The Hindu Business Line : `Tea packaging cos must look for innovations'

It sounds a bit odd because the common belief among producers is that buyers would always try to strike a deal at a lower price. This was apparent in the last few years when tea prices plummeted to extreme lows.

This situation has changed. Buyers and tea-packaging units have suffered because the average quality of tea deteriorated with the gradual fall in the prices. So, the tea packeteers failed to deliver a standard quality to their consumers.

Hence, they conclude that low tea prices in the auction houses have done more harm to their business than they good. This factor has forced them to urge producers to manufacture good quality tea.

The Governments, both in the Centre and States, have kept on listening to the problems of the producers, which are at plenty, but the buyers, who operate as tea packers have a lot to say against the present status of the tea industry.

Mr Piyush O. Desai, immediate past president of West India Tea Dealers Association (WITDA) and a past chairman of Federation of All India Tea Traders Association (FAITTA), spoke to Business Line on various issues on the tea sector.

Mr Desai is a director of Wagh Bakri Group, a significant regional tea player in the country.

As a leader of a buyers' association, what are your expectations for the tea producers?

We want good quality of tea. I agree that producing good quality is always not remunerative. Moreover, producers are facing several problems. Tea prices have fallen to extreme lows in the last few years. However, going by the auction prices you would notice that there is a price difference of Rs 30-Rs 40 per kg between the good and common quality of tea.

Tea producers play a vital role in building the future of tea trade and the industry. They should continue to strive for improving quality. It should start from the plucking methods. They should bring improvements in the various processes in tea production.

Do you want the Union Government or the Tea Board to formulate any quality standards for the tea gardens?

Yes, tea gardens producing good quality tea should come under some sort of a mark. It can be either ISO or ISI or Hazard Analysis Critical Control Point or any new mark, which would be acceptable to everyone. The idea is that once a buyer sees that mark he is assured of a particular quality of tea. It would also help the producer in earning a premium from the market.

What is the role of the packaging companies?

In 25 years the pattern of tea consumption in India has drastically changed. In the early eighties, consumption of loose tea was approximately 85 per cent, while packet tea was only 15 per cent. Today, loose tea has lost its market share and it has dropped to 60 per cent. The rest, 40 per cent, is packet tea. Acceptance of tea in bags is slowly increasing among consumers.

In the current competitive market scenario, it is appears that tea packaging companies are eager to pay more on promotional efforts. I feel that they should refrain a bit. Otherwise, they would end up compromising on the quality. In the long run, these promotional activities may not prove to be beneficial to the company.

Second, tea packaging companies should be honest in their claims and must not try to affect the decision-making process of a consumer. Instead they should look for innovations, such as newer forms of tea bags, variations of tea or tea dispensing machines and likewise.

The buyers, including you, strongly opposed the introduction of Tea Marketing Control Order (TMCO). Two years have almost passed. How do you look at TMCO now?

Even today, we feel that TMCO is not needed. Small buyers are facing a major problem in the maintenance and filing of records to the Tea Board every three months. The small players should be freed from the clutches of TMCO.

However, as TMCO is already in place, the Tea Board should be having all the necessary figures and statistics. So, they should publish the consumption pattern of tea in India in terms of state, quality and variety. Otherwise the purpose of TMCO would be defeated.

You were also critical of the 5 per cent premium that is being charged by producers for division of lots at the auction houses. Why?

Instead of premium, I call it penalty. The producers are charging 5 per cent extra on every kg of tea sold after a division of a lot. This, I feel, is an unfair and irritating practice and has created a lot of discontentment among buyers. Moreover, buyers at the auction houses are now quoting a lower price to accommodate that 5 per cent increase. This factor has reduced the buyers' interest in the auction houses which, in turn, is affecting the producers' interests. I think this 5 per cent premium should be abolished.

What are your views on the coming value-added tax (VAT) regime?

As it appears now VAT is set to be implemented from April 1. It also seems that tea is being identified as a luxury item and bracketed in the 12 per cent tax slab. This is unfair because tea is no longer a luxurious or fashionable item. It is a common man's drink. If at all the Government wants to impose tax on tea, it should not be more than 4 per cent. Every producer, trader, dealer and whoever is associated with this sector should try to convince the Government on reducing tax on tea. FAITTA has already engaged IPAN, a public relations agency, to highlight the importance of tea.

If tax on tea is not reduced the worst affected would be its ultimate consumer.

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`Tea packaging cos must look for innovations'