Panic sweeps tea industry

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Panic has swept the tea industry in Assam as it is slipping into deep recession while big houses like Mcleod Russel and Tata are in deep red and series of acquisitions have turned the industry and its culture upside down.

Almost one-fifth of Assam’s population’s fate hangs in balance as the big gardens are desperate to find a way out of the crisis of low price which has spilled over to the huge small tea grower base.

The McLeod Russel India Ltd, which saw its losses widening on a standalone basis to  Rs 318 crore for the quarter ended March 31, 2019, as against Rs 142 crore same period last year, is in talks with lenders for refinancing its loans. As on September 30, 2018, its debt stood at Rs 1,500 crore, said the industry sources.

McLeod, part of the BM Khaitan controlled-Williamson Magor Group, has been facing liquidity issues and has been selling its tea estates to repay its financial obligations. The company has already sold 16 tea estates and has entered into MoU for selling another four estates. It is also open to looking at the further sale of assets of certain tea estates, the source said.

The Amalgamated Plantation, A Tata Tea Enterprise have also reported Rs 68.50 crore loss in 2018-2019, sending tea industry of Assam into a free fall.

The Amalgamated Plantation Private Limited (APPL), a Tata Tea enterprise in its 12th Annual general meeting announced that loss was 140 per cent more than the previous year.

In upper Assam and North bank, many tea estates have not been able to pay its staff and executives their monthly salaries and stopped allowances and somehow stretching the labour payment to stem any social unrest. The situation pretty bad for the McLeod Russel estates, especially in North Bank, where even coal needed for running the machines are not there.

The crisis in the tea industry is largely due to the demand-supply mismatch as the domestic demand has not increased although the production has grown and the arrival of the small tea growers in a big way have altered the situation forever. 

Moreover the cartelling of the three big players, TGBL, HUL and Wag Bakri have also been blamed for maintaining a hold over the price for past three years turning the tea business into a loss making venture.

According to the latest Tea Board data, the Small Tea Growers(STG) produce more than 51% of the entire Indian tea, which is also the second largest employers of India.

With World is completely moving towards the Orthodox and quality tea, India tea is traditionally for volume and CTC. Moreover, about 40% of tea bushes are old yielding low quality of tea while the STGs are always blamed for supplying poor leaves.

That is the reason even as the export market remains stagnant and has not been able to attract better price while domestic consumption growth is very slow in comparison to coffee.

India’s per capita tea consumption is 0.78 kg per year against 3.2 kg in Turkey, 2.4 kg in Libya and 1.68 in the UK.  These two factors have not pushed up the industry.

This has a very serious bearing on the STGs of Assam as big buyers like Magors have refused to buy and not being able to pay even last year’s due. This has put pressure on the bought leaf factories pushing about 1,20,000 small tea growers of Assam into a corridor of uncertainty.

“We have a serious problem in hand and there is no straight forward solution too. One hand you have the statutory responsibilities from the Plantation Labour Act and the other side the market position,. I do not think the industry can handle both at the same time” said Deepanjal Deka, Secretary Tea Asociation of India.

An effort have been mooted from the Tea Board of India to separate the bought leaf factories as well as company gardens having own factories. At this moment both are in same platform, pulling down the price of the company gardens too.

But the social implication of that in Assam is even incomprehensible as one-fifth of Assam’s population is involved in the only industry of Assam.

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