BUDGET 2000
SPECIALS
INTERVIEWS
COMMENTARY
GOVT&ECONOMY
Y2K: BIZ FEATURES
INDIA & THE WTO
CREDIT POLICY
BIZ IN THE USA
CARS & MOBIKES
MANAGEMENT
CASE STUDY
BIZ-QUIZ
USEFUL INFO
ARCHIVES
NEWSLINKS
SEARCH REDIFF

South Indian tea industry faces unprecedented crisis

Caught in the grip of falling prices, mounting costs and a negative fallout of economic liberalisation, the south Indian tea industry is facing an unprecedented crisis, the United Planters Association of Southern India, or UPASI, and the Planters Association of Tamil Nadu, or PAT, lamented today.

Addressing a press conference in Madras UPASI president M H Ashraff and PAT chairman E B Sethna contended that the slide started in 1998. This was borne out by the auction price in southern India, which had plummeted to Rs 43.98 per kg as against Rs 57.09 per kg in 1999, Rs 68.80 per kg in 1998 compared to Rs 59.31 in 1997.

They contended that many estates and grades of tea were selling between Rs 20 and Rs 30 per kg. In contrast, wages and cost of production, or COP, had steeply risen. The COP per kg had mounted to Rs 63 this year, from Rs 57 in '99, Rs 53 in '98 and Rs 44 in '97.

The wage per labourer had increased to Rs 76 this year from Rs 70.17 in 1999. It was Rs 55.76 in '98 and Rs 51.07 in '97.

Demanding immediate suspension of tea imports for whatever purpose, UPASI and PAT contended that crisis was compounded by a world-wide slump in tea prices due to low demand and consumption with soft drink beverages cutting into tea consumption even in India.

Ashraff and Sethna said the imposition of an excise duty of Rs 2 per kg on bulk tea in 1999 had a debilitating effect on the tea industry, which was one of the largest national and traditional industries in terms of employment and foreign exchange earnings.

It pushed the cost of production by Rs 2 per kg in the industry which employed about 1.50 million permanent workers and earns a foreign exchange of about Rs 20 billion per annum, they said.

As immediate relief measures, they also demanded imposition of 100 per cent import duty on quantities of tea which were contracted to be imported. This was well within the bound rate under World Trade Organisation as tea was not an essential commodity.

It also demanded persuading Russia to buy larger quantities of south Indian tea, if necessary with suitable adjustments or incentives in the debt repayment agreement. Russia must buy the agreed 100 million kg also.

UPASI and PAT also demanded abolition of the excise duty of Rs 2 per kg and reintroduction of fertiliser subsidy for the cultivation of plantation crops.

It also demanded that the Tamil Nadu government reduce the sales tax by two per cent until tea prices improved, immediately reduce agricultural Income Tax rate to 35 per cent from the 65 per cent fixed under central Income Tax Act for companies.

It also asked for reduction in the high-tension power tariff rate for tea factories by classifying them under a lower tariff schedule.

Ashraff and Sethna said under the WTO agreement, the quantitative restrictions on tea were likely to be removed from April next year.

This would add to the distress of the tea growers down south as tea from any country could be imported into India either for re-export or for domestic consumption without any license or restriction on quantity.

They said post liberalisation induced inflation steeply, pushed up costs of all inputs and supplies used in tea production also.

They alleged that the centre had failed to protect the interests of the primary and informal sectors, including plantation while formulating and implementing the reform measures.

They said the central government's judgement on imposition of excise duty and the import of cheap tea from countries like Indonesia, was clouded by the relatively comfortable position of north Indian teas like Assam and West Bengal.

North India was not much affected by the present crisis as north Indian tea was of much higher quality due to geo-physical conditions. They fetched higher prices and were mostly sold in international markets. The cost of production and wages were much lower.

Calcutta auctions boycotted

No auction of tea could take place at Calcutta for the second consecutive week following boycott by buyers over entitlement of free trade sample issue.

Traders said the new norms would severely hamper the interest of small buyers, who will now have to purchase a minimum of ten chest from the auction and this will increase their investment cost.

The protest was also on account of decrease in quantity offered by the planters to the buyers and changes in goods division norms.

Small and large buyers are boycotting the auction as the benefits would be reaped by all, a trader said. An official of the auctioneers J Thomas and Company Limited said, buyers are refusing to buy following some dispute over auction norms, so the things are at present on hold.

UNI

ALSO SEE

Domestic tea sector cries foul over India's move to allow duty-free imports

Packaged tea segment reels under excise duty, seeks relief in Budget

Business