Agri Business

‘Plantation sector should also be included under PLI Scheme’

Vishwanath Kulkarni Bengaluru | Updated on December 10, 2020

Prasant Bhansali, president, of United Planters Association of South India

Upasi chief seeks incentives and handholding from the government to boost exports

Reeling under the impact of changing climate, rising costs, volatile prices and Covid pandemic, the plantation sector in the country — which employs about 25 lakh people — has been facing challenging times. In an interview with BusinessLine, Prashant Bhansali, the newly-elected president of the United Planters’ Association of India (Upasi), the apex trade body, says there is a need to incentivise the sector until it achieves a level playing field and able to meet the global challenges. Excerpts:

What’s your current assessment of the situation in the plantation sector?

The present scenario in the plantation sector is one of a mixed bag. In the case of tea, we have seen severe shortfall in production this year to an extent of 151.6 million kg (mkg) as of October 2020. The drop was mainly in North India (152.24 mkg). South India reported more or less same crop as on date, but 2019 saw one of the lowest crop from the region. South India has been reporting lower crop during the last five years and it maintained status quo in this pandemic year.

Prices were on an increase since July due to supply issues which was very much needed for the sustenance of this sector. Having said this, let me hasten to add that in the last few auction sales there was a severe fall in price realisation and quantity sold, and the latest prices are on par with November 2019 levels.

In coffee sector, the exodus of the migrant labour due to the pandemic will have an impact on the crop prospects. Coffee is an export-oriented commodity with more than 75 per cent of production being exported and the second wave of the pandemic in Europe is a matter of concern as the demand for the beans may get affected due to lower out-of-home consumption. However, supply challenges in some of the producing origins such as Brazil that is experiencing prolonged drought, delayed start in Vietnam crop, damages caused by hurricane in Central America could aid price stability.

Rubber prices have been on an incline since last month, which was very much needed for the sustainability of the Natural Rubber growers who have been reeling under the low prices for the last nine years. Multiple factors such as extreme climatic events like cyclone and floods in rubber growing regions in the world, the leaf fall disease reported in Thailand, increased consumption by China globally and by domestic industry during the post lock down, demand for healthcare products, etc were instrumental in price rise. It is only hoped that this price revival should stay so that the production potential in the country could be fully utilised.

What has been the impact of Covid on plantations and how long will it take for recovery?

The initial challenges to the plantation sector arising out of Covid-19 were restrictions on the movement of workers leading to shortage of workforce for cultivation especially plucking/picking, delay in streamlining the supply chain, cash flow issues due to disruptions in the supply chain, transport to and from most ports not functioning during the initial phase of Covid and total collapse of domestic trade & consumption. This has resulted in economic loss to the plantation sector due to both loss in crop and decline in exports. It is true that all sectors in the economy have been severely impacted as evident from the contraction in the growth rate projections in the country’s economic activity. The plantation sector is no exception to this general trend. But the issue was that the sector was already going through a bad phase due to high cost of production and low price realisation coupled with climate change issues, and the pandemic turned out to be a double whammy for the sector.

Have the recent interventions by the Govt helped mitigate the impact?

Upasi has made many representations in the last few months highlighting issues in the plantation sector due to Covid-19 pandemic. Though there were no direct announcements to the plantation sector per se, the two schemes, viz., Pradhan Manthiri Garib Kalyana Yojana and Atma Nirbhar Bharath Abhiyan had benefited a few in the sector. Needless to mention that this important agro-industry, which employs nearly 25 lakh workers of which more than 70% are women, and very important from the inclusive growth model pursued by the Government of India, needs special care and handholding.

What more needs to be done in the short term?

