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Producers have not been getting right price for their produce as it is largely a buyers’ market, says Chairman CK Dhanuka
Dhunseri Tea and Industries Ltd, which had acquired six estates last year thereby doubling its total production to around 15 million kg (mkg), is open to more acquisitions if the government steps in to support the industry by announcing a floor price for tea.
According to CK Dhanuka, Chairman, Dhunseri Group, producers have not been getting right price for their produce as it is largely a buyers’ market. Some of the large packeteers have been dictating prices and this affects most producers, particularly the small tea growers. “Every packeteer would want to buy tea at lower prices but if the government takes some steps and announces a floor price it would help the industry sustain. Right now there is a lot of uncertainty…….if the government announces a floor price then we may look at more acquisitions,” Dhanuka told businessline.
Floor price for tea
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 Commerce Ministry 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. The government has already done this for sugar.
Tea prices are down by nearly 15 per cent on a year-on-year basis and there is a lot of uncertainty in the industry, Dhanuka said highlighting the urgent need for introduction of a floor price.
Dhunseri Tea had, in December 2022, acquired two estates of Apeejay Tea Ltd located in Tinsukia district in Assam for an estimated consideration of Rs.109 crore. The company had signed an MoU with Apeejay Tea for acquisition of Hapjan tea estate and Budlabeta tea estate with a total production of close to 31.33 lakh kgs.
Both the estates are into manufacturing both CTC and orthodox grades of black tea.
This apart, Dhunseri had also acquired three tea estates namely Deohall, Tara and Duamara from Warren Tea with a total production of about 27 lakh kg for a sum of Rs.90.80 crore.
With these acquisitions the company’s total production went up to 15 mkg, up from around 7 mkg in 2021-22. This apart, the company has plantations in Malawi in Africa which produces close to 8 million kg of tea.
For the year ended March 31, 2022, the company had revenues of around Rs.210 crore. The current acquisition would not only help enhance the company’s production, but also its turnover and profitability.