As cup brims with losses, Centre to hold meeting with tea sector chiefs

More than 80% of the Indian Tea Association members incurred losses in 2018-19

Days after the Indian Tea Association (ITA) sent a distress signal through newspaper advertisements, the Centre has called for a meeting of all stakeholders to discuss issues pertaining to the sector.

The ITA, the apex industry association — accounting for a majority of the tea produced in the organised sector — had inserted an advertisement, highlighting the crisis and seeking government intervention.

More than 80% of the ITA members, with estates in Assam and West Bengal, had incurred losses in 2018-19 and were preparing for losses during the first quarter of this fiscal.

“Most of our members (nearly 251) are in losses,” a senior ITA official told The Hindu.

A reading of the published results of the listed companies shows that in most cases the losses had widened since 2017-18. These firms belong to industry houses such as Williamson Magor, a heritage company, the Birlas, Bangurs, the Goenkas, Tata Group and another heritage organisation in the public sector, The Andrew Yule Group.

The long list includes McLeod Rusell, Warren Tea, Andrew Yule, Jay Shree Tea, Associated Plantations Pvt. Ltd. and Joonktollee Tea & Industries to name a few.

Many of these companies have also suffered rating downgrades.

The red streak runs across the country’s tea-growing regions in the north and the south. Companies like Harrisons Malayalam Ltd. based in Kerala, and with tea and rubber plantations in Kerala and Tamil Nadu, have also recorded shown losses during the last fiscal.The main reason cited by the managements of these companies as also the industry captains has been the stagnation in the average selling price of tea.

While the costs have ballooned to almost ₹200 per kg, the average selling prices have remained flat at about ₹160 per kg between 2013-14 and 2018-19. Costs have mainly increased on account of wages and farm inputs such as fertilizers as well as fuel costs. In a recent presentation, IIM Professor Mahadevan, who has studied the auction system, said that prices have stagnated over the last four to five years.

The industry also feels that production needs to be regulated in order to boost prices. “The unhealthy demand-supply situation is one of the main reasons for stagnating prices,” said Vinay Goenka chairman, ITA and executive chairman, Warren Tea. His company closed the first quarter of this fiscal with a ₹10.6-crore loss against ₹50 lakh a year ago.

The emergence of a “dual economy,’’ created by the growing dominance of the small tea growers’ (STG) sector, has also added to the woes of the organised industry.

According to a January 2019 ITA estimate, the organised sector’s production cost per kg stood at about ₹190 against that of ₹115 of the STG (small tea growers) and bought leaf sector. In 2018, the latter accounted for almost 50% of the tea output.

However, sector experts felt a section of the industry, too, had failed. “One major reason is that this industry failed to reinvent itself and continued with the same old cultural practices and selling procedures similar to what was being done 100 years ago,” said N. Laxmanan, a senior Nilgiris tea planter. In private conversation, even industry representatives admitted that many large players had not sufficiently engaged in replantation activities to reduce the ageing bushes which give rise to indifferent quality of tea.

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