The plantation sector in South India, which employs over 2.5 million has been facing multi-faceted crisis in recent years with climate change impacting output, rising input costs, labour shortage and volatile commodity prices emerging as key concerns. In an interview with businessline, Jeffry Rebello, President of the United Planters’ Association of South India (UPASI), the apex trade body, says the excess supply in tea is weighing on prices, while suggesting that fresh planting in new and non-traditional areas should be discouraged. Excerpts:
How do you assess the current situation in the plantation sector?
It had been a mixed year with price recovery noticed in pepper and cardamom, while coffee prices sustained but at a lower level for arabicas over last year. Tea and rubber prices reported steep decline and fell below cost of production. South Indian tea prices, which hovered around ₹130-135 per kg during the first quarter have now declined to ₹102, a dip of nearly 25 per cent. Similarly, rubber prices (RSS-4) are currently at ₹146.50 per kg against ₹175 in same period last year. Main reason for decline in tea prices has been excess supply — both domestically and globally — and also lower export demand due to global headwinds. Rubber prices declined due to dip in demand from major consumer China, lower oil prices and global economic crisis.
What has been the impact of deficit monsoon on plantations in Kerala and Karnataka?
Kerala has reported 45 per cent rainfall deficit this season, while the month of August has reported 80-90 per cent decline from the normal levels. In Idukki district, the main tea growing region, the rainfall during August was the lowest recorded in last 10 years. Rainfall deficits of this magnitude, would impact the application of fertilisers and other cultural operations which will have a bearing on the overall production in the coming months.
In Karnataka, the deficit monsoon was estimated to be around 60 per cent compared with last year, while the delay in monsoon had its impact. Given the last two years rainfall pattern in Karnataka, the growers are concerned about sudden heavy bouts of rain in a short span which resulted in crop damage and damage of assets.
How is the sector gearing up to mitigate and deal with the impact of changing climate?
Needless to mention, climate change has strong direct and indirect effects in carrying out agricultural operations and could hamper crop production as was witnessed during the last few years. Some of the climate change challenges faced in the plantation sector are delay in monsoon, deficit monsoon, unexpected heavy downpour, a smaller number of rain days, long spells of exceptionally warm weather, raising temperature and dry spells, rainfall concentration over a short period against a well distributed rainfall pattern.
Plantations are at the receiving end with climate change and we have been requesting Government’s support for Climate Smart Agricultural Intervention measures. Plantations have emerged as validated carbon sinks that deserve significant attention as a climate change mitigation solution. Extensive research has established that natural rubber and other plantation crops possess substantial capacities for carbon sequestration among cultivated crops and UPASI has been engaging with entities dealing on the carbon markets for potential utilisation of carbon credits.
Yields have been stagnating or are on the decline with plantations turning senile in coffee and tea. What’s being done to arrest this trend?
It is true that both tea and coffee in South have been impacted by the either stagnant or declining yield. It is evident from the South Indian tea production figures, that after recording the highest production of 246.9 million kg (mkg) in 2008, production could never surpass this levels. Importantly, the production decline is going to be permanent as it an ‘area effect’ that is at play. In other words, the production decline is more on account of area decline rather than on productivity decline.
In the case of coffee, Indian productivity levels are at 790 kg/ha , which is among the lowest when compared with major producers like Vietnam (2,825 kg/ha) and Brazil (1,630 kg/ha). It should also be noted that Indian coffee is grown under shaded conditions . Though there are limits for increasing the productivity in Indian coffee, there is a need that we derive benefits of sustainably produced Indian coffee.
In this regard, Coffee Board, jointly with all stakeholders of the coffee sector, is organising the World Coffee Conference in Bengaluru during September 25-28 which would showcase some of the finest Indian coffees grown under shade conditions. Another concern is the decline in Arabica production vis-à-vis Robusta and its implications on the coffee exports.
UPASI has been requesting for an early introduction and implementation of developmental schemes in tea and coffee, especially the replanting and other incentive schemes. Replanting scheme is quite critical as the cost of replanting involves huge investment. There is a need for Government support for replanting without restrictions on the basis of size of holdings or type of ownership.
With inputs and wages going up, how is the sector dealing with the rising cost pressures?
South India has turned out to be a high-cost producer of plantation commodities due to high wages, high input costs and low productivity of land and labour. This, with constantly falling prices often below cost of production have brought plantations to a situation where it is increasingly becoming financially unviable to operate. For instance, the cost of tea production which was ₹44/kg in 1995, has increased to about ₹145-150 in 2022 registering an increase of more than 240 per cent. It is even more challenging to reduce the cost of production since 60-65 per cent of the total cost of production is on account of labour. There should be a thrust on labour productivity and rationalisation of input costs as well as embrace mechanisation quickly.
What has been the progress of implementation of developmental schemes in plantation sector?
