FICCI requests Assam govt to consider bringing in cost-based floor pricing for tea

tea, FICCI, Assam, floor pricing, Industry body

Industry body FICCI has requested Assam government to consider bringing in cost-based floor pricing for tea.

FICCI has made a host of recommendations for rejuvenation of the Tea Industry in Assam. The recommendations are based on a detailed study carried out by FICCI and GMS (Globally managed Services).

Ranjit Barthakur, Chairman, FICCI Northeast Advisory Council said, “The Tea Industry, which was instrumental in laying the economic foundation of modern Assam, is in crisis today, and immediate steps must be taken to reinvigorate this industry. The Government of Assam has been very proactive in responding to the needs of the industry. The exemption granted on Agricultural income tax has been very helpful, similarly the steps taken to encourage small tea growers, are very welcome.”

He said, “We have requested the Government to consider bringing in cost-based floor pricing for tea, we believe this will give the age old industry some breathing space to work towards long term sustainability of the industry.”

“The gap between cost of production and auction price of tea is increasing continuously, this has impacted not just the large tea producers, but also the small tea growers, with price realization having dropped by 40 – 50% in the last year alone”, he added.

The Floor price could be indexed to the cost of production, excluding administrative overheads, and segmented as per quality benchmarks. As opposed to a Minimum Support Price (MSP), Floor pricing will not impose any financial obligation on the Government, rather the tea value chain will absorb any variation in cost.

Barthakur said “we have requested the Government to mandate agro-forestry/alternate cropping for regulated tea gardens. The small Tea estates already practice alternate cropping, and this has helped them to optimise land value.”

During the last two decades, Assam has lost over 2,30,000 Hectares or 11% of its forest cover –Agro- forestry could help restore the states forest cover, regenerate soil health and water quality and mitigate Climate challenges. Agro-Forestry will also provide new avenues for employment and improving the socio- economic status of the local population of the Tea Estates apart from augmenting state revenues through ancillary and downstream industries.

Barthakur said “for the tea industry to be sustainable in the long run, the industry needs to reinvent itself in terms of operational efficiency, productivity, use of technology, adoption of clean energy, and most importantly improved livelihood conditions for the workers”.

The tea industry employs a large number of workers across the state and for any change in the industry to be sustainable, it must be community driven with the workers as the primary stakeholders. Development of the tea industry should ultimately lead to better livelihood conditions, better housing, better education, better health care for the workers.

FICCI further said, “Energy is a major component of the recurring cost in Tea production consuming about 1KWh per KG of tea produced. With an abundance of open space, the Tea Industry should switch over to solar power. This will contribute towards India’s target of producing 450 GW of renewable power by 2030, while helping to make the Tea Industry cost competitive.”

Barthakur said, “we have requested the Government to consider allowing capital investment subsidy under the Northeast Industrial Policy for installations related to solar energy, we have also requested the Government of Assam to extend the benefits for solar installation, proposed for MSMES, under the new Assam Industrial Policy, to the Tea Industry as well”.

Other important recommendations made by the Industry Body include institution of a Ministry of Tea to look after the holistic development of the sector and allowing utilisation of important Government schemes like MGNREGA and other schemes for socio – economic development in tea garden areas.

Prabir Banerjea, Group CEO of Globally Managed Services, made a detailed presentation, highlighting the issues faced by the Tea Industry and suggested a way forward for the next 30 years. He highlighted that Tea occupies about 43 % of total Agricultural Production Area in Assam, therefore any improvement in the Tea Industry will have an immediate and substantial impact on the state’s overall economy.

He said, “The regulated tea segment is under a lot of stress and so are the small tea growers due to fluctuations in price of tea. While the regulated industry suffers from high cost of operations, on the other hand most socio economic socio – economic schemes of the Government are not available for the sector. In addition to this the regulatory burden on the tea industry in Assam is higher as compared to those in South India for example.”

He argued that to create a level playing field, a uniform regulatory framework should be put in place.

He also highlighted recommendations related to improved living conditions in tea estates, and a transition to modern practices to cater to changing needs of a modern marketplace.

He also laid stress on the need for skill development and strengthening research. He said TOCKLAI should become a global centre for innovation, and research on all components of the Tea value Chain.

FICCI pointed out in the last few decades, a significant number of Tea Estates have been sold/changed hands and are awaiting registration. The properties run on Power of Attorney, thereby preventing any infusion of funds/investments from Pvt Equity and International markets. The valuation methodology of arriving at the fees based on a “Zonal Value” is the major bottleneck for Registration as it accounts to approximately 33% of the sale transaction value. For the purpose of computation of stamp duty and registration fees, the gardens should be valued on the actual transaction value which is per kilo rate times production volume of made Tea. Besides alternatively, the Government of Assam may consider reducing the rate of stamp duty and registration fees from existing 5% to 1% of the Zonal Value for the Tea Estates.

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