Falling tea prices woo garden owners in Assam to monetise land assets

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Kolkata | December 20, 2019 12:59 AM

Tea being sold at an average price of Rs 150 per kg for the last five years is an absolute loss and there is no margin unless Rs 200 per kg is fetched.

As much as Rs 120 crore worth of free tea samples are distributed within the trade effecting in a major loss to the industry on a whole, tea garden owners felt.

In the wake of stagnancy in tea prices for the last five years and increasing cost of production, the tea industry, gradually turning unviable, is looking for a way out through monetising its huge land assets and bringing about reforms in auction process.

A model adopted by the West Bengal government, in which it has decided to lease out 15% of the tea garden land for purposes other than agriculture, has attracted attention of the tea garden owners, with which it has started lobbying with the Assam government.

The West Bengal government has taken a policy decision of attracting at least Rs. 7 crore of investment for every hectare of leased out tea estate land. The investment may come in the form of setting up hotels, putting up other tourism related products or even setting up eco friendly manufacturing units.

Earlier in a programme West Bengal chief minister Mamata Banerjee said the government has gone on an overdrive in promoting tea tourism, which could be a lifeline for the ailing tea industry. The Indian Tea Association (ITA)has now taken it up with the Assam government and with the Centre to adopt such a model, although it feels there are hiccups in Assam since every land in Assam is given out under a thirty years renewable patta or donation agreement.

“Leasing out patta land is difficult,” Prabhat Bezbaruah, chairman, Tea Board of India, told FE. “ Since land is a huge asset lying locked with the ailing gardens, the Assam government and the Union commerce ministry has to look at means of monetising it.

Pradip Ganeriwal, a tea garden owner of Assam, opines, cultivating tea has become unviable because costs have increased between 8% and 10% CAGR but price realisation has increased at only 1% CAGR over the last five years.

Tea being sold at an average price of Rs 150 per kg for the last five years is an absolute loss and there is no margin unless Rs 200 per kg is fetched.

However, reforms in auction has been identified by the Tea Board of India as a mechanism to fetch good prices but auctioning is defective from the sellers point of view with buyers playing a close hand giving last minute bid and sellers keeping reserve price and quantity visible. Data from the buyers side also need to be disclosed for a fair price discovery, Vivek Goenka, the ITA chairman said,

Transaction costs in auction sales of Assam tea in Kolkata are as high as Rs 12 per kg. There is no need for physically transferring teas from tea estates to auction centres and teas can be sold at ex-estate. As much as Rs 120 crore worth of free tea samples are distributed within the trade effecting in a major loss to the industry on a whole, tea garden owners felt.

Regulating production, maintaining price stability, enhanced incentives for Orthidox tea estates, boosting exports, bench marking Green leaf with linkage to leaf quality and a new package from the union commerce ministry is the need of the hour with which the ITA is persuading the Centre at present. The tea industry gets a Rs 110 crore worth of subsidy annually, which translates to 80 paise per kg of subsidy. Tea growers are looking for a revival package from the Centre for a turnaround.

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