Tea Crisis in India

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Tea Association Pleas for Financial Relief

By Aravinda Anantharaman

India’s tea industry is struggling with low prices, high labor costs, vagaries of the weather, and with every passing year, the problems are both recurring and amplifying.  Growers report that 80% of the country’s plantations are not profitable.

In a desperate measure to draw attention to their plight, they launched a newspaper advertising campaign in August. The ad drove home the urgency of the problems faced by the industry, revealing the discrepancy between costs and selling prices, and seeking the government’s intervention.

The publicity paid off and a meeting was convened in New Delhi where the chair of the joint secretary of the union commerce and industry ministry met with plantations represented by the Indian Tea Association (ITA), UPASI representing the growers of South India, the Confederation of Small Tea Growers Associations, tea associations from Assam, the Northeast and conglomerates HUL (Hindustan Unilever) and Tata Global Beverages (TGBL), in addition to a group representing brokers.

Participants identified 10 areas that demand immediate attention. These include implementation of auction reforms; diversifying estates to include other crops; increasing domestic tea consumption via marketing and branding; promoting tea tourism;  and allowing the export of tea waste.

Other areas mentioned including raising the incentive for production of orthodox tea from the current $0.04 (INR3) per kilo, assessing the feasibility of a minimum support price for green leaf based on meeting quality standards; offering the Mahatma Gandhi National Rural Employee Guarantee Act – a social security scheme – for temporary tea garden workers, and exploring a mechanism to exchange rupees for rubles to increase Russian exports. ITA seeks a ban on the expansion of tea estates for at least five years as well as financial relief by asking that state governments take over contributions to the employee retirement fund for a 3-year period.

Tea Board of India chairman Prabhat K. Bezboruah expects to deliver a final proposal to the Ministry of Commerce this fall. Vivek Goenka, chairman of ITA, is advocating the cultivation of other cash crops, and tourism. Meanwhile, the Indian Institute of Management in Bangalore recommends revamping the e-auction system to improve price discovery for bulk tea, using the Japanese tea auction as a model.

Assam’s state government withdrew a cess (tax) on the production of green leaves backdated to April 2019. Additionally, the larger tea gardens get a three-year exemption on payment. The specialty tea market, in small quantities, commands high prices, in Assam, Dikom Tea Estate near Dibrugarh received a record $1,046 per kilo (INR75,000) but the bulk of the industry depends on the sale of bulk tea where there’s a big gap between the INR18.50 to produce a kilo of green and what factory buyers pay (INR14).

The auction price in Assam has risen only marginally from $2.00 per kg in 2014 to $2.15 per kg in 2018. The average price for finished tea this year is $2.30 per kg while the cost of production is estimated at $2.78 per kg. Ninety percent of Assam teas at auction sell for less than the cost of production.

In contrast, wages have increased 22%. The tea industry employs 1.2 million people, supporting more than three million dependents, with women making up half the workforce. Prices are depressed due to a global surplus. Annual production is rising – growers saw a 12% increase during the first quarter, but exports are flat globally, and domestic consumption remains low. While specialty teas command good prices through direct sales, the cost of production for an industry that has been largely focused on producing commodity CTC, remains a deterrent.

This year’s budget adds a 2% tax on employers who continue to pay wages in cash. This complicates the financial situation at tea gardens, where cash payments are preferred by workers. Although the government has insisted that bank accounts be opened and payments made only via bank deposits, the reality is there are few ATMs in the gardens and little access for most workers.

In Assam, where the situation is acute, state government is taking a leading role to provide relief and financing a third-party agency to study the challenges of its industry and possible solutions. The state in September formally requested that the Tea Board of India back a minimum support price around INR20 for growers in Assam.

Lynch Mob Kills Estate Physician in Assam

Violence comes amid rising tension over wages in India’s tea gardens. In June doctors across the country protested a brutal attack on one of their colleagues by the relatives of a patient who died during treatment in West Bengal.

In September a lynch mob killed a retired 73-year-old physician at Teok Tea Estate in Assam — the latest of several brutal attacks on healthcare workers.

Dr. Deben Dutta, who was born and worked his entire life at Teok estate, was at home when a grievously injured worker arrived at the clinic.

The worker died despite his efforts, enraging relatives. A video shows Dutta bleeding as he attempts to quell a rock-throwing crowd that blocked ambulance staff. The nation reacted in outrage.

The Union Health Ministry subsequently proposed legislation mandating imprisonment and hefty fines for assaulting health services personnel.