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Darjeeling gardens may post losses this year due to indefinite shutdown

Tea gardens are expected to post at least 3-4 per cent net loss in the current financial year

Avishek Rakshit  |  Kolkata 

Darjeeling

Already reeling under the stress of higher cost of production and declining profitability, nearly all of the 87 in are expected to post at least 3-4 per cent net loss in their balance sheet for the current financial year in face of the prevalent indefinite shutdown in the hills which has stalled prime production.

While the Tea Association (DTA) has estimated the immediate loss to be over Rs 100 crore, other industry officials peg the number higher at Rs 150 crore if export value additions are taken into consideration.

At this time of the year, the gardens produce around 1.6 million kg (mkg) of the priced Muscatel tea whose average price in the European Union ranges from Euro 8-10 per kg. Around 90 per cent of this produce is exported.

“This is the time when the tea companies hedge for the entire year. The price we get from the Second Flush which comprises the Muscatel variant, makes up for the cost for the entire year”, a tea garden owner told Business Standard.

However, with the entire production stalled, all the tea companies operating in the area which includes famous names like Goodricke, Chamong, Namring, Makaibari and several others are not able to produce even a single kg of the Muscatel variant.

“This is going to be an entire loss making year for tea companies who operate only in Darjeeling”, a second tea garden owner, who had previously sold boutique tea at inflated prices, told Business Standard.

As such, tea companies like Namring, Chamong, Makaibari and others are going to be the worst affected while companies like Goodricke, which has a considerable number of gardens in Assam may be able to make up for the loss from Assam operations.

Estimates put the loss for the tea firms’ operations to the tune of Rs 600 per kg of production loss.

A tea garden owner near Kurseong said that at other times of the year, the First Flush usually fetch Euro 5-6 per kg while the Monsoon and Autumn Flush fetches Euro 5-7 from the German blenders. As the tea companies will resume production at some point of time in the monsoon-autumn season, the average cost of production will be higher by at least Rs 100 per kg than the selling price estimated to hover around Euro 4-5 per kg.

“At some point of time, when the gardens open, the leaves will be overgrown and will not be of any use. Then, we have to provide for a 7-10 days’ buffer to resume production. By that time, the monsoon will set in and hence, the quality will be too bad”, Kaushik Basu, secretary general of DTA informed.

tea is best known for its quality which helps the companies bag better prices than the CTC variants in the export market. However, for the rest of the year, overgrown bush and the resultant clearance, backed by the risk of pest attack is most likely to hit the prices of these teas both in the export as well as the domestic market.

“It has hit us at a time when things were looking good. Although we suffered around 20 per cent volume loss in the First Flush, prices had increased by 5-20 per cent according to grades. Now, with the Second Flush gone, none of the companies who operate only in will be able to recover the hedged price and is most likely to post losses for the year”, a tea garden official who focusses on organic tea, told this pink paper.

Since the times the Gorkha political parties had called for a shutdown in the hills, the were exempted from taking any hit. The last time the faced such a scenario was during the 1986-87 agitation led by the Gorkha National Liberation Front.

However, at that point of time, the shutdown was called after the Muscatel Flush was harvested and thus only the monsoon-autumn flush was hit which spared the tea producers. This time however, the shutdown has hit at a time just when the gardens were optimistic about prices this year.
 
Some estimations of and their productivity:

1. Number of gardens in - 87
2. Total effective area under tea cultivation - 18155.23 hectare
3. Total production - 7-8 mkg; fallen from 10 mkg
4. Estimated average yield per hectare - 400 kg (nearly 5 times lower than Assam)
5. Estimated cost of cultivation per hectare - Rs. 400-600 (nearly 3 times higher than Assam)
6. Estimated cost of replantation per hectare - Rs. 6-8 lakh
7. Estimated total cost of replantation of effective tea area - Rs. 1,089-1,452 crore
8. Bush variant used in gardens - Camellia Sinensis (85-90%), Clonals (10-15%)
9. Major varieties of Tea - Black, Oolong, Green, White
10. Considered as the costliest tea in the world netting at record $ 1,850 a kilo
11. India's first produce to get the Geographical Indication (GI) tag in 2004-05

What is Muscatel?
During end May-June (Second flush), unique to Darjeeling, the Chinrary tea bushes produce an oil which results in the tea leaves emit a sweet and fruity smell rather than the usual flowery aroma. It also refers to a sweet, grape-like aftertaste. The Muscatel tea is the flagbearer of tea and is sold at exorbitant prices across the globe

First Published: Fri, June 23 2017. 00:59 IST
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