Low Prices, Land Constraints Stunt Tea Industry
The tea industry has broadly classified all the constraints under which it has to operate. These include low tea prices against its costs, plantation growth constraints and problems in raising productivity.
Between 1970 and 1978, production increased by around 35 per cent and land area only by 3.6 per cent, while yield increased by almost 30 per cent. Between 1986 and 1997, production again rose by over 30 per cent, while land area went up by only 7.4 per cent, while yield went up by over 21 per cent.
The tea industry's research analysis shows that since independence, production has grown over 190 per cent, while land area has just grown by 38 per cent.
Other major impediments to the industry's performance is the long gestation period for a tea bush to reach commercial significance. The time-frame could be as high as nine years, in the case of replanting. Therefore, payback periods are high and upkeep of the bushes an expensive proposition. Given the economic life span of a tea bush at 50 years, two per cent of the bushes need to be replanted every year. However, the average annual rate of re-plantation is only 0.4 per cent. Currently in India 42 per cent of the bushes are above 50 years - 37 per cent overage bushes in north India and 59 per cent in south India.
The tea industry has pointed out that replanting leads to a loss in crop and therefore income, which in turn contributes to a payback period of well over 20 years.
The constraints in terms of land availability restricts additional plantation. With such low land availability, expansion of tea plantations does not take place which affects its production and growth.
The cost of tea is only 24 per cent in the total cost of a cup of tea which works out to about 25 paise per cup. Between 1995 and 1997, tea prices in India moved up by 39.72 per cent, in Sri Lanka it went up by 65.27 per cent, in Kenya by 49.25 per cent and Malawi by 62.74 per cent.
During 1990-91 to 1996-97, prices of fertilisers went up by 132 per cent, coal by 109 per cent, electricity by 173 per cent, wages by an average of 110 per cent and tea only by 55 per cent.