To strengthen its footing in the orthodox tea market and take advantage of the Sri Lankan crisis, the Indian producers have asked the Commerce Ministry to consider reviving the subsidy scheme with a sunset clause.
Under the earlier scheme, tea producers were offered a subsidy of ₹3 a kg for production of orthodox leaf and ₹2 a kg for the dust. The scheme has been withdrawn since the beginning of this year.
Now, the industry not only wants the scheme to be reintroduced possibly with a sunset clause but is also urging the government to increase the rate of subsidy to make orthodox production more lucrative. This is because the cost of production of orthodox tea is much higher as compared to CTC (crush, tear, curl) tea and the price differential between the two varieties has been gradually narrowing thereby discouraging growers from stepping up production of such teas.
“Besides, for India to benefit from Sri Lanka position there needs to be enough orthodox tea available and there is a need to induce orthodox producers through incentives. Production of orthodox entails higher cost and also a risk since it is primarily exported,” Sujit Patra, Secretary, