Organised sector banking more on bought leaf factories: ITA

At a time when bought leaf factories and small growers? cooperatives have been increasing their share in the country?s tea bag, production from the organised sector has come down significantly. A recent status report published by the Indian Tea Association (ITA) shows that production of bought leaf factories and cooperatives has increased by 12.3% during the decade 1998-2007, and the share of the organised sector came down by 0.9%.

The industry is worried that the mushrooming of bought leaf factories has put the quality of the produce at stake. ?Inadequate quality control or expertise makes the sector?s produce low quality. Due to various reasons the sector has much lower cost of production and thus can offload tea at lower prices. This adversely affects the general tea market because of uneven production,? the ITA said.

Share of bought leaf factories, especially in North India, has increased significantly during the decade. According to the paper, share of the bought leaf factories in North India production has increased to 23% in 2010 from mere 10% in 2001.

According to analysts, this points at a decline in tea production in the organised sector. The organised sector in North produced 641 mkgs of tea in 1998 which came down to 592 mkgs in 2007. On the other hand in South, the sector?s production came down to 135 mkgs in 2007 from 142 mkgs in 1998. According to ITA estimates, the decline was about 0.9% across the country during the decade under review.

Assam registered the highest increase in bought leaf factory and cooperative production, which rose from 21.43 mkgs in 1998 to 102.93 mkgs in 2007. Area under the bought leaf factories and cooperatives have also increased to 88,674 hectares in 2007 from 25,923 hectare in 1998. Across the country the area under small growers has increased to 1.62,431 hectare in 2007 from 68,598 hectare in 1998.

Tea production in North has increased from 651 mkgs in 2001 to 765 mkgs in 2007 showing 1.7% growth, while contribution of bought leaf factories and cooperatives has increased to 173 mkgs in 2007 from 68 mkgs in 200, registering a growth of 24.5%. In South, share of bought leaf factories in total production has increased marginally.

While the organised sector?s output has come down, bought leaf factories have also started increasing their output, by 25% in North and 4.5% in South. Meanwhile, the sector has also started procuring tea in large quantities from the bought leaf factories keeping the increase in demand and lower cost of production at the bought leaf factories in mind.