Bought Leaf Tea Manufacturers not to sell below the base price of ₹85

V.Sajeev Kumar | | Updated on: Jun 27, 2022


Many bought leaf tea factories are not in a position to make payments for green leaf being supplied by small tea growers

The Nilgiri Bought Leaf Tea Manufacturers Association has informed auctioneers in Coonoor of their inability to sell tea below the base price of ₹85, citing several issues.

K Dhananjayan, President of the Association, told BusinessLine that low prices of tea in Coonoor auctions continue to be a big challenge for bought leaf tea manufacturers to carry out business because of the high production cost, which is in the range of ₹25 to ₹30 a kg and the District Average Green Leaf Price being fixed by the Tea Board at the end of the month based on the consolidated auction averages.

He pointed out that 70 per cent of the offered quantity of 25 lakh kg of tea in auction sale 25 remained unsold as buyers are unwilling to pay ₹85 for the brew. The auction price during the same period last year was ₹122 against ₹78 now. Many bought leaf tea factories are not in a position to make payments for green leaf being supplied by small tea growers.

However, it has been decided to continue procurement of green leaves from small tea growers, but the association has expressed its inability to make payments to small growers for the green leaves supplied from June 24.

Invoke provisions

The association also requested the Joint Secretary (Plantations) to invoke the provisions under Section 30 (1) (2) of the Tea Act 1950 to fix a minimum price for made tea as this would help resolve the long-pending issue of low prices for small tea growers and would create a positive environment to run the business, Dhananjayan added.

The Association also expressed concern over the proxy model of tea buying as opposed to direct sourcing being followed by certain corporate firms in the South Indian auctions to avoid the initial issues faced during the introduction of GST. With GST implementation being streamlined, it urged companies to procure directly from the auctions which would ensure responsible sourcing practices.

Likewise, it is pointed out that free trade samples (FTS) supply to eligible buyers has been a big burden on the manufacturers as it amounts to ₹3-4 crore annually. The Association urged the Tea Board to remove the concept of FTS and make the trade samples paid entities, he said.

The association also requested big corporate buying houses not to procure teas below ₹100 so that manufacturers and small growers would get a responsible price to manage their livelihood.

Published on June 27, 2022
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