Assam tea industry faces economic crisis
• Assam tea industry is at the peak of an economic distress and on the verge of a crisis. It’s a big economic setback for the agricultural economy of the nation.
• The cost of production of tea has been growing by a compounded annual rate of 10% for the last 10 years, while the tea prices are increasing by a compounded annual rate of 6% only.
• Specific issues plaguing the tea industry include the inability to meet international quality standards and high labour wages.
• Strategies like a sound certification mechanism, aligning of wages to market prices and active promotional strategies to promote Indian tea worldwide will go a long way in remedying the problem.
The Assam tea industry is at the peak of an economic distress and on the verge of a crisis. Presently, Assam Tea is not as economically profitable as it used to be earlier on account of rising production costs and stagnant prices of production. The cost of production of tea has been growing by a compounded annual rate of 10% for the last 10 years, while tea prices are increasing by a compounded annual rate of 6% only. This drastically reduces the profit margin. Assam and West Bengal produce nearly 80% of India’s tea, and so this situation would impact not only India but tea consumers globally. The Assam government has announced a hike in tea workers’ wage rate to counter this situation, but this is not solution. It needs aggregate effort at the micro and macro level.
Challenges: It has been observed that there are specific reasons, which are causing problems for the tea industry, such as:
1. Indian tea, especially Assam tea, has been rejected by global players because of the high content of nitrogen and pesticide residues. When there is a shortfall of green leaves, tea gardens procure from small tea farmers, who use excessive fertilisers and manures to boost production; thereby failing to live up to international standards of quality.
2. Increase in the cost of labor is reducing the profit margins of growers and producers massively. Labour cost accounts for almost 60% of production cost.
3. Workers are having health issues. The state government asserts that sanitation and health facilities in some tea plantations are poor; because of which they are suffering from tuberculosis, anemia, hypertension and leprosy.
4. Tea workers who are agricultural labourers are hit the most in these crises, because they don’t have another alternative source of income with limited skill sets.
5. Closing down of small tea gardens, which are being taken over by large corporates.
Strategies: The Assam tea industry is playing a significant role in the state. It is imperative to find solutions to the present crises. The following remedies should be pursued:
1. There must be a certification mechanism, facilitated by establishing green leaf analysis centres for chemical analysis at the time of procurement.
2. Increase in labour cost must be in proportion with tea prices in the market, which is necessary to produce quality tea having a better price.
3. There is a need to shut down tea estate operations by December 15 every season. This would remove about 35 million kg of tea from the market, which are considered bad teas. (Pullock 2018).
4. Tea gardens must focus on high yield and a genuinely premium quality profile, coupled with a moderate cost of production.
5. There must be active promotional strategies to promote Indian tea worldwide like Sri Lanka’s Tea.
6. Tea promotion campaigns should be undertaken in potential export countries.
7. Activation of Ancient Tea Horse Road route and export of tea to China.
8. Export promotion of tea actively in global market.
Assam has more than 850 big tea estates and thousands of small tea gardens. Four million people are directly earning a livelihood from the industry. It’s a big economic setback for the agricultural economy of the nation, if the Assam tea industry is not running well. Hence, the revival of the Assam tea industry is in the interest of the nation generally and the Northeast economy in particular.
Dr. Parashram Jakappa Patil is currently an Advisor/Consultant at APEDA. He has also served as the President of The Institute for Natural Resources, Kolhapur. He is an export policy consultant for the Ministry of Commerce and Industry. He has received many awards and accolades lately; some of which include Young Researcher Award and Best Citizen of India Award.