Divya Agarwal
New Delhi [India], July 11: India’s tea sector has been a major source of employment and exports for the rural population for many years but with the increase in input costs, climatic conditions and varying auction prices, tea producers have been under pressure in recent years. In this context, policy support is gaining greater significance, especially in tea producing states where the tea industry is important to the local economy.
In the recent Assam Budget, the government has tried to tackle some of these issues by introducing a number of subsidy and incentives for the tea growers, factories and exporters. The announcement has received a positive response from most planters and tea traders, who feel the steps would make them more competitive and increase investment in the sector.
One of the major proposals is to provide ₹3 subsidy per kg to the producers of orthodox tea produced in Assam. The incentive is hoped to help the premium tea producers group, which has been becoming more significant in export markets, but is also more expensive to produce than conventional CTC tea.
The Budget also plans to provide a capital subsidy of 25% up to ₹50 lakh for new tea factories and modernisation of existing processing units. This may spur technology investments and help boost processing efficiency, especially for the small and medium sized manufacturers, industry participants said.
Yet another significant announcement is the offer of ₹5 per kilogram for tea exports via Assam’s airports. The state government hopes the move will help to enhance logistics and promote direct shipping from Assam rather than through other states’ airports.
One of the most notable things is that the proposals are not just about production but also about several other aspects of the tea value chain. In addition to manufacturing and exports, the Budget also contains measures to enhance quality, infrastructure and long-term sustainability.
The government has also suggested that more support should be given to small tea gardeners who produce over 50 per cent of the green leaf production in Assam. Although the sector has developed significantly in the last 20 years, access to finance and quality inputs and modern farming practices remain a challenge for many growers.
The announcements have been welcomed by industry bodies which say they show a greater awareness of the structural problems facing the tea industry. Members of planter associations and tea traders pointed out that incentives on production and export may enhance profitability at a time when operating costs are high.
Meanwhile, a number of stakeholders have noted the need for timely implementation of the proposals for their success. If the promised benefits are going to be delivered to growers and manufacturers without delay, then it will be critical that subsidy payments are made on time, that application procedures are simplified, and that there are clear operational guidelines.
Assam is still the biggest tea producer state in India accounting for over 50% of the tea production of India. The state is a leading producer of tea with more than 650 million kg of tea being produced per year, thereby providing jobs to millions of people directly and indirectly and thousands of tea gardens. The industry is also a significant contributor to the export earnings, and Assam tea has a good market in the European countries, Middle East and some parts of Asia.
The Budget is in fact a reflection of the state’s overall strategy to promote value-added manufacturing rather than focusing on raw production. Increased production of orthodox tea, factory modernization and provision of better export facilities are all in the interest of making the industry more competitive in the longer term.
But for tea producers, the prospects of the upcoming months will be more significant than the announcements. Proposed incentives, if they are implemented efficiently, may help reduce cost pressures, attract new investments and facilitate better market access. With the tea industry facing domestic and international challenges, reliable policy support will be as important as a favourable market.
