian tea market left to itself, has not been able to address the low price cycle, introduction of a floor price would be an immediate solution to address the unremunerative price of tea without any additional cost to the government. This has already been done for sugar by the government of India,” the association said in a statement.
The new tea season provides the context for taking up the issue of floor price afresh. The ITA noted that the new season had not started on a bright note for the West Bengal tea industry with unfavourable weather conditions adversely impacting the crop in several tea growing pockets in Dooars and Darjeeling.
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The association said that there were reports of widespread hail damage to the second flush crop across many gardens in North Bengal.
Although the official Tea Board data is awaited for March, as per available ITA membership crop data, Darjeeling crop is estimated to be down by 39 per cent in March. “Crop decline has also been reported in several pockets in Dooars region,” the association said.
Most of the Darjeeling estates have been going through a financial crisis the past few years.
West Bengal tea prices since 2014 have grown at a CAGR of around 4 per cent while costs of vital inputs like coal, gas, MOP, sulphur etc have grown at a CAGR of 9 per cent to 12 per cent during the same period, the ITA said.
But the auction prices of Darjeeling tea have been more depressed than the overall West Bengal average price – recording a CAGR of only 1.86 per cent since 2014, the association pointed out. Moreover, the cost of production in Darjeeling is higher compared to the plains.
What is also worrying the producers body is news reports on the possibility of the government of West Bengal effecting a further increase in wages of daily rated tea plantation workers. The move, ITA said, would further aggravate the financial stress of tea producers and make tea estate operations unviable.
Wages of tea plantation workers increased since April 1, 2014 by about 144.21 per cent, ITA said. In comparison, the AICPI (All India Consumer Price Index) during the corresponding period increased by 60.3 per cent. In addition to cash wages, the association said, workers were also being provided in-kind benefits which are inflation indexed.