One of the immediate need of the plantation sector is that the committed incentives under various developmental schemes should be disbursed immediately. There was a considerable reduction in allocation of funds to the Commodity Boards in the Budgets and over and above it is gathered that there is an additional 40 per cent cut in the allocation during the current year due to the pandemic. This is affecting the plantation sector as the Boards are not in a position to disburse the dues to the growers under various developmental schemes. Given the gravity of the situation in the sector, a one-time special allocation be made to disburse the committed overdue amounts. This would go a long way in helping the South Indian plantation growers to tide over the critical financial crisis they are in today at least to some extent. We are following up with the government on the need to include plantation sector loans, both the current and overdue loans, along with interest accrued to be restructured into a single term loan with a couple of years of moratorium period and sharing of interest between growers, banks and Boards during the moratorium period, which we hope might be accepted. We have also requested for reduction in the rate of interest to 3 per cent per anum on all crops and development loans disbursed to growers as per the applicable scale of finance, to enhance the global competitiveness.

What are the long-term interventions required to make plantations more sustainable considering the challenges such as volatile markets and climate change?

South India is facing acute shortage of workforce especially for harvesting followed by steep increase in wages and high cost of inputs. Hence, there is a need for a holistic approach on mechanisation with larger outlay, so that the industry can embrace both on-farm and off-farm mechanisation to increase the efficiency in farm and processing activities. Mitigating effects of climate change through schemes for rain water harvesting, water augmentation, micro & drip irrigation, solar/wind energy and water harvesting are key strategic areas to be pursued in the longer term.

Additional funds on infrastructure for development of plantation sector under the Atmanirbhar Bharat Abhiyan mission which should complement Make in India initiative by encouraging value addition. The plantation sector should also be included under Production Linked Incentive Scheme (PLI Scheme) of the government. The development of good seed material and clones with high yield that are resistant to pests and diseases, drought resistant and having positive quality attributes is a matter of great urgency and importance.

A focused research which delivers cutting edge technological advances in production, productivity, agronomical practices and post-harvest technology is of paramount importance for which plantation research needs to be financially supported. The vision of the Government of India being to increase R&D expenditure in the country from the existing 0.7 per cent to 2 per cent of GDP, plantation research in country should be adequately supported.

The government has given enough indications on the discontinuation of subsidy going forward. How is the sector gearing up to meet such a challenge?

Historically, the plantation industry on its own provided social welfare amenities such as medical, education, housing, water and sanitation to the labour employed in the plantations. With the introduction of the Panchayat Raj legislation in 1992, these costs should have been absorbed by the Panchayats, but that was not the case. One cannot and must not expect to pay taxes and provide services for which taxes are already being collected by another entity. The excessive taxation since 1950s has affected the financial stability and pre-empted plantation from ploughing back money into development. This being the background, we will continue to pursue with the government the need to incentivise the plantation sector until it achieves a level playing field and able to meet the global challenges.

What’s the broader outlook for exports and imports?

Exports of plantation commodities were significantly affected due to various logistics issues involved in moving products from field to port, during the initial phase of lockdown. The export numbers during April-October 2020 confirms this, as the value of tea exports was lower by $87.49 million, coffee exports was lower by $30.12 million, while spices exports showed some increase of $24.49 million.

The sudden stoppage of MEIS export incentive due to shortage of funds added to further misery to the existing distress situation. Any mid-way changes in an ongoing scheme will put the exporters into tremendous pressure leading to incurring huge losses, besides hardship in the working capital/cash flow issues. Plantation commodities’ exports need to be supported as the plantations are at a competitive disadvantage compared to other exporting origins due to infrastructural inefficiencies and other associated costs. The scheme that was established to push export earnings and increase foreign currency reserves needs to be continued till a new scheme is put in place.

For a sustained growth of exports, there is a need for policy continuity and any abrupt measures like this will have far reaching implications and may result in losing out our established markets and it will not help in achieving government’s vision of doubling agricultural exports. On the import side, we are noticing some increase intake of tea during the current year, as the imports during January-September 2020 is estimated at 22.12 mkg as against 17.47 mkg (as per DGCIS) during the corresponding period last year and if this trend continues, we fear that this might be a record highest import of tea into India.

This calls for close monitoring of imports as per the provisions of the Tea Export Distribution Control Order.

Published on December 10, 2020

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