Agri Business

Tea sector poised to face climate change challenges in 10-15 years, says McLeod Russel chief

Pratim Ranjan Bose Kolkata | Updated on April 10, 2013

Aditya Khaitan

Aditya Khaitan has a distinct voice in the Indian tea industry. In 2005, when seasoned planters were making an exit from the business – in the face of seven-year long recession in tea – Khaitan, then in his mid 30’s, predicted recovery and steered McLeod Russel towards capacity expansion.

To his credit, tea prices are on the rise since 2007. But just when everything looks hunky dory, the Managing Director of world’s largest black tea producer expects the Indian tea industry to face major challenges in the next 10-15 years. Below are the excerpts of an interview:

You always maintain that tea prices are set to shoot. Prices did really spiral especially since last fiscal. Have we hit the high tea price regime?

My assessment is based on fundamentals. From 2007, the aggregate production of three major black tea producing nations – India, Sri Lanka and Kenya – remained constant. In contrast, the demand for tea has increased by approximately 50 million kg (mkg) a year, leading to an estimated global shortage of 300 mkg. India being a consuming nation, the demand-supply imbalance should reflect on domestic tea prices, which is still lower than the cost of water.

Should it mean happier days are ahead for the industry as well as McLeod?

Success of a planter lies in thinking at least five years ahead. Five year ago, irrigation was considered a luxury. Today it is a necessity.

Out-growers (small tea farmers) were once a peripheral issue. Today they are the only vehicle to increase plantation acreages and, large producers, like McLeod, are devising models to integrate them in production plan.

My worry is, in the next 10-15 years, the industry is going to face major challenges on account of climate change as well as inadequate infrastructure and short supply of farm labour.

You have been speaking about climate risks and the need to hedge against the same by spreading in different geographies. Do you expect more problems on that front?

Weather is changing. The rain and temperature patterns are broken, leading to crop loss.

I expect weather god to throw up more challenges in the future. In Assam (contributing half of India’s 1,000 mkg production and approximately 95 per cent of McLeod’s 80 mkg domestic production), river beds are rising due to heavy siltation, impacting drainage. The immediate pitfall is tea estates are getting more vulnerable to water logging leading to damage of tea bush.

This is not an issue in our control. But, we have to take safeguards. The only available solution is uprooting and re-plantation to bring down the age of the bush, to make them more resilient to weather conditions.

Can you elaborate issues with regard to infrastructure and labour?

Power is a major concern in Assam. Hardly 20-30 per cent of our requirement is met through grid power. Dependence on diesel generators to source majority of our energy requirement is proving costly. With rising diesel price, power will be more costly in the future.

Non-availability of farm labour is another major concern. Implementation of MNREGA has hit the industry. And, going forward plucking machines are the only solution. We (McLeod) are also using them in a limited way in some of our estates. But, that is not free from the pitfalls. Machines are not the best replacement of tender hands and quality suffers.


Published on April 10, 2013

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