The Centre’s decision to withdraw the replantation subsidy has come as a big blow to integrated tea plantation companies. Small tea growers (STGs), not regulated by the Tea Plantation Act, have started eating into the business of the large tea planters.
The ministry of commerce provided a 25% replantation subsidy, as tea bushes productivity remains for maximum period of 20 years. But replantation follows a 7-8 years gestation period which was proving to be a high cost for the government, which led the government to withdraw the subsidy.
A Tea Board of India official said, even as the subsidy has been stopped, the government has provided market access assistance under the guidelines for tea development and promotion, aiming greater foreign exchange earnings from tea.
Large Indian tea producers account for 25% of the global tea production and employ around 35 lakh people. The replantation subsidy provided from 2008 up to 2021 in a cyclic order helped large players to produce quality tea leaves.
The autumn flush, harvested during November-December in Assam has also been lost this year, B. Barkatkoty, advisor North Eastern Tea Association said to Financial Express.
An ICRA- Assocham report says, consistent production increase from STGs since 2010 has turned detrimental to large players. In 2008, when India produced 950 million kgs a year, the STGs share was 250 million kgs. But in 2021 out of India’s production of 1400 million kgs, STGs share has come to 700 million kgs. The surfeit of teas primarily of the plainer category, from STG segment has led to pressure on auction averages, particularly of the CTC variety, mostly consumed domestically unlike orthodox that are exported. In case of North Indian tea auction the cost increase has far outweighed the price increase largely remaining rangebound at an average of Rs 120 per kg, the ICRA-Assocham report said.