Tea producers have called for a floor price for green leaf and made tea in the wake of stagnant prices in the auctions amidst rising input costs fuelled by a wage hike.
The fresh appeal by the Indian Tea Association (ITA), which represents the organised segment of the tea producers, coincided with the beginning of a new season for the industry. It also followed extreme weather conditions that led to a major crop loss in Darjeeling (39 per cent in March) and in the pockets of Dooars.
The proposal for a floor price, which can be implemented by the Centre, is being supported by the small growers as well as the estates in south India. It has also been backed by the state governments of Assam and Bengal, who have lent their support by writing separately to the Union commerce ministry.
The ITA’s appeal on Tuesday comes in the backdrop of ongoing discussions for another round of wage hikes in Bengal. At present, the daily wage of a tea garden worker stands at Rs 232 which is likely to go up to Rs 250 a day. Given that the general election will take place in less than a year from now, more wage hikes cannot be ruled out in a politically charged environment.
The proposal from the ITA to the Union ministry of commerce calls for the declaration of a floor price for green leaf (payable to small tea growers) and made tea (payable to tea producers) indexed to the cost of production. The industry body, however, cautioned that it was not seeking a minimum support price (MSP) for tea. In the MSP mechanism, the government nominated agency is liable to procure the agri product at the MSP rate from farmers.
“There is a provision within the Tea Act to implement floor price. Such a price support mechanism has been in practice in the sugar industry in the last few years. If implemented, producers will get remunerative prices and the quality of tea will also improve,” Arijit Raha, secretary-general of the ITA, said.
He claimed that despite the floor price, there would only be a marginal effect on what consumers pay for tea. As a thumb rule, 400 cups of tea can be prepared from one kilogram of made tea.
The Confederation of Indian Small Tea Growers Associations president Bijoy Gopal Chakraborty also backed the demand for a floor price. “We want fair and remunerative prices for leaf and made tea,” he said.
Darjeeling pain point
While the abundant supply from the small growers has outpaced domestic consumption leading to stagnant prices in the auctions, nowhere it has hurt more than in Darjeeling. The gardens in the hills have lower yield than the gardens located in the plains, consequently increasing the cost of production.
“The Bengal tea industry and particularly the Darjeeling tea industry has been going through a period of acute financial crisis over the last few years with prices not able to keep pace with the rising cost of production.
“Bengal tea prices since 2014 have grown at a CAGR of around 4 per cent only while costs of vital inputs such as coal, gas, MOP, sulphur have grown at a CAGR of 9-12 per cent during the same period,” the ITA said in a statement.
In contrast, Darjeeling auction prices have grown 1.86 per cent CAGR from 2014 to 2022.
However, wages in Bengal have increased substantially from Rs 95 per day to Rs 232 per day now, a CAGR of close to 12 per cent.
“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 ITA said. Many of the Darjeeling gardens are in a financially bad shape and up for sale.
