This is the busiesttime of the year in Assam, with the summer flush underway.
The Indian teaindustry, including the Tea Board of India and the region’s producers aremaking a concerted effort to stabilize falling prices amid rising costs. Theseinitiatives include offering a more transparent selling platform; and,insisting on quality and adherence to minimal acceptable standards. Tech is asignificant enabler of transparency and therefore encouraged. This, inconjunction with other initiatives like Trustea certification, which serves asa benchmark for Indian tea producers with few non-negotiable clauses, shouldbring results in coming years. Meanwhile, the biggest demand on large producersremains: how to create a level playing field with the now sizeable productionfrom small tea growers. Steps to showcase the teas of Assam and attract a newergeneration to tea drinking are shaping up.
Assam is the largesttea producing state in India and is finally shifting its tea marketplaceonline. Until now, teas produced and earmarked for auction (about 50%) were auctionedat the single center in Jorhat. But now, a new vendor has been signed on toshift the business online. The B2B e-commerce firm mjunction recently won thebid to create this marketplace. The firm will design, develop, launch, andmaintain this platform. Media reports the platform will handle 200 million kilogramsof tea per year.
Where the Assam e-auctions differs from the Calcutta and Siliguri auctions is that it does away with brokers as middlemen. Until now e-auctions have merely replaced the actual auction location, from a physical room to an online one. Otherwise, the auctions proceed in much the way they used to, with brokers, traders, and sellers complying with the tea board’s pan India e-auction rules.
The mjunction platformis designed to facilitate “fair price discovery in a transparent and securedmanner.” Mjunction acts as the auctionorganizer, facilitating transactions between producer and buyers. The mjunctionmarketplace is expected to launch in three months.
Mjunction promises shorterturnaround time, transparency in pricing, an online catalog, trackingtransactions, reports, and analytics that improve efficiency. Both large producersand the small growers are expected to participate in this marketplace, possiblya levelling ground for tea production in India.
Minimum prices(orthodox incentives)
The Indian TeaAssociation (ITA), a body of tea producers, is demanding the tea boardestablish minimum benchmark prices by tea grade to solve the problem in costdisparity between production expenses and sales. High production costs are therecurring complaint from the producers, who struggle with high labor costs thatincreases year on year. The rise of small tea growers is seen as a problem. Smallgrowers don’t contend with high labor costs are able to offer tea at lowprices. Now that production from small growers, known as the unorganizedsector, almost matches that from the organized sector, the balance seems skewedin favor of the small growers.
However, a lack ofexpertise makes the quality of production by small growers suspect. Some equalthe larger estates but low price and volume seems to be trumping quality. TheTea Research Association has brought out a machine to detect fine leaf (twoleaves and a bud) count, where at least 30% fine leaf count renders a tea ofstandard grade. The producers are also asking the board to regulate the STGsand the Bought Leaf Factories (BLF), and tackle the use of pesticides by them,and ensure traceability from production through factory processing andpackaging. Better price for better quality, is what the ITA is asking for, andthat is the need of the hour for them to come out of the otherwise worryingstate of the industry.
Ranking Tea Gardens
The tea board has, forthe second time, taken up the task of ranking the tea gardens across thecountry, a SWOT (strength-weakness/opportunity-threat) analysis of sorts forthe 1,421 tea estates. Three years ago when the tea board last published itsrankings it awarded the highest A+ ranking to eight gardens in Assam. None ofDarjeeling’s estates made the cut (ageing bushes and low productivity werecited as the reason). The parameters for ranking include agriculturalpractices, replantation, and rejuvenation of bushes, irrigation, effectivequality control, condition of the workforce. The point of the exercise is tounderstand the problems plaguing the gardens, leading to quality production andprice realization.
As an extension of thisexercise, the tea board is also proposing the return of the Tea Awards, onemore avenue to support and encourage the industry.
Assam’s multi-prongedapproach to promoting their teas now includes a premium tea lounge, Chai Bar.Opened June 25 by the Guwahati Tea Auction Centre at its location on Guwahati’sGS Road, Chai Bar will be a single point access to the varieties of teaproduced in Assam. It is supported by the Tea Board of India, Assam Tourism,North Eastern Council, and the Industries & Commerce Department of theGovernment of Assam. The lounge will sell singles estate origin teas from theorganized sector with both tea tasting and buying will be made available here.
The Indian TeaAssociation is pushing for incentives to promote the manufacture of orthodoxteas. Until recently, the industry relied on the Merchandise Exports from India(MEIS) scheme that offered exporters a duty credit of 2-5% of their exportturnover. Since MEIS was not World Trade Organization (WTO)-compliant, the ITAconsidered disbanding it. Hopes lay with this year’s budget for otherincentives. The budget, announced on July 4, has instead brought in a newproblem for the producers. The finance minister announced a 2% tax at source oncash withdrawals exceeding $146,000 (INR10 million) effective September 1. Theintent is to discourage cash transactions. Since tea regions lack sufficientbanking infrastructure, and few workers have checking accounts, wages are usuallypaid in cash. The announcement was viewed as a new burden on the alreadystruggling producers. The ITA has appealed to the government to exempt the teaindustry until personal bank accounts for individual tea garden workers areoperational. With a workforce of 1.2 million, the tea industry is directlyimpacted by any decisions made on labor laws and welfare programs. Thegovernment already has exempted several sectors including ATM operators,bankers, post offices and similar ventures routinely handling substantialamounts of cash.