The Hindu Business Line : Upasi opposes orthodox tea sales thru auctions

THE United Planters Association of Southern India (Upasi) has opposed routing of 100 per cent of orthodox tea production via auctions as it would mean lower price realisations for producer exporters.

Questioning the need for a producer to buy his own tea via the auctions, Upasi maintains that producers get much lower prices for orthodox tea at auctions, but get much better prices, if they directly export it.

"Recently, some of the producers of orthodox tea have formed a consortium to give a fillip to exports which has been very successful. Why should a producer purchase his own tea at auctions by paying brokerage and incurring other charges and involving time delay?" wondered Mr B.B. Medaiah, President of Upasi.

Officials maintain that on an average, over the past two years, of the total orthodox tea exports of about 64 mkg as much as 38 mkg (58 per cent) is by producer-exporters.

According to Mr Medaiah, many established producer-exporters have entered into forward contracts with the importers at pre-determined quantities, prices and shipping schedule, which will become uncertain, if mandatory auction is introduced. Moreover importers insist on good manufacturing practice or GMP, which include product safety, quality and environment policy, occupation and health safety policy etc., which can be adhered only by the producer-exporters.

"One of their USPs has been garden fresh teas, which will be lost if routed through auctions with attendant warehousing of the teas and time delays. The auction process would considerably delay the shipment schedule and also lower the freshness and quality of tea. This would create doubts in the minds of the established importers," the Upasi chief said.

With the industry having identified orthodox tea as one of the key ingredient to augment export volumes, Upasi is of the view that manufacture in this category could show an increase in the near future, provided that the Tea Board design and structure a production and/or export development incentive programme quickly.

"High elevation gardens, especially in the regions of Nilgiris in Tamil Nadu and high ranges in Kerala, are eminently suitable for manufacture of quality teas. However, the producers have to incur an additional cost of Rs 8 per kg for orthodox production. Given this, it is essential for the Government to provide an incentive for the entire orthodox production and not just for incremental production, so as to enable producers to work out a strategic plan for production and export. An additional incentive should be given for export of orthodox teas, which should be available either for merchant exporters or direct export by producers," Mr Medaiah added.

As per the Upasi data, orthodox production in South India during 1961 was 76.2 mkg and that of CTC was only 3.3 mkg. The production mix of orthodox and CTC in 1961 was 94 per cent (orthodox) and 4 per cent (CTC), respectively, and 2 per cent others.

In 2003, the mix was 12.6 per cent orthodox and 87 per cent CTC and 0.4 per cent others. The highly-skewed production in favour of CTC production is attributed to the local consumption pattern needs apart from the Russian demand. The world export during 2003 is estimated to be lower at 1,390 mkg, a decline of 2.7 per cent compared to the previous year.

India's share in world exports came down from 14 per cent in 2002 to 12 per cent in 2003. But, in 2003 India's share in world production had gone up by 1 per cent, while its share in the world exports had declined by 2 per cent. The all-India production in 2003 stood at 857 mkg, which constitutes 28 per cent of the global production estimated at 3,095 mkg. "India has lost considerable export market share on account of earlier policies. We need to resolve this with a holistic approach towards tea production and export," the Upasi chief added.