What to do with idle land in tea gardens?

The State governments’ move to allow tea estates in West Bengal and Assam to use their idle land for tourism or cultivation of other crops may not bring about any major change in the short-to-medium term; especially when the tea industry continues to be cash starved. However, the move could augur well in the long term, senior industry officials said.

The West Bengal government recently allowed tea garden owners to use up to 15 per cent of unused land within the estates for promoting tourism or for crop diversification. The Assam government, which had earlier restricted the use of idle land to just around 5 per cent, has also indicated that it could consider higher usage of unused land in tea estates, up to around 20 per cent, on a case-to-case basis for business diversification.

The move is believed to have been taken in the backdrop of increasing stress on the profitability of tea companies, falling tea prices and rising costs. It was expected to boost the earnings of companies.

According to Vivek Goenka, Chairman, Indian Tea Association, the revenue per hectare that the planters have been getting in North India is lower than their costs.

“By diversifying into other crops or tourism, if they can increase their revenue per hectare, it will help the industry move towards sustainable production. There are some studies with respect to some other crops both in Bengal and Assam where we got a very positive response. Ginger, cardamom and certain spices can do extremely well. But the issue is that of funding,” Goenka told BusinessLine .

All these diversification initiatives should have been taken at least ten years back when the industry had the kind of funds to invest on such efforts, says DP Maheshwari, Managing Director, Jay Shree Tea. “Today we are barely surviving….banks are hardly giving us any money.”

Alternative use of land will essentially mean tea tourism, which calls for substantial deployment of funds to create the kind of infrastructure and facilities to be able to attract tourists, said Kaushik Das, Vice-President and Sector Head, Corporate Sector Ratings, ICRA.

Given that the industry is cash-starved and has been facing issues on the profitability front, the move may not act as a game changer in the short-to-medium term, he said.

Demand-supply issues

Since diversification will be allowed only for the unused land of tea estates, it may not address supply side issues, said Jagjeet Kandal, Managing Director, Amalgamated Plantations Pvt Ltd (APPL).

“We have to see how much of good highland is available of the non-tea area (for such diversification). The idea of diversification is that some amount of tea area will come down leading to an improved supply-demand situation. If we do not bring down supply, prices are not going to go up so the industry will not be revived,” he pointed out.