Stagnant prices lead industry captains to question the long-term sustainability of the tea industry in Assam.
Speaking at the general meeting of the Assam Tea Planters’ Association (ATPA), the oldest body of ethnic tea planters in the Brahmaputra Valley, India Tea Board Chairman Prabhat Kamal Bezboruah last month cautioned that if the price of tea does not increase in the next few years, the industry will not survive.
While production costs continue to rise, there has “hardly been a rupee increase” per kilo of tea, on average, since 2013, he explained.
“In such a scenario it is a matter of time before the tea gardens will be forced to wind up operations in the Brahmaputra Valley,” he told planters gathered for the ATPA’s 81st annual general meeting. Doling out statistics, Bezboruah said that the price of tea from the Brahmaputra valley at the auction centers since 2013 has averaged: INRs152, INRs156, INRs156, INRs152, and INRs155 respectively.
This equates to a range from $2.17 to $2.22 per kilogram ($0.98 to $1 per pound at auction) for the commodity CTC (crush-tea-curl) teas for which Assam is famous.
He predicted that without price relief the large plantations will splinter with the resulting small-scale gardens unable to attain the quality and efficiency standards. Anarchy will prevail.
“It is just a matter of time before tea gardens in the Brahmaputra valley will close down if such a situation continues for the next few years. Small portions of tea gardens would be taken over by either by musclemen in the respective areas or by garden laborers because owners of these estates would not be able to continue operations,” Bezboruah cautioned.
He said that the cost of production is spiralling, with wages and inputs seeing year-on-year increases.
In 2012 the daily wage for tea workers was INRs67 ($0.96) but has now gone up to INRs167 ($2.38) per day “with the state government announcing an interim hike of INRs30 ($0.43). Apart from these, every garden also pays rations and other perks to the workers,” he said.
Continued focus on quantity is not a solution. It is time for the industry to take some drastic steps to improve the quality of tea which would fetch a better price, he said.
“We on the tea board are contemplating an order to close down operations at all tea estates by December 15 every season,” he said. “This would remove about 35 million kilograms of tea from the market which are considered bad teas,” he said. Halting production after the autumnal harvest allows the plants to rest, which improves the spring flush.
In late July a lot of Manohari Gold sold for $556.52 per kilogram (INRs39,001) at the Guwahati Tea Auction Center. The $252 per pound paid by Saurav Tea Traders is an auction record for India.
While record prices are making headlines, it’s news for the wrong reason, says Bezboruah.
The trend in the auction centers of tea fetching record prices – INRs1000 a kilogram or INRs2000 a kilogram is deceptive. Lots from these “star gardens” are not more than 5 kilograms at most, he explained.
“I strongly believe this hype is not doing any good to the industry, since it gives a misleading picture of the prices of tea and holds up an illusion that other gardens can emulate this strategy to find an orbit out of their financial woes,” he said.
“This is exactly what this is; an illusion, or if you prefer, a mirage,” he writes.
Selling small tea quantities at record prices is a marketing strategy undertaken manufacturers in league with the concerned broker or buyer. The practice draws attention respectively to their mark, their brokerage and their buying firm and indirectly confers a “star” quality profit upon themselves and by extension, upon their other teas, Bezboruah observes in an article in the Assam Tea Planters’ Year Book.
Bezboruah says that even CTC lots that sell at INRs500 ($7.14) a kilogram are more often limited to 10-bag lots, making the total deal value INRs150000 ($2,150).
“The iconic garden that sells its CTC teas at these levels ended 2017 with an average CTC selling price of INRs280 ($4) per kilogram. We are told that its cost of production is INRs250 ($3.57) per kilogram, and its annual output per man-day is 1.8 kilogram of made tea, against the average for Assam which stands at 2.5 kilogram per man-day. Hence, when wages rise say INRs30 ($0.43) per day, this garden’s cost will rise by INRs24 ($0.34) per kilogram, whereas a typical garden’s cost will rise by INRs18 ($0.26) per kilogram. Will the quality premium keep pace with the cost escalation? It is anyone’s guess,” Bezbaruah explained.
“There are tea estates which may survive the impact of a steep wage hike of the workers, but these are gardens with a high yield, a genuinely premium quality profile, coupled with a moderate cost of production sustained by low overhead. Focusing on producing exotic offerings to gain publicity may not be a good strategy as one needs to have a ready and willing customer in place to achieve the desired results,” he said.
Source: The Sentinel