Hit by lockdown, tea industry seeks financial package

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Published: May 26, 2020 8:41 AM

At present, there is a strong export demand for second flush Assam tea from key markets like Iran, Russia, the UAE,and Europe.

tea industry india, ailing tea industry, coronavirus impact on tea industry, coronavirus in India, coronavirus impact in IndiaTea production was closed from December 2019 by an order of the Tea Board.

The ailing tea industry has urged the Centre and state governments of Assam and West Bengal to extend a financial package to the sector in view of production loss to the tune of 140 million kgs during March, April and May, which translates to a revenue fall of more than Rs 2,100 crore, based on last year’s north India auction prices.

The lockdown in the wake of Covid -19, at the onset of new season, has dealt a big blow to production of tea in Assam and West Bengal which is estimated to have declined by 65% for the period of March and April and by 50% during May.

The tea sector has demanded a financial package in terms of interest subvention, enhancement of working capital limit, relief in payment of electricity charges and provident fund dues. The various relief packages announced so far have yielded little for the tea industry, an Indian Tea Association (ITA) statement said.

The north Indian tea sector was already under financial stress with input costs going up by 7-10% CAGR in the last five years, while the growth in prices have been at 1%, resulting in large number of tea estates incurring losses. The lockdown has further aggravated the situation bringing the sector under acute financial stress.

Tea estates in Assam and West Bengal, after closure of production for three weeks during the lockdown, resumed operations from April 12 with partial workforce utilisation. Plucking operations could not be resumed immediately as tea bushes which had overgrown for the halt in operation had to be skiffed. Besides, a dry spell resulted in the skiffing operation being done with low soil moisture, making recovery of unpruned tea bushes slower.

The deployment of workforce below the normal strength for considerable period as mandated by the government resulted in operational problems, thereby posing a grave challenge to the industry.

Tea production was closed from December 2019 by an order of the Tea Board and therefore the carryover stock this season has been much less. So, combined with the loss of production during the lockdown period, the demand-supply situation is expected to get corrected and the disruption in supply chain has led to certain buoyancy in North India CTC tea prices. However, the recent spike in prices will not compensate for the revenue loss and thus a financial package is required, according to an ITA statement.

But the industry remains optimistic in export front. At present, there is a strong export demand for second flush Assam tea from key markets like Iran, Russia, the UAE,and Europe. Logistics remains an area of concern as operation would take some time to stabilise, the ITA statement said.

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