Rising costs of production and stagnant prices have made the Assam tea industry come under immense pressure for the last few years.
An analysis for the past 10 years have revealed that the prices of Assam tea has not been able to keep pace with the inflationary period which has put immense pressure on the margins of profit.
The input cost in manufacturing tea in the given period has increased at a rate of 10% per annum whereas the price of tea has increased only 6% to 7% per annum, according to the release issued by Assam Branch of Indian Tea Association on Wednesday.
As 70% of the input cost including wage, fuel, fertilizer are fixed in nature and the selling price of the tea are bench marked with auction prices, the producer is unable to pass on the increase in cost of production to the consumer.
While CTC-Dust combined prices for teas in Assam valley are on an average of Rs 5.67 lower than last year, a disturbing trend in the shift in buying patterns from the higher selling range to the lower selling range of teas.
Drop in Price
‘Between 2014 and 2016, there has been a 15 per cent drop in buying in the Rs 180-200 range while, at the same time, there has been a corresponding increase of 13 per cent in the lowest category of Rs 100-Rs 129,’ the association said.
The pan-India auction of tea has not been able to generate competition for a fair price as many producers were compelled to sell lower than their production cost, the India Tea Association’s (ITA) Assam branch said on Wednesday.
‘It would appear that despite all efforts of the Tea Board at introducing pan-India auctions, the platform has been unable to generate competition for a fair price discovery. Many producers are compelled to sell tea well below the cost of production,’ said India Tea Association, adding it will have serious consequences in the future on the industry’s sustainability.
The association said efforts being made by producers to explore alternative private channels of sale for better price are also inhibited by the Tea Board’s mandate that ‘50 per cent of the tea manufactured must be routed through public auctions’.