Stressed tea estates want to use a portion of land for other purposes
Options like growing other crops and developing real estate projects are being explored
Faced with the spiralling cost of production and competition from bought-leaf factories (BLF), some estate holders are exploring the possibility of using a part of their land for activities other than growing tea.
The Indian Tea Association (ITA) has decided to appoint a consultant to study the alternatives for the large estate holders to contain falling profitability while retaining the existing labour force. Sources said possibilities like horticulture as well as building supermarkets, theatres and other commercial real estate projects were being thought of.
People belonging to the large tea estates said while they had to sustain a higher cost of production, small tea growers (STGs), who usually send their produce to the BLFs, incurred about 50 per cent lower cost of production. With tea prices remaining more or less flat, the estates have started to incur losses.
McLeod Russel, the world’s largest tea producer, reported a 35 per cent decline in its operating earnings before interest, tax, depreciation and amortisation (Ebitda) at ~110.44 crore during the year ended March 31, 2017, while its top line dipped by 3 per cent to ~1,870.82 crore.
Warren Tea reported a loss of ~15.17 crore during the previous year against a marginal ~4.58 crore profit in the 2015-16 period. Jay Shree Tea & Industries’ bottom line shrunk by 53.74 per cent to ~24.46 crore during the past financial year.
Officials said rising cost of production, depreciation of plant and yield per hectare as well as their commitment towards labourer social security like housing, ration, education and others (as per Plantations Labour Act, 1951) were straining the estate tea sector across the country, gradually making tea “unsustainable to produce”.
Wages and employee benefits, which account for around 45 per cent of a garden’s annual expenses, spiked by nearly 12 per cent for McLeod Russel, while Rossel Tea saw a 10.5 per cent hike.
“STGs, on the other hand, are not required to abide by the Plantations Labour Act, 1951, which makes their cost of production around 50 per cent less than the ones borne by the larger estates,” an estate tea producer said, adding that STGs appointed seasonal and casual labourers only, unlike the estates and large growers who relied on full-time regular staff.
While the yield per hectare for estates stands at 1,000-1,400 kg in north Bengal and 2,000-2,500 kg in upper Assam, STGs’ yield is anywhere between 2,700-3,000 kg a hectare. “It’s not a level-playing field anymore between the estates and STGs,” the producer added.