Highlighting a spike in cost of production and a decline in crop in Darjeeling and the Dooars region of West Bengal, the tea industry has urged the Commerce Ministry to declare a floor price for tea.
“The industry has proposed to the Ministry of Commerce, Government of India for declaration of a floor price for Green Leaf (payable to small tea growers) and Made Tea (payable to tea producers) indexed to cost of production,” the Indian Tea Association (ITA) said in a press statement.
The ITA said that the introduction of a floor price would be an immediate solution to the issue of “unremunerative price of tea” without any additional cost to the government, given the fact that the Indian tea market left to itself has not been able to address the low price cycle.
According to the tea industry, the Government of West Bengal as well as the Government of Assam has supported the proposal for the introduction of a floor price for tea and have conveyed their opinion to the Ministry.
Highlighting the urgent necessity for mitigating the escalating costs to ensure continued sustenance of the tea industry, the ITA said that as per its membership crop data, Darjeeling crop is estimated to be down by 39% in March. A decline in crop has also been reported from several pockets in the Dooars region.
The West Bengal Tea Industry and particularly the Darjeeling tea industry has been going through a period of acute financial crisis over the past few years with tea prices not able to keep pace with the rising cost of production, the ITA said .
The tea industry argued that West Bengal tea prices since 2014 have grown at a CAGR (compound annual growth rate) of around 4% only, while costs of vital inputs like coal, gas, MOP, sulphur and others have grown at a CAGR of 9% to 12% during the same period.
“Auction prices of Darjeeling tea have been more depressed than the overall West Bengal Average price – recording a CAGR of only 1.86% since 2014. Given the fact that the cost of production in Darjeeling hills is significantly higher compared to the plains, the majority of Darjeeling tea estates are finding it difficult to sustain operations,” the ITA said.
Tea plantation workers are paid ₹232 per day and according to the ITA, the wages have increased by 144% from ₹95 since April 2014.