The organisation of tea planters, Indian Tea Association (ITA) on Thursday, October 12, said that the industry is going through a phase of acute financial crisis as the prices are not keeping pace with the rising costs of production.
While the tea prices increased at a compound annual growth rate (CAGR) of around 4% over the past decade, the cost of inputs like gas and coal grew at a CAGR of 9-15%, the ITA said in its status paper 'Tea Scenario 2023.’
According to the status paper, the price trends declined alarmingly in 2023, compared to 2022. The auction prices of CTC and dust teas covering sale numbers 14-39 are down by ₹12.49 per kilogram for Assam tea and ₹11.30 per kg for tea from West Bengal. Auction prices for the orthodox variety are also down by ₹95 per kg covering the same sale numbers.
Weak exports
While in 2022 tea exports showed some signs of revival and touched 231 million kg, it was down by 2.61 million kg during January-July in 2023. The export scenario remains grim as shipments to Iran remain uncertain due to the payments issues. The Iran market constitutes nearly 20% of total tea exports from India.
To mitigate the high export costs and enable the exporters to remain competitive, the industry has urged the government to consider enhancing RoDTEP (remission of duties or taxes on export products) incentive cap for high quality CTC, orthodox and Darjeeling teas.
The paper added that the rise in small tea growers and so in the production, was not in proportion with the domestic consumption and exports, and thus surplus production.
Earlier, CRISIL Ratings said tea companies were likely to witness an 8% dip in revenue in the current fiscal.
The report said wages constitute 20% of the total cost of production and they were hiked nearly 15% in the last financial year. However, low leverage and little capital expenditure of the tea companies will keep their credit profiles stable, the report added.
