The Hindu Business Line : Orthodox tea subsidy: No benefit to small-scale units

TWO months after the Centre announced a subsidy for the manufacture of orthodox teas, the 60,000-odd small growers in Nilgiris have told the Government that this has not benefited them at all.

"The factories buying our green leaves manufacture only CTC teas and, hence, the subsidy does not apply to them. So, we also do not get improved prices for the raw material we supply," said Mr M. Bhojarajan, President of the Nilgiris Small Tea Growers' Association.

He had urged the Additional Secretary of Commerce, Mr Abhijit Sen Gupta, and the Tea Board Chairman, Mr N.K. Das, during a recent interaction, to give subsidy for production of quality CTC teas as that alone would benefit small growers, even as it would usher in quality in the end produce.

"We have asked for a subsidy for CTC teas, which fetch Rs 10 a kilo more than the district average at the auctions," he told Business Line.

But, the factories should be encouraged to go for dual manufacturing facilities so that they can shift from one variety to another depending upon the price and the demand.

"Since small-scale factories cannot afford the huge investment, we have sought the doubling of the machinery subsidy so that half the cost could be covered. This will help the factories install orthodox manufacturing machineries," Mr Bhojarajan said.

But it is intriguing as to why the Tea Board, which had realised the importance of orthodox teas in the global market, had not promoted the conversion or the establishment of the dual manufacturing facility in a large number of small-scale factories.

"Even when the Tea Board went ahead with its factory upgradation programme, I insisted on subsiding the orthodox machinery rather than the CTC. Since this was not carried out, today, even after the upgradation and the subsidy for the orthodox manufacture, the small growers have not gained," said Mr T. Rangaiah, former Vice-Chairman of the Tea Board.

"I promoted orthodox tea manufacture in the Kaikatty Indco factory. We got Rs 67.50 a kilo even as the average price was only Rs 25. Price is the big attraction for orthodox teas," said Mr Rangaiah, who is also the founder Chairman of this factory and the only elected Chairman of Indcoserve, the apex body of Indco factories.

Because of the lack of manufacturing facilities, the volume of orthodox teas in the market is low. This is more telling in the markets that are over-dependent on the teas from the small growers' sector.

In the Coonoor auctions, for instance, of the 24.6 million kg sold so far this year, only 1.79 million kg was orthodox teas. Last year, 1.91 million kg was sold in the corresponding months. But the loss is significant considering that every kilo of CTC tea sold fetched, on an average, Rs 13 lower than the orthodox teas. Besides, while the price of CTC teas has fallen by a rupee a kilo over the same period of last year, the orthodox teas are ruling Rs 3 a kilo more.

In the Kochi auctions, the volume of orthodox teas dropped drastically to 7 million kg from 25 million kg last year, principally because of some corporate manufacturers taking advantage of the price difference for the manufacture of CTC teas.

There, CTC teas are fetching Rs 8 a kilo more this year compared to Rs 3 in the case of orthodox teas. Still, orthodox teas are Rs 4 a kilo more than the CTC teas. But in the Coimbatore auctions, the exporters bought more orthodox teas, resulting in the volume rising to 1.3 million kg from 0.9 million kg last year. They paid Rs 7 a kilo more compared to just 60 paise more fetched by the CTC teas. Besides, orthodox teas are Rs 6 a kilo more than the CTC teas.

Overall, the market suffers from an inadequacy in the orthodox teas. This is the result of the south Indian tea industry stepping up in the recent past the manufacture of CTC teas, keeping the domestic market in view. The home market lays emphasis on the increased cuppage derivable from CTC teas. Export market needs more orthodox teas.

Right now, the Government's thrust is on orthodox manufacture and that's why it has given the subsidy of Rs 2 a kilo for the manufacture of dust grades and Rs 3 for leaf. But the corporate units had been seeking Rs 7 a kilo to cover the additional expense on the manufacture of orthodox teas.

In any case, the subsidy is funded out of the additional excise duty of around Rs 138 crore collected from the industry in the last two years. The commitment during the scheme period running up to March 31, 2007, is pegged only at half the additional excise duty collections. So, the Government does not lose even as the industry gains.

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