Amid heavy production loss, rains to add to tea companies' woes

At a time when tea companies were just starting to recover from a Rs 2100 crore loss owing to production shortage because of the lockdown and other Covid-19 related disruptions, rains and floods are poised to aggravate the situation further thereby deepening the revenue loss.

Over the course of the next few days, heavy rains and flood alerts have been issued in Assam and West Bengal, the major tea producing belt in the country. The rains and floods are expected to destroy around 10 million kg (mkg) of crop. At last year’s auction prices, 10 mkg loss would translate into a revenue loss of around Rs 150 crore.

“Already the tea companies are reeling under financial stress and liquidity position of the companies has been affected because of several reasons. Now another round of production loss due to rains and floods would damage the financial health of tea companies further”, said D P Maheshwari, managing director and CEO at Jay Shree Tea and Industries.

According to Vivek Goenka, chairman at the Indian Tea Association, production in Assam and West Bengal has been estimated to have declined by 65 per cent during March-April and it is estimated that production will further decline by 50 per cent during May.

Tea estates in Assam and West Bengal, after closure for three weeks during lockdown, resumed operations from April, 12, 2020 with partial manpower utilisation.

However, plucking operations could not be resumed immediately as tea bushes, which had overgrown due to stoppage of operations during lockdown, had to be skiffed and pruned to make them suitable for plucking.

“If the rains go on for 4-5 days then there will be a serious problem”, said Atul Asthana, managing director and CEO at the Goodricke Group.

The Central Water Commission has issued a flood alert for the Brahmaputra river in Assam’s Jorhat and Sonitpur districts, which house some of the major tea estates. A similar alert has been issued for the Baksha district as well.

After cyclone Amphan weakened, Assam and its neighbouring Meghalaya have been receiving extremely heavy rains. Another low pressure situation has been created and northern West Bengal, which houses the Darjeeling-Dooars belt, is expected to be hit by severe rains.

• Tea companies have already lost Rs. 2,100 crore revenue
• Production loss in March-April estimated at 140 mkg
• In May production to dip by 50%
• Heavy rains and floods expected to result in further production loss of 10 mkg