Falling prices, wage increases coupled with high fertiliser cost have put the South Indian tea industry in dire straits. Tea prices of late have dropped 13 per cent compared with last year, thereby putting several companies in an unviable position. There has been a growing demand from the plantation industry for government support as a whole on account of high labour involvement in various phases of tea production.
Chacko P Thomas, Managing Director, Kanan Devan Hills Plantations Company Pvt Ltd (KDHP), spoke to BusinessLine on the current phase of the industry, issues faced by the sector and increase in production cost which have put the plantation sector on the verge of collapse. Labour wages have increased by 18.34 per cent in the past two years while prices registered a 13-per cent drop.
Edited excerpts from the interaction:
With the prices falling, how do you see the prospects in the current year?
Tea prices in South India have fallen to alarmingly low levels from April and the free fall is continuing. It is certainly a threat for the survival of the plantation sector and the industry has sought support from the Union and State Governments in the form of export incentives, plantation and land reforms and tax breaks to ensure sustainability of the plantation industry.
Unfavourable policies such as Plantation Tax, Agriculture Income Tax, Basic Land Tax etc specifically in Kerala have further aggravated the situation, forcing South Indian tea companies to operate on razor thin margins. With wage increase in the North-East, I understand that the situation there too is expected to deteriorate.
What is the situation on the export front? Have problems in West Asia and Pakistan affected the trade?
Export markets are dull as far as Indian tea is concerned due to over production in export-oriented tea economies such as Kenya and Sri Lanka, making low-priced teas easily available in the international market. The demand in West Asia and Pakistan, due to political turmoil and cheaper Kenyan teas, is for very low-priced Indian teas, which is not economically feasible to produce.
What is the status of the proposal for tourism-promotion activities in estates?
All activities on the non-tea and plantation tourism front have been suspended at the moment as we are awaiting certain clearances from the government. The continued viability of the plantations is greatly dependent on obtaining these permissions and implementing the same in the shortest possible time.
Do you have any plans to acquire other plantations?
There are no plans to acquire any plantations. However, we will continue to support partial, inorganic growth, by taking factories in other States to process bought leaf.
How was the performance of KDHP last year?
The performance of KDHP during the last year was quite good with the company turning out with a profit before tax of ₹23.94 crore. The production in 2013-14 was 23.46 million kg while the turnover was ₹287 crore.
How is your Ripple brand doing in the retail market?
Ripple has created a strong market presence in Kerala and we have now slowly introduced it into Tamil Nadu in the first stage, after which we will cover the rest of South India in a phased manner. We are also working on introducing new variants of Ripple in the market.
What is your share in organic tea business?
We produce up to 2 lakh kg of organic teas annually. We have a small yet significant presence in the organic market.
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