Financial Daily from THE HINDU group of publications
Monday, Nov 08, 2004
Agri-Biz & Commodities
Columns - Plantation Panorama
It's time to take tea lessons from Lanka
THE nine-member small-scale sector delegation sponsored by the Tea Board to Sri Lanka has returned with high hopes of mutual prosperity if India were to emulate a couple of practices prevalent there.
"There are certainly a lesson or two for us to learn from the tea industry in Sri Lanka," Mr M. Bhojarajan, President of the Nilgiris Small Tea Growers' Association, a member of the delegation, told Business Line.
His reference was to the Tea Small Holdings Development Authority in Sri Lanka, which caters to almost all the needs of the nearly 2.5-lakh small growers ridding the Tea Board of the need of looking into subsidies, inputs and short-term solutions.
His prescription is that a similar autonomous body be created in India so that the Board concentrates on extensive promotion and aggressive marketing, particularly, exports.
But, the very fact that India has to learn from Sri Lanka now should ring a cautious bell in the tea industry here.
In the last decade, while the Indian tea productivity has fallen to 1,675 kgs per hectare from 1,819 kgs, the Sri Lankan yield has increased to 1,615 kgs from 1,245 kgs. While India accounts for some 28 per cent of the global production against 10 per cent by Sri Lanka, the island holds 21 per cent of the world exports against 14 per cent by India.
Since it has to export some 94 per cent of its production, Sri Lanka is adopting all techniques to boost its tea shipments. One of them is to export teas even to India under the SAARC bilateral pacts and Free Trade Agreement (FTA). As per this, Sri Lankan teas are imported into India at a mere 7.5 per cent ad valorem against 100 per cent for teas from other countries.
In the seven months of this year, production in Sri Lanka has mildly risen 2.7 million kgs to reach 156 million kgs against a whopping increase of 35 million kgs in India to reach 385 million kgs. But, Sri Lanka has already posted an export of 146 million kgs against 94 million kgs by India. What's more, Sri Lankan teas fetch the highest price for all the teas in the international auctions. Its average has been $1.66 a kilo against $1.32 for India and mere 97 cents for the South Indian teas claimed to be comparable to the Sri Lankan grades.
For that matter, South Indian tea prices are the lowest for teas from any origin at the global auctions.
Of late, the teas from the island are posting a still higher price on claims of improvement in quality. Last week, for instance, tea prices averaged $2 a kilo in Colombo. The industry and auction sources confirm that the prices would continue to rule high for some predictable weeks more because of the marked improvement in quality.
Against this, prices have been declining week after week at the auctions in the Nilgiris on complaints of a fall in quality. This needs to be noted because the Nilgiris has the largest number of small growers in the country.
In any case, the small growers in the recent delegation have mooted with the Sri Lankan Tea Board a proposal for some sort of a joint venture to market the CTC of the Nilgiris and the orthodox of the island so that cut throat competition could be avoided.
Several initiatives for such bilateral agreements had taken place in the past and a healthy connection is always mutually beneficial.
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