The reported move on part of the central government to classify tea as an agricultural commodity instead of a plantation crop will not only enable tea to get all the benefits that farm goods export get, but will also help in addressing a long standing demand of the sector to bring it at par with other agricultural commodities.
The Indian tea industry which produces one of the world?s finest quality of tea in large volumes has been facing a slew of problems because of rising input cost?mostly labour, fertiliser and power?and almost stagnant returns. Of late though, there has been some improvement in realisations, but it is not sufficient to wipe off the losses suffered over the last 10 years. According to industry estimates, the biggest cost for making tea is the welfare cost of plantation workers, which according to some estimates works out to around Rs 7 per kilogramme of finished tea inclusive of the subsidised foodgrain supplied to plantation workers. Such high cost of production makes Indian tea less competitive in the global market and also squeezes margin of planters.
This year, as the industry was showing signs of coming out of the glut because of improved export earnings, drought in large parts of crucial tea growing areas in north-eastern Indian, has spoiled hopes. Cumulative rainfall in major tea growing districts has been around 20%-25% deficient, which could impact tea output as low moisture will make the crops more vulnerable to pest attacks.
The industry feels that the gains in price realisation made last year will be offset by the drop in production and rise in input costs as low rains will increase the need for irrigation. It is under these circumstances that the tea industry is demanding that the sector be brought under the ambit of the agriculture ministry which will help it in getting the benefits of priority lending from the banks. At present, most banks consider the sector only partly under priority lending. Moreover, industry also argues that when the state government imposes agricultural tax on 60% of their income, there is no reason why tea industry should not be classified as an agricultural commodity.
sanjeeb.mukherjee@expressindia.com