Floods in the northeastern state of Assam have further hit India’s beleaguered tea industry already battling with a lower production due to a national lockdown triggered by the Covid-19 pandemic back in March, industry officials said.
They told indoasiancommodities.com that the lockdown would result in an estimated revenue loss of at least Rs 2,100 crore based on prices recovered last year in North India tea auctions in Bengal and Assam.
According to the Indian Tea Association (ITA), the two key states contributing nearly 80 percent of the national yield, have registered a production loss of 140 million kg between March and May this year.
While the input costs for tea production has been rising in the last five years, there has been no simultaneous increase in tea prices. Current lack of supply has seen tea prices rise by Rs 70/kg, but that is expected to rationalise once the economy stabilises.
Further, the lockdown due to the pandemic has resulted in below normal deployment of workforce which has led to operational problems. “The last few months have really aggravated the financial stress of the tea industry,” noted an ITA official.
Around 1,000 tea gardens in the two states have lost their ‘first flush’, a major contributor to their revenue, industry officials said.
Normally, March-April is an important period for tea planters as it is the best time for the high-quality, best-priced tea production. It follows soon after the no-plucking period after December when the pruning of tea leaves are undertaken.
A first in a century
“However, this year due to the lockdown plucking of tea leaves in March could not be done. And, untouched for three weeks, bushes grew and had to be pruned again. This is the first time in 100 years of tea history that pruning will be done twice in the year,” said Rajesh Beriwal, director of the Dibrugarh-based Langrai Tea Estate in Assam.
Also, the rains in upper Assam have been playing havoc with the yield.
“There is a flood like situation here, which is hampering the tea production. As it is, in June, we are 5 to 10 percent behind in tea production. Recovery from the total production lag will take us at least two years,” adds Beriwal.
ITA has asked support from the commerce ministry and the respective state governments of Assam and West Bengal to extend a financial package, which includes interest subvention, hike in working capital limits, relief in payments of electricity charges and PF dues.
Meanwhile, at a recent webinar organised by Indian Chamber of Commerce, Arun Kumar Ray, deputy chairman of Tea Board of India (TBI) said getting additional funds from the central government, which has been “static” for the last five years, will be very difficult.
Hard on funds
TBI spends 90 per cent of the funds it receives from the government on subsidies. Currently, the board is having financial issues, as the statutory body under the commerce ministry has kept the replantation subsidy in abeyance for the time being. It is expected that the situation will improve by 2021.
However, given the present situation, according to Ray, it is more prudent for the tea industry to find ways to stand on its own feet.
He suggested that exporters be roped in to contribute towards the promotion and branding of the beverage in order to increase the demand for tea internationally.
Indian tea growers, in the meantime, have been asked to focus more on orthodox tea manufacturing which has a good export market.
Exports this year are expected to be lower by 20 to 30 million kgs as shipments have dropped. The silver lining, however, that there is strong demand for Assam’s second flush tea from Iran, Russia, the UAE and Europe.