Stagnant prices: Need to break stranglehold of few big buyers, says Tea Board chief (IANS Interview-II)

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Kolkata, June 26 (IANS) Reeling under an “over supply” situation and “stagnating prices”, the tea industry would be in hot water unless prices of the commodity take an upturn, Tea Board Chairman P.K. Bezboruah has said.

He also said wages paid to tea garden workers are “low” compared to wages paid by other organised sector industries, even when the non-cash component of wages amounting to Rs 160 per man-day is taken into account.

But, how can tea planters pay higher wages to the workers, unless the prices firm up and “the stranglehold of a few big tea buyers in the primary tea market is broken?” he asked during an interview to IANS.

“Unless the excess supply situation emanating from relentless expansion of tea area by small tea growers is halted, prices are unlikely to go up. In the face of stagnating prices coupled with ever increasing input cost, the industry would be hard-pressed to pay the higher wages that its workers deserve.

“The impending central legislation, the so-called code on wages, to enforce a nationwide floor wage, will result in widespread financial sickness in the industry, unless benefits provided to workers under the Plantation Labour Act and bilateral negotiations, were all taken into account while computing the wages paid,” Bezboruah said.

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The Tea Board Chief further said: “Unless the stranglehold of a few buyers in the market is broken, the prices may not go up. It is only natural that buyers do not want prices to go up, and in a scenario where an oligopsony persists in the primary tea markets, coupled with oversupply, prices are likely to remain suppressed.”

Elaborating on the surplus tea supply situation in the domestic market, he said it can only absorb a certain level of output, which is around 1,000 million kgs while the present retention in the country is over 1,100 million kgs.

“There is an over-supply situation and naturally, buyers are taking advantage of that,” Bezboruah said.

He explained that the average price of tea in 1954 was Rs 7 a kg and it is now Rs 140 a kg. It has gone up only 20 times over a 60-year period while prices of other commodities went up many more times in the same period; for instance, rice from Rs 0.20 per kilo to Rs 20 per kilo, saw a 100-times increase.

Acknowledging that workers’ wages must be attractive to avoid attrition of the work force in the gardens, he said: “The organised industry with large workforce has to pay its workers better, but the problem is that about 60 per cent of cost of production is the labour component. How will tea planters pay higher wages to them unless the prices increase?”

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He also expressed concern over the ever growing supply of tea by small growers, particularly in Assam. The relentless area expansion and output growth is “destabilising organised players” and affecting the overall market scenario.

“Small growers do not have to follow any legislation. In practice, the Plantation Labour Act and Minimum Wages Act are not applied to them. They pay workers on a contractual basis. Their cost of tea production is 50 per cent of that of an organised player,” he said.

Tea has been planted in a large scale on forest land and government community grazing areas, and the rural economy is fast becoming a monoculture in Upper Assam, Bezboruah pointed out.

According to him, the ecology of the state is also being affected due to the replacement of all other vegetation by tea. In Assam, small growers’ cost of production of green tea leaves is around Rs 13 a kg while cost of production of organised players is hovering around Rs 26-30 per kg of green leaf.

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“Although tea plantation appears to be an ecologically-friendly activity, it is having a harmful effect on the ecology of this region, since these are coming up at the expense of old growth forests and other wildlife habitat,” he said.

However, Bezboruah said there was “no widespread financial sickness” in the industry as of now, even amidst “unsatisfactory trend of price realisation in the primary market”, but if the present scenario continues, such eventualities cannot be ruled out.

“There are only two tea companies who are facing Insolvency and Bankruptcy proceedings now and I don’t think many tea companies will face such proceedings under Insolvency and Bankruptcy Code.

“There may be one or two more. There is no major widespread financial sickness in the industry as of now. This is because, banks have been conservative in lending to the tea industry,” he said, adding that the situation is, however, “likely to worsen because the companies will continue to bleed unless tea prices go up”.

(Bappaditya Chatterjee can be contacted at [email protected])

–IANS

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