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Special Report    Vol. 3 Issue No. 15         November 16 -30,  2006

India's Tea Industry and Assam
Dr. Rabindra Kr. Choudhury

India, the largest producer and consumer of tea in the world, accounts for around 28 per cent of world production and 13 per cent of world trade. However, the production as well as export of tea has shown a declining trend in the recent years of the current decade. Thus, while the production increased from 835.6 million kg in 1997-98 to 848 million kg in 2000-01, it started declining thereafter from 847 million kg in 2001-02 to 830 million kg in 2004-05 and further down to only 667 million kg in 2005-06. Exports of tea, on the other hand has shown a further deterioration from 211 million kg in 1997-98 to 189 million kg in 1999­2000 and from 204 million kg in 2000-01 to 183 million kg in 2003-04 and to just 101 million kg in 2005-06. In spite of almost stagnant rupee value in the period, the value of India's tea exports has come down from Rs. 2192 crore in 1998-99 to Rs. 1637 crore in 2003-04 and to less than RS.1000 crore in 2005-06. Thus our tea exports as proportion to production has declined from 24 percent in 1998­99 to 15 percent in 2005-06, though it was 25 percent in the previous year.

In recent years, some quantity of tea is also imported for blending and re­exports. The quantity of such imports went up from just 9 million kg in 1998-99 to 32.5 million kg in 2004-05 and it declined to 8 million kg in 2005-06.

One cannot forget that the major driving force behind the country's tea­sector growth is the prospect of eastern India's tea industry, particularly of Assam which not only produces around 53 percent of the country's total production, but also employs more than 10 percent of the stat&s work force or around 12 lakh people. However, the share of Assam in the country's tea production in course of last three-and-half decades has remained confined to a narrow range from 51

per cent in 1970-71 to 53 per cent in 2003­04 due to decline in per hectare productivity though the area under the plantation rose from 182 thousand hectares to 280 thousand hectares in the period with the number of tea estates rising from just 750 to as many as 32,000.

It may be noted here that the sudden rise in the number of tea gardens of Assam and its area under tea (to around three lakh hectares), particularly since the latter half of 1990's was due to the unemployed youths taking to small scale tea production as their profession. There are around 2500 small tea gardens in Assam today adding to the State’s total production by more than 50 million kg. This is certainly a welcome change. But, since they grow in small scale, they cannot go for factory manufacturing and, hence, have to sell out only green leaves to the large estates which often subject them to exploitation. The addition to tea hectarage by around 50 thousand hectares in the latter half of 1990's was possible mainly through conversion of agricultural land with below 10 hectares being the cut off point of land for small tea growers.

There are, however, a number of problems of tea industry of Assam. A considerable number of teagardens of the State have gone sick over the period due to lack of infrastructure, modernisation and efficient management. The Assam Tea Corporation, a state-level public sector enterprise, for example, is not functioning at all. The amount of good will that Assam tea had long been enjoying in the international market has now been eroded to a great extent. Though Assam tea is still earning around 50 per cent of the foreign exchange earned by India's tea industry, its demand is already in recession due to better quality-tea supplied by countries like Sri Lanka, Cuba etc at comparatively lower prices.

That the fate of India's tea industry is largely dependent on what happens to its eastern sector of Assam and West Bengal is well known. What is seriously worrying the tea industry is that even though India still produces 27 percent of global tea output, the quality of product is sadly doubted in the global market. It is a fact that the planters of major tea growing states, themselves were not careful enough about the deterioration of quality during heydays and their    negligence gradually turned more than 30 per cent of tea bushes into infructus plants. Studies confirm that the root cause of closure of a number of tea gardens in parts of the country was low productivity and lack of investment in plant development activities.

India's tea market is facing yet another paradox which could be explained in terms of glaring gulf between the price received by producer and the price charged by dealers and retailers. The common consumer in the market is confused of the fact that while the producers are facing the crisis created by a

market glut and decline of prices, often voiced by the corporates, the benefit of low price does not come to the common consumers. The reason perhaps lies in non-conformity with regulated market behaviour of producers among whom many are found to be selling out their produce directly without routing it through auction centres.

This apart, the most serious ailment remains not only low productivity but also with quality of produce due to low investment on infrastructure and low managerial efficiency. The problems of high cost production and stagnant productivity need be addressed on an urgent basis. It is heartening to note, however, that some important steps in recent times have been taken for development and modernisation of the sector. The most important of them are the following:

Withdrawal of additional excise duty of Re 1.00 per kg on tea as announced in the Union Budget 2005-06.

Sanctioning of two schemes viz grant of subsidy for production of orthodox teas and assistance to the two Research and Development institutions, viz Tea Research Association at Tocklia (Assam) and United Planters' Association for Southern India Tea Research Foundation with an estimated outlay of Rs. 93 crore for financing Planning Commission is very positive about finding a solution of the tea crisis which the industry has long been suffering from. The Union Commerce Ministry proposed to unveil a 15-year programme for massive replantation and rejuvenation of the tea industry.

The "Special Tea Fund" to be created now will greatly benefit the tea growing states of Assam, West Bengal, Tamil Nadu, Kerala and Utlaranchal. The revival package for tea industry had already been assured of fiscal and tax incentives and of cost effectiveness for both domestic and export markets. The Union Commerce Minister also assured    that       it would provide a concrete support with special thrust on regeneration of old and replenishable tea bushes. The package which was proposed is also supposed to frame a marketing strategy to give the tea in the global market.

While the package if implemented promptly and with all sincerity, will go a long way to rescue the tea industry from its long drawn crisis, what is fearing now to the stakeholders is that the budgetary announcement of service tax on auctioneering could increase the tea prices if the tax liability is to be borne by the tea growers. If it is so, the market competition would be still tougher and it would affect the global demand for Indian tea. However, the other budgetary action of reducing customs duty on bulk plastics, used for packaging, from 10 per cent to 5 per cent would encourage value addition activity of tea industry because or the reduction of packaging cost.

What is necessary at the moment is that the tea industry get modernised with a change in technique of plantation, improvement of encouragement to the electronic tea auction and managerial excellence. If the "Special Purpose Tea Fund" with the already promised revolving corpus of Rs 1000 crore with a target of replantation in 1.7 lakh hectares over a period of 15 years, is established without further delay, the industry could be expected to get back its pride of place in international competitiveness and drive to road of prosperity.

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