Sunday, November 2, 2014

A "storm in the tea cup"?- Indian tea growers' woes!

A Indians have this habit of depending for every thing on the government and the farmers are no exception. Whether there is a market slump or depression of crop prices, they run to the government for getting subsidies to compensate for their likely loss. Latest to cry hoarse about market turbulence vis-a-vis prices are tea gardeners who claim that due to lower prices being realized they are under financial stress making their operations non-viable. It is true that keeping in steps with global market dynamics, prices of all commodities, especially those being exported, cannot escape wild swings in market prices but they do not complain when they reap windfall profits during periods when global prices go up through the roof! in a free economy profit or loss is influenced by consumer demand and supply situation and government has a limited role to play in ensuring that such situations do not cause permanent damage to the sector concerned. There is some substance in the argument of tea planters that historically government has forced on them some social responsibility for better welfare of the plantation workers and enforcement of such laws must be relaxed at times of distress. Here is a take on this issue as orchestrated by the industry.  

"Tea prices in South India are at unviable levels, with the average price during the year 2014 up to September dropping to Rs 85 a kg from Rs 105 during the corresponding period last year. At the same time, wages have gone up between 9 and 19 per cent in the three tea producing southern states of Karnataka, Tamil Nadu and Kerala," Vijayan Rajes, president, United Planters' Association of Southern India (Upasi), said. The increase in wages, which has no linkage to productivity, coupled with spiralling costs of other inputs such as fertilisers, has crippled the tea plantations and they are on the verge of collapse, he said. Rajes said the co-relation of wages and the price level was an easily accessible health indicator of the tea industry. When the daily wage in Tamil Nadu was Rs 8.20 in 1980, the average price was Rs 12.66 a kg. The equation gradually changed and in 1995 both were almost on a par — the daily wage at Rs 39.88 and the average price at Rs 41.25 a kg. "If one indexes it on a scale of 100 with 1995 as the base, the wage in 2014 has gone up to Rs 528 in Tamil Nadu, Rs 485 in Kerala and Rs 681 in Karnataka whereas the average price is at Rs 207. In addition to the basic wage, the organised sector spends an additional 75 per cent for discharging the obligations of social costs. Central and state governments are yet to provide support for the sustenance of tea plantations," Rajes said. There are around 70,000 small and marginal tea growers, with a land holding of approximately 49,000 hectares in South India depending wholly on tea. Almost half of South India's tea production is contributed by this segment with the tea leaves supplied to the Bought leaf factories. During the period from January to August 2014, South India's tea production stood at 158.49 million kgs compared to 147.73 million kgs, showing a year on year increase of 7.3 per cent. During 2013, the production stood at 241.79 kgs, a marginal growth of 1 per cent. Plantation sector is additionally burdened with social costs providing housing, medical, educational and other infrastructural facilities to the huge population it supports, which in the normal course is provided by the local administration and the Government for the local population. While the large amounts are saved as the basic civic amenities to the estate population are provided by the estate management, no concessions are given to taxes and other levies. The recommendations and assurances given by many expert Committees for reimbursing part of the expenses incurred for social costs still remain in paper, Rajes added."

Of course even in a wealthy country like the US farmer subsidies are part of the government policy and there is even an anachronism in that farmers are paid money for not cultivating the land to prevent surplus production and consequent market glut causing price depression! Therefore government has a responsibility to ensure tea planters do not suffer too much forcing them to close their operations due to mounting losses. It is here where government needs to have a mechanism to counteract such times of distress which may be of a temporary nature. After all India is the major producer and exporter of tea in the world after China and it is in the interest of the country to see that no major dislocation is caused by occasional economic problems which may be just a passing phase.


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