The Hindu Business Line : No system to ensure MSP payment for tea

POLITICAL and industrial pressures are mounting with the Centre likely to fix a minimum price for tea by invoking Section 30 of the Tea Act, 1953. A six-member delegation of industrial representatives and the political parties supporting the UPA Government has taken up the issue personally in New Delhi. The reality is that Section 30 is more an enabling provision than mandatory. To that extent, while the Centre may fix a minimum price, there is no mechanism to ensure that the market pays the fixed minimum.

As per Section 30, the Centre may, by notification in the Official Gazette, fix in respect of tea of any description specified therein, a maximum or a minimum price, which may be charged by a grower, manufacturer or dealer whether for Indian or export market. There are other clauses in the Section relating to the quantity control, persons to whom the teas have to be sold and so on. Also, this Section jointly deals with the tea waste as well. So, it is titled, "Power to control price and distribution of tea or tea waste."

The demand now is to invoke this provision to fix a minimum price for the green leaf supplied by the small growers to the factories. But, if the Centre fixes a minimum price, there should be a simultaneous fixing of the minimum price for the manufactured teas at the auctions as otherwise, the factories in the private sector may not be able to recover the administered raw material cost.

The buyers, on their part, will demand a minimum price to be fixed for the wholesalers to whom they supply their teas and the latter, in respect of their supplies to the retailers and finally to the consumers. Unless all this happens, there is no guarantee that the growers will receive the fixed minimum price. If factories or the dealers refrain from buying the product at the fixed minimum price on economic grounds, invoking Section 30 may not help the growers.

This has already happened in the case of rubber where there is a floor price, but many times, the market level was below the minimum prescribed and the growers could do nothing other than to make representations. So much so, the minimum price is only on paper and it is the market, which decides the price.

Besides, the minimum price should have a co-relation with the quality to avoid dispute amidst the players. The Tea Board has been, in the last five years, running schemes for quality upgradation in both fields and factories. Any minimum price fixed should recognise the higher valuation of the quality leaves.

At the same time, unless the volume to be purchased is also specified, there is the possibility of the factories rejecting the leaves on grounds of mismatch between quality and the minimum fixed price.

The equally important question is: what is the minimum price to be fixed under Section 30? Growers have given varied figures such as Rs 8, Rs 10 and Rs 15 for a kg of the green leaves they supply to the factories.

The factories have demanded Rs 50 a kg for their black teas at the auctions. Currently, exporters are not paying this price at the auctions and forcing them to pay may send wrong signals in the global market. Invoking Section 30 without a simultaneous mechanism to ensure the payment of the fixed minimum to the growers will hardly serve any purpose.

As the Section now stands, it speaks about the minimum price fixed by the Centre, which the grower "can charge" for his tea, but does not guarantee the price, which the growers "should get." Charging a price and realising it are not the same. That makes all the difference!

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