South Indian plantations are facing a huge crisis with tea prices dropping below production cost. Many plantations depending solely on tea are even mulling closing down as returns from tea are becoming unviable, officials of United Planters’ Association of South India (UPASI) said.
Experts caution that there are around 70,000 small and marginal tea growers with a land-holding of about 49,000 hectares in South India depending wholly on tea. The small growers are in a serious crisis and almost half of South India’s tea production is contributed by this segment, with tea leaves supplied to the bought leaf factories, sources said. India is a leading producer of tea with an approximate annual production of 1,100-1,200 million kg.
“Tea prices in south India are at unviable levels with average price during 2014 up to September dropping to R85 per kg from R105 in the same period last year, a drop of 17%. At the same time wages have gone up between 9-19% in the three tea producing states of Karnataka, Tamil Nadu and Kerala,” Vijayan Rajes, president of UPASI, said.
“The huge increase in wages which has no linkage to productivity coupled with spiralling costs of other inputs like fertilizers have crippled tea plantations. Co-relation of wage and price level is an easily assessable health indicator of the tea industry. When the daily wage in Tamil Nadu was R8.20 in 1980, the average price was R12.66 a kg. The equation gradually changed and in 1995 both were almost on a par, daily wage at R39.88 and average price at R41.25 a kg. If one indexes it on a scale of 100 with 1995 as the base, wages in 2014 have gone up to R528 in Tamil Nadu, R485 in Kerala and R681 in Karnataka whereas the average price is at R207,” he added.
The plantation sector is additionally burdened with social costs providing housing, medical, educational and other infrastructural facilities to the huge population it supports, which in usual course is provided by the administration and government, he added.
One particularly vulnerable entity in this situation will be Kanan Devan Hill Plantations Company Pvt, with its unique ownership pattern of around 12,000 employees owning 69% of shares. BP Kariappa, chairman, Kanan Devan Planters’ Association, said the crisis is taking the industry back to the worst period the tea growers had at the start of this century.