The Hindu Business Line : `Increase in per capita offtake of tea, coffee needed'

Kochi May 16 Plantations crops, mainly rubber, coffee, tea, pepper and cardamom have done well during the last fiscal. Though the tea prices have moved up after a long-time, the increase is not enough to extricate most of the plantations from the red. The Centre has also come out with some programmes to help the tea plantations industry.

Mr J.K. Thomas, President, UPASI and Vice-Chairman, Tea Board India, spoke to Business Line on the present status of the plantation industry. Excerpts:

The Centre would be creating a Special Purpose Tea Fund, will it help improve the situation?

The fund created by the Union Government is an old wine in a new bottle. As against the proposal of 40 per cent subsidy, the Government has finally agreed to 25 per cent. However, it would be beneficial when this component is calculated on a higher unit cost. Lot of interaction is needed on the part of banks, management and trade unions to make it operational.

It was announced that over a dozen defunct tea estates would be re-opened, what is the progress on that?

On the re-opening of over a dozen defunct estates the State Government has shown interest. But, the main hurdle is that the Kerala State Electricity Board (KSEB) which has not been co-operative so far. One of the conditions for re-opening of the estates is that the KSEB should waive the minimum demand charge. Besides, at present, the estates are treated as HT1 consumer and charged high tariff accordingly. The estates are demanding that it should be made HT3 consumers and charged agricultural tariff. Therefore, the re-opening of about 15 estates would now depend on the decision of the KSEB.

Has the increased tea prices taken the plantations out of the red?

Though the tea prices have increased last year that was not enough to break even in many plantation companies which has only tea. However, there may exceptions. In fact, it is the good rubber prices, which has improved the profitability in the balance sheets of corporate estates having both rubber and tea. Productivity of some of the tea estates continued to remain low and, hence, unviable.

The increased availability of tea from other origins appears to be pushing the prices down. Given this situation, what is the option for Indian tea?

We should increase our consumption of tea, as it would create huge market here itself. Even a marginal increase in the per capita consumption of tea and coffee in the country could result in the absorption of almost the entire quantity of these commodities produced here and, consequently, it could ensure stable and remunerative prices. At present, the per capita consumption of coffee is a meagre 130 gm/year, while that of tea is 700 gm/year.

Increased domestic consumption could improve the prices. It is also on a growth path and once the per capita consumption reaches one kg/year, the total domestic output might not be enough to meet the demand.

Such a scenario is foreseen by buyers overseas. No importer, in fact, wants to rely fully on India for tea, as any spurt in domestic consumption would squeeze the exportable surplus here. The overseas buyers, therefore, feel that supply from India could become inconsistent. Besides, increased consumption/demand could raise the prices also.

Domestic consumption of tea in other producing countries such as Kenya is much below their total output.

Last year, there was a fall in Kenyan output and that had raised the tea prices world over and it was reflected here also. But, this year the situation has changed and Kenya would be having its normal production. As a result, the international prices started declining.

What is the status of South Indian tea?

Increased availability abroad could negatively affect the South Indian teas. It is vulnerable as 50 per cent of its output is exported. Exports from the South are estimated at 115.9 million kg (mkg) in April - March 2007 against 96.1 mkg the previous fiscal.

The exports from North are estimated at 87.04 mkg compared with 100.5 mkg in 2005-06. The average unit value realisation also showed an increase last fiscal to Rs 68.97 a kg from Rs 65.89 in the previous financial year.

There had been interaction with tea traders in Pakistan and how far has it helped in increasing exports?

The interaction between South Indian tea producers/sellers and Pakistani buyers in the recent past has started yielding positive results.

The exports to our western neighbour had shown a significant increase.

As against 11 mkg in Jan - Dec 2005 we could export 15 mkg in the corresponding period in 2006.

If free trade is allowed between the neighbours we could increase our tea exports substantially.

Much of the tea produced in India is CTC and demand, of late, is for orthodox and, hence, do you think conversion would take place?

Conversion to produce orthodox tea is not an easy task in most of the plantations. It requires increased investment and that, at this juncture, does not seem to be possible.

The total Indian production is estimated at 950 mkg and 90 per cent of it is CTC teas and the rest is orthodox. When one kg of CTC gives 350 to 450 cups, orthodox tea gives only 100 - 150 cups.

This is also reflected on the consumption pattern.

How is the import of tea of late?

Imports of cheap tea have also its adverse impact on the Indian prices. It has shown an increase of 8 mkg last year. As against 16 mkg in Jan - Dec 2005 the imports in the same period in 2006 were at 24 mkg. Invariably, poor quality teas are imported and it is channelled in to the exports. As a result, the retention in the domestic market increases besides depressing the prices here.

What is the present situation in coffee?

In the case of coffee, there had been a domestic consumption growth of 10 per cent and that rate is expected to stay. It had gone up to 130 mg in 2006-07 from 73 mkg. Coffee prices would remain stable at the current levels provided there is no further spurt in the output.

Throughout the year 2006, prices for all grades were good and that is likely to sustain this year also. If the per capita consumption of coffee is doubled to 260 gm/year, almost the entire domestic output would be absorbed by the domestic market itself. What is the progress on the introduction of e-auction in tea?

The Tea Board has appointed NSEiT to redesign the system and they are expected to complete it in two to three months. Thereafter, we will launch a pilot project involving all the stakeholders. Anyway, we hope it would be in place before end of the current fiscal.

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`Increase in per capita offtake of tea, coffee needed'