Agri Business

Darjeeling tea industry staring at ₹400 crore loss

Shobha Roy Kolkata | Updated on January 10, 2018 Published on September 05, 2017

The Darjeeling tea industry is bracing for tougher days ahead. The indefinite shutdown in the Darjeeling hills, which has crossed 80 days, is costing the tea industry dearly, with the industry staring at a collective revenue loss of ₹400 crore. While on one hand the cash flows are under pressure, the need for paying bonus once operations resume, could exert further pressure on the companies, denting their bottomline, industry experts said.

But according to A N Singh, managing director and CEO, Goodricke Group, the greater fear for the industry stems from the fact that blenders and packeteers have started making inquiries for an alternative for ‘Darjeeling’.

“In the last so many years I have never seen so much of Nepal tea floating around. Infact there are some overseas inquiries coming in asking us if we could supply Nepal tea. If that tea makes inroads then we might potentially lose our overseas market,” Singh told BusinessLine.

Nearly 50 per cent of the total 8-million kg (mkg) of Darjeeling tea produced across 87 estates each year is exported. The industry has already lost nearly 70 per cent of its production, a majority of it being from the most prized second flush tea. The second flush crop – extending between May to July – fetches maximum price for its unique colour and flavour.

Bonus Payout

According to the Payment of Bonus Act, 1965, an employer is bound to pay the employee a minimum 8.33 per cent of the annual wages as bonus every accounting year irrespective of whether the company has any allocable surplus cash. The maximum permissible bonus is 20 per cent.

According to Binod Mohan, chairman, Darjeeling Tea Association, the industry had paid 20 per cent of the gross annual wages as bonus last year. However, this year, due to the prevailing situation, the effort would be to come to a “mutually acceptable level”. The bonus is decided based on negotiation with workers’ trade unions.

“We cannot say anything until the gardens reopen. But it is an extremely challenging situation. We are requesting the government to announce a relief package otherwise many small estates might not be able to recover from this situation,” Mohan said.

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Published on September 05, 2017
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