The West Bengal tea industry has been going through a period of acute financial crisis as tea prices have turned unremunerative
Kolkata, April 26 In the wake of a spike in cost of production and poor realisation leading to financial distress for tea growers in West Bengal, particularly in Darjeeling, the tea industry has proposed to the Ministry of Commerce for declaration of a floor price for green leaf (payable to small tea growers) and made tea (payable to tea producers) indexed to cost of production.
As the Indian tea market has not been able to address the low price cycle, introduction of a floor price would be an immediate solution to address the unremunerative price of tea without any additional cost to the government, said a press statement by the Indian Tea Association (ITA). The government has already done this for sugar.
The Commerce and Industry department of West Bengal government has supported the proposal for introduction of a floor price for tea and has written to the Union Commerce Ministry to consider the floor price proposal favourably. The Assam government has also extended its support to the proposal and has requested the Ministry to grant in-principle approval to it, ITA release said.
Unremunerative tea prices
The West Bengal tea industry, particularly the Darjeeling tea, has been going through a period of acute financial crisis over the last few years with tea prices not able to keep pace with the rising cost of production. West Bengal tea prices since 2014 have grown at a CAGR of around four per cent only while costs of vital inputs like coal, gas, MOP, and sulphur have grown at a CAGR of 9-12 per cent during the same period.
Auction prices of Darjeeling tea have been more depressed than the overall West Bengal average price – recording a CAGR of only around two per cent since 2014. Given the fact that the cost of production in Darjeeling hills is significantly higher compared to the plains, majority of tea estates are finding it difficult to sustain operations.
“There is an urgent necessity for mitigating the escalating costs to ensure continued sustenance of the tea industry,” the release said.
Unfavourable weather conditions
The new tea season 2023 has not begun on a bright note for the industry in West Bengal with unfavourable weather conditions adversely impacting crop in several tea growing pockets in Dooars and Darjeeling. Reports of widespread hail damage to second flush crop have been received across many gardens in North Bengal. Although the official Tea Board data is awaited for March, as per available ITA membership crop data, Darjeeling crop is estimated to be down by 39 per cent in March. Crop decline has also been reported in several pockets in Dooars region.
“In the backdrop of stagnating prices and increasing financial stress of tea producers, the ITA is deeply concerned with newspaper reports on the possibility of the West Bengal government effecting a further increase in wages of daily rated tea plantation workers. This move will further aggravate the financial stress of tea producers and make tea estate operations unviable,” the release added.