Bought-leaf factories stop production

The GST issue is turning serious in the Nilgiris with small bought-leaf factories stopping production from Saturday.

“Since the discussions on GST implementation commenced a month ago, buyers are refusing to purchase our tea at the auctions of the Coonoor Tea Trade Association, demanding changes in billing procedures,” HB Ananthan, President, The Nilgiri Bought Leaf Tea Manufacturers’ Association, told BusinessLine.

“Last week, in the first auction held after GST was rolled out, 95 per cent of the tea on offer was not bought. This week, 54 per cent remained unsold,” he added.

“Major corporate buyers and exporters are not operating. So, there is no competition for the few buyers who purchase. Consequently, they bid for our tea at low prices,” lamented Ananthan.

₹11 crore hit As a result, the Nilgiris Bought Leaf Manufacturers’ Association has decided to stop production for a week, till July 21. This is expected to cause a production loss of around 15 lakh kg, worth ₹11 crore.

“On the one hand, unsold tea is piling up; on the other, the price we get for our tea is not remunerative. In the circumstances, we are unable to operate our factories. So, we have decided to close factories from Saturday for one whole week. Casual labourers will lose their wages,” Ananthan noted.

Impasse continues Exporters and buyers thought that the dust had settled after the commercial taxes department issued a notification last Friday stating that “different procedures for different auction centres is inadmissible” as GST has a uniform implication throughout the country. They now realise that their elation was shortlived after sellers decided to shut their factories.

Meanwhile industry stakeholders have rushed to Kolkata to meet with the Tea Board Chairman and seek his intervention to resolve this issue. The meeting is slated for Tuesday.

“We will not buy green leaf from small growers during this period. We fully sympathise with the farmers as they will not get returns but we appeal to them to support us in view of the difficult situation,” said Ananthan.

Small growers are equally worried. “This will upset the economy of not only the 65,000 small farmers’ families but the entire Nilgiris district. The Tea Board has announced a minimum price of ₹12 per kg for our green leaf for July, but now we want the Board to intervene to ensure that normalcy returns to the trade,” said H Thiagarajan, President, The Nilgiris Small Tea Growers’ Association.

A cross section of buyers that BusinessLine spoke to alleged that sellers were unnecessarily casting aspersions of a nexus between the broker and buyer. “When all the knockdown prices are on the portal and open to all stakeholders, this fear of malpractice is totally misplaced and misleading,” said a buyer, preferring anonymity.

Both buyers and sellers were blaming each other of attempting arm-twisting tactics to win their respective demands.

The stand-off, happening during high cropping season, is expected to hit the trade badly, albeit only at the auction centres — Coonoor and Coimbatore — in Tamil Nadu.

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