As the plantation sector is going through a multi-faceted crisis, there is a need to support the agri-industry which has immensely contributed to the development of the nation in terms of generation of foreign exchange and employment to the population in rural and remote areas of the country. This calls for a quick implementation of developmental schemes.
Presently, there are no new developmental schemes announced for the plantation sector, since the culmination of the Medium-Term Framework period during 2017-20. Though we understand that the schemes are in the final stages, pending approval of the Government, given the magnitude of the issues involved in the plantation sector, there is a need to quickly come out with revised scheme guidelines and implement the same without delay.
What is the latest trend in domestic consumption of tea, coffee? Do you see the imports of these commodities rising to meet the growing demand?
Domestic consumption in tea, per recent estimates, is growing at around 2.3 per cent, while the production is reportedly growing at 2.6 per cent. The per capita consumption in tea is estimated at 850 grams per person per year, which is very low compared to other countries such as Turkey [3.88 kg/person], Morocco [1.89 kg/person] and China [1.82 kg/person]. There is a need to bridge the demand-supply gap, which calls for generic promotion measures to increase the consumption of tea and given the high penetration level of tea as 88 per cent of household drink tea.
In coffee, bulk of the Indian production is exported and per the International Coffee Organisaiton, the domestic consumption is estimated at 0.94 lakh tonnes against the production of 3.52 lakh tonnes during 2022-23. In coffee, consumption is growing globally with maximum growth at the premium end as coffee is perceived as a lifestyle product. There is a massive scope for value addition as coffee is perceived as an affordable luxury in the minds of consumers.
Though the imports of tea (0.29 lakh tonnes) and coffee (0.86 lakh tonnes) are taking place, it needs to be monitored.
How is the coffee sector gearing up to meet the new European regulations?
Per the EU Forest Regulations, a product is defined as deforestation-free when the product itself, its ingredients or its derivatives were not produced on land subject to deforestation or forest degradation after the cut-off date of December 31, 2020. Any entity importing or exporting these commodities to and from EU must prove that the products are deforestation free. South India is the traditional plantation growing region for coffee and rubber, as they were established almost a century and half ago. Hence, as such plantations in the region would not come under the purview of the EU deforestation regulation. There could be a few exceptions especially in the small grower segment, but it may not be significant in terms of area.
However, let me hasten to add that from the trade policy perspective the EU regulations are nothing but non-tariff barrier and Government should flag this in the WTO and other trade forums. In the rubber sector, the regulation could have implications on imported rubber since some of the geographies from which NR is imported might be squarely covered under the ambit of this regulation. This would necessitate the NR consuming sector to be conscious of its import requirements and make sure that they are not sourced from the geographies that are susceptible to deforestation.
How do you think tea growers can attain better prices and make growing tea more economically sustainable?
The main issue today is that there is a wide surplus due to higher production than consumption. There is a need to produce better quality teas for the market which will automatically reduce supply as higher quality teas require higher plucking and processing standards. From the plucked leaf to manufacturing, every process has to be made more quality oriented.
Secondly, India today consumes 850 gm per capita. With a rising middle class population there is a great scope to have a generic promotion campaign wherein all the different health and positive benefits of tea can be highlighted. An Atal incubation center in tea is much needed to get in new generation entrepreneurs to work on innovations and value addition in tea.
Tea exports from South India have now come down to the level of 225 million kg from a high of 250 mkg due to certain unique issues in some of our traditional markets of Iran, Iraq, Turkey, Russia, etc. If the government can address these issues through bilateral negotiations, we could easily remove the excess supply
Also, there is a need to discourage fresh planting in new and non traditional areas. Rather, the replanting should be incentivised with high yielding and drought/pest tolerant clones in traditional areas which will automatically reduce supply in the short run and be more productive in the long run. The Government could also incentivise small farmers to diversify into growing fruits and vegetables which are far more remunerative today
With two major markets for tea – Iran and Russian Federation facing issues, what is the outlook for exports?
The present tea export trends clearly suggest that the quantum exported this year – 2023 could be lower. The exports figures for Jan-June 2023 indicate that the volume exported was marginally lower at 96.49 mkg. The global headwinds and recessionary trends in consuming destinations are clouding the market prospects for tea exports. The export to Russian market is marginally higher during the current year, while the export to Iran was significantly affected and up to May 2023 the quantum exported was lower by 6.01 mkg. UAE was the single largest export destination for India during 2022 is also reporting marginal decline in the quantum exported by 0.82 mkg, which is a matter of concern. There is a need for Government to incentivise exports by way of increasing RoDTEP rates for tea to 5 per cent from the existing 1.7 per cent. Similarly, Transport & Marketing Assistance (TMA) scheme should be re-introduced to defray the international freight changes. Also, the Government should help the industry in jointly taking up promotion and branding of Indian teas and coffees in the overseas markets.