G Plus looks into the troubled tea industry of Assam that is currently hit by surplus production, rising cost of production and archaic government policies.
There are a number of markers that define Assam and make it stand out from the rest of the world. One such prestige that is local to the state is the production of tea. Assam tea is known world over and has been revered by all for almost 150 years now. However, during recent times, the market has been hit and the industry blend is not looking its best.
Thus, to get to the root of the problem, G Plus spoke to some tea experts to understand why and how the tea industry is currently suffering and if there is a solution to end this phenomenon.
“Presently, the main challenge that the tea industry is facing is the excess surplus. There is a mismatch between production and consumption and that has been supplemented by a huge increase in costs for tea estate owners and proprietors,” said Arun Thekedath, former chairman, Assam Tea Planters’ Association (ATPA).
The industry is currently producing about 1,300 million kgs of tea annually. Out of that, about 80 to 90 million kgs of tea have remained unsold, informed Ranjan Chowdhury, a tea connoisseur who has been working in the industry for about 45 years now.
“The tea industry has gone through this process many times. It is the nature of this industry. The current situation has been continuing for the past two to three years. Sometimes it’s a five-year cycle, sometimes it’s a 10-year cycle. It all depends on the market,” added Ranjit Chaliha, owner of Korangani Tea.
Tea Labourers: An asset or liability?
Chaliha further mentioned that one of the other main challenges facing the tea business is in understanding how to contain the cost of production, labour productivity and labour absenteeism. Since tea is primarily a labour intensive industry, labour is its biggest asset, but also its biggest liability.
In Assam, tea estate owners are entirely responsible for the labourers working for them. Chowdhury mentions that most, if not all these labourers, are in the estates “from their birth to death.”
Thus, it becomes the duty of the estate owner/manager to provide the labourers with their wages, job security, living quarters, food, medical facilities and maternity benefits to female workers, provident fund, schooling, nutritional meals for children etc.
“Almost 60-65 percent of our cost is wage and this cost is increasing at a rate that is much higher than what the products are selling at. Costs in all our inputs are going up, while the price of our produce is not keeping up,” explained Thekedath.
He further informed that even though the tea industry goes through this market cyclic process of surplus every few years, it is more challenging now as the pressure on cost is much more than what it used to be earlier.
Since wage is divided into two components - cash and kind (welfare facilities) components - the cash component of this exchange is going up exponentially, and since this kind of increase in cost had not happened in earlier years, the impact is now much more visible and prevalent than before.
“There was a time when we had profits and we could do that (provide welfare facilities to labourers), but now, you can’t expect the industry to take the burden all the time. A lot of places are closing down, lots of places are up for sale. That is a bad situation,” added Chowdhury, expressing serious concern.
Another reason why the industry is so dependent on labourers is because in Assam, the tea is plucked by hand which ensures better quality, which in turn assures higher prices. In many other places however, tea is plucked by machines, thereby compromising quality. Thus, to maintain quality, the labour force is an absolute necessity, explained Chaliha.
The tea estate owner also mentioned that in general, the productivity of the labourers is not up to par due to their health, genetics and poor diet. The productivity of a labourer in Assam is 2.4 kgs to 3.2 kgs per man day, i.e., work production by a single labourer done in 8 hours in one day. In south India, it is almost double - a labourer’s productivity is 8 kgs per man day. It is all part of the cyclic process and the rising costs for everything are not helping.
Per capita consumption of tea on the decline
Adding to the tea business’s woes, it has come to the notice of many tea enthusiasts and businessmen that the per capita consumption of tea in India is very less compared to the rest of the world, which is continuously adding to the problem of the demand-supply gap.
“In India, the consumption of tea per capita is about 750-800 gms per year, whereas in other countries such as those in the Middle East, Ireland, United Kingdom etc., the per capita consumption is about 3 kgs per year. So, there is a need to increase the demand of tea so that the supply does not go into excess thereby rendering losses in the business,” said Chowdhury.
He also noted that this decline in consumption of tea is quite noticeable as the younger generation prefers to have coffee instead of this local beverage.
One important aspect that was extending this period of stagnant growth in the industry that Chaliha mentioned is the prevalence of climate change. He informed that it is producing a devastating condition on the plantations. There is too much rainfall and too much drought, as a result of which, there is a lot of pest infestation and disease, which leads to the crop failing and causing more harm than good.
Also, an additional burden that tea growers in Assam have to face is to do with the climate conditions in the state which prevents it from growing tea all year round unlike in many south Indian states.
“In south India, they produce tea from January to December, because tea is a light-sensitive plant. There’s a critical requirement of 11 hours of sunlight that it must have. So, in the winter months in Assam, we do not have 11 hours of sunlight and as a result, the boost goes dormant and it does not produce green leaves,” explained Chaliha.
He further mentioned that in northeast India, tea production starts from March, when production levels are at two to three percent. Then until June, the production goes up to 14 to 16 percent and following that, in July, August, September and October, 60 percent of the crop is produced. Then, in November and December, the production drops again.
Competition is killing the business
One more major factor affecting the tea business is competition from various other markets.
Chowdhury explained that a lot of tea is being produced in Africa, which has access to relative technology and better planting materials. Since they operate at almost half the cost when compared to India, their tea market is growing and the market here is collapsing. India is fast losing its monopoly in the tea business as many other countries have started producing this beverage.
Agreeing to this fact, Chaliha stated that tea is a global commodity and the import and export of tea is a big factor in this business being a success. Iran is one of the countries that imports orthodox tea (a lighter and milder version of tea) from India. A while ago, because of the sanctions made by the United States against Iran, it was unable to import tea from India. But now, the sanctions have been overcome and orthodox tea is again exported to Iran, which has led to a boost in the profits of that particular brand of tea.
Similarly in India, since the introduction of cheaper varieties of teas such as CTC, which is the most preferred in the country because of its ‘kadak’ and ‘danedaar’ properties, the production of other teas which are of higher quality has taken a back seat. These teas which are produced mostly by the unorganised sector and other Bought Leaf Factories (BLFs) are another reason why the tea estates in Assam are suffering from the surplus problem.
Govt. should intervene: Tea estate owners
Looking to the future, most experts have stated that the government has to intervene and help out. Even though they have taken some measures such as reducing cess and duties for three years, it is not enough.
Talking of the Rationalisation of the Plantation Labour Act 1951, which provides for the welfare of labour and regulates the conditions of work in tea plantations, Thekedath explained that this Act needs a serious rethink because it was made a long time ago and most of the clauses are not relevant to this day and age.
“One direct way in which the government can help us is by supporting and taking up our welfare responsibilities like housing, hospitals and medical and schooling. These three things which are provided by the estate owners as per the Plantation Labour Act can be taken over by the government just like they provide it for any other citizen of the country. This will be a big help to the industry,” informed Thekedath.
Another thing that the government can help out with, as mentioned by almost all the tea men, is that it should look into the generic promotion of tea.
“If the domestic consumption of tea goes up, then that will be a great help for us to meet the demand-supply mismatch and the government can help with generic promotion, which we, as individuals cannot do because it’s a very expansive population,” stated Thekedath.
He also added that the concerned authorities can also help to increase awareness about good quality tea and help buy generic promotion so that the industry here is able to buy and push up their per capita consumption of tea, which is the goal to help the industry overcome all of these issues.
“Tea will ultimately recover, by hook or by crook. But the thing is, this model of tea industry will not remain as it is for very long. It will change; I don’t know how it will change, but it will change,” said Chaliha, the veteran tea planter in closing.