Tea cos to take a hit as foodgrain cost flares up
Profitability of tea companies with a presence in Assam and West Bengal may suffer in 2007-08 as production costs are slated to shoot up in coming months.
By Sutanuka Ghosal, TNN |
KOLKATA: Profitability of tea companies with a presence in Assam and West Bengal may suffer in 2007-08 as production costs are slated to shoot up in coming months. The prime contributor to the sudden spurt in production costs is foodgrain which tea garden owners have been forced to buy from the open market and provide it at a subsidised rate of 47 paise per kg to their workers.
Till recently, tea garden owners were allowed to buy foodgrain for workers through the public distribution system (PDS) at a price way below the prevailing market rates. However, the Central government has now introduced a new system, targeted public distribution system (TPDS), for tea gardens.
"So far, the state governments have been making allotments of foodgrain to the tea industry for consumption of its workers. On the introduction of TPDS in tea gardens, the quantity of such allotment has been drastically curtailed," Tea Association of India president Shashank Prashad told ET.
Traditionally, the owners are required to provide 35.25 kg of foodgrain to a tea garden worker on a monthly basis. The new system allows the garden owner to buy only 7 kg of foodgrain from PDS. He is forced to buy the rest 28 kg per worker from the open market.
"As a result of this open market operation, the market prices of foodgrain have shot up to a level going beyond the means of the tea industry, which is reeling under crisis for the last eight years," Mr Prashad added.
Tea companies are also upset over the sudden rise in foodgrain prices. "The industry had been asking the Central government to bear a portion of the social cost fund that we have to bear. The government has done nothing.
On the contrary, it has now increased the foodgrain prices. This will affect the profitability of the companies as the labour cost will go up substantially," said a Warren Tea official. His view was shared by Dhunseri Tea, Goodricke Group and others. Tea Board chairman Basudeb Banerjee said: "It is a Central government policy and we can hardly do anything."
Till recently, tea garden owners were allowed to buy foodgrain for workers through the public distribution system (PDS) at a price way below the prevailing market rates. However, the Central government has now introduced a new system, targeted public distribution system (TPDS), for tea gardens.
"So far, the state governments have been making allotments of foodgrain to the tea industry for consumption of its workers. On the introduction of TPDS in tea gardens, the quantity of such allotment has been drastically curtailed," Tea Association of India president Shashank Prashad told ET.
Traditionally, the owners are required to provide 35.25 kg of foodgrain to a tea garden worker on a monthly basis. The new system allows the garden owner to buy only 7 kg of foodgrain from PDS. He is forced to buy the rest 28 kg per worker from the open market.
"As a result of this open market operation, the market prices of foodgrain have shot up to a level going beyond the means of the tea industry, which is reeling under crisis for the last eight years," Mr Prashad added.
Tea companies are also upset over the sudden rise in foodgrain prices. "The industry had been asking the Central government to bear a portion of the social cost fund that we have to bear. The government has done nothing.
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On the contrary, it has now increased the foodgrain prices. This will affect the profitability of the companies as the labour cost will go up substantially," said a Warren Tea official. His view was shared by Dhunseri Tea, Goodricke Group and others. Tea Board chairman Basudeb Banerjee said: "It is a Central government policy and we can hardly do anything."
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