The Tea Industry in India Since 1991.

The Tea Industry in India since 1991.

The Tea Industry in India has experienced enormous change during the last 25 years or so, all though the production of made tea has increased from the 1990’s levels however, quality has declined to a large extent. This phenomenon has reduced the price realization and also resulted in closer of many reputed tea manufacturing companies. As manufacturing units have closed down the cultivation and business of green leaves has increased and factories with the sole purpose of manufacturing has amplified. These are called “bought leaf factories” and do not own or operate tea plantations. The scenario that has resulted is not progressive for Indian tea industry because a) Quality has been compromised; b) Specific amendments have not been made in the “Plantation Labour Acts” due to which there is usually a drift between the management policies and productivity of the workers and standard of living. Certain companies with greater financial autonomy have provided better facility to workers and as a result have created a space for themselves within the industry randomly Goodricke group, Jayshree Tea and Planatations, Barooah & Associates, Williamson Magor, Amalgamated Tea and Plantations Pvt Ltd, Andrew Yule & Company Limited and few others. On the other hand, majority of the companies have not been able to run their setups in a developmental manner because of lack of support from the Government of India. Tea has been a major source of foreign revenue earner for the Government of India but the due importance has not yet been given by the Government for the upliftment of the industry. Various policies have been formed and a large amount of money has been pumped in without any accountability. On the contrast the tea plantations sector in Africa and to some extent Sri Lanka along with South of India have surged ahead with bigger incomes and diversifications. The primary problem of the industry currently is that professionalism is lacking in many ways than one due to this productivity has declined and tea estates have become unfeasible for operation. The most highlighting example of this situation is that of the famous Tata Tea Limited Group Limited in India (Finlays). This group had plantations in Assam, West Bengal and Kerela and was doing extremely well with good customer satisfaction and employee productivity. Nonetheless, during the end of 2005 and by the beginning of 2007 or so the company disinvested from its plantation operation. First to be disinvested was South India, followed by East India. A Co-Operative organization was set up with stakes held by employees, workers, a non-tea organization and the principle organization (Tea Group). The new company formed was namely Amalgamated Tea Plantations Private Limited. Initial years were smooth with good production but soon by the end of 2010 the profits of the company showed some decline that may have improved as on now. Since this was a probability foreseen earlier the company started new business within its area namely, pepper plantation, fishery, tea tourism, rest house etc. Still, to what extent has this resulted in betterment of the company is an answer that only the owners can say. This reason why Tata Group decided to disinvest was because there was no substantial return from the tea estates. If we take the example of tea plantations in Sri Lanka than we can see that they are flourishing because there is absolute support from the Government of Sri Lanka to aid in the growth with areas like health care and food that is supplied by the government and the companies solely concentrate on improving production and perk up quality. Further Africa has also become a primary producer of tea with its exclusive quality and influx of experienced tea planting experts from India. Therefore, even though India was the pioneer in tea cultivation since its inception however, the current condition has resulted in rather less demand for Indian tea due to its price which included cost of exporting. Tea is a seasonal crop in East India while in South India it’s a 12 month crop and requires adequate input of organic matter and fertilizers to pick up yields and enhance quality. But since the requirement of crop is essential for higher better returns as a result most companies concentrate on crop enhancing measures while not giving adequate stress to quality and the soil. In the long term the result is that costs of production is going up with more budget on pest control, nutrient input, machinery upkeep to name a few in the production sector. Non – production costs dealing with human resources, statutory obligations are also increasing with higher inflation. The scenario in which the tea industry is functioning now a day after liberalization is that of extreme stress due to fluctuating cost of production and price realization. In the long term experienced executives are changing organizations due to better prospects and as personals interchange companies so does the systems. As a result running of an estate becomes chaotic to some extent before stabilizing.The visionaries of the Indian tea industry must co-ordinate with the Tea Research Association (TRA -India) for the long term benefit of the whole industry and streamline their policies within Tea Research Association guidelines. Additionally, the TRA should on their part increase their scope of work and include human resource and management related study to incorporate with the requirement of the Indian tea industry in its present status. The marketing sphere needs a complete overhaul and traditional tea auctioning must be retained completely. In fact the brokerage should increase by 1% and become 2% for the overall uplift-ment of the Indian tea industry as this increase will revolutionize the Indian tea industry in a very constructive manner. Tea marketing has five major areas namely, a) auctioning, b) tea tasting, c) manufacturing advice, d) feedback to buyers and producer, e) diversification. With an increase in brokerage, broking houses will be in a far better position to assist the ailing tea industry. Diversification could include a tie-up with TRA for organizing and implementing correct marketing techniques and doing away with forward contract based production. Further a set of guidelines must be given to bought leaf manufacturers to ensure regulated and quality production only through the auction system. Individual companies must reduce their self marketing teams and align them only with broking houses to eliminate incorrect trading practices which lead to price fluctuation and in the long term affect exports. To sum up the Indian tea companies are current ruining their futures by bye passing broking house advices and actually causing reduction of exports.

Average Yield Rate of Tea in India

(Figures in Kg/Hectares)

Year North India South India Total
1995 1676 2133 1770
1996 1742 2072 1809
1997 1749 2318 1865
1998 1805 1987 1844
1999 1631 1875 1685
2000 1639 1817 1679
2001 1647 1771 1675
2002 1575 1802 1625
2003 1601 2004 1690
2004 1630 2003 1713
2005 1649 1899 1703
2006 1684 1910 1732
2007 1667 1851 1705
2008 1597 2062 1693
2009 Not Available
2010 Not Available

*The steady decline in yield is quite visible

* Figure from Tea Board info.

The call of the hour is improved co-ordination of the major tea companies, tea broking houses, TRA, Tea Board, Indian Tea Association and Ministry of Agriculture to ensure that Indian tea actually survives and regenerates to improve the lives of millions around India rather than disappear with the globalizes competition. It’s about time that concrete policies are put to action or carried out in the fields and offices. In the Indian system of purchasing tea electronic auctioning is ready for success and must be pursued with more effort. As the 2011 season has commenced one can only expect a good year for all.

Compiled By
Sandeep Barua
Via Email Kolkata / Calcutta
May 29, 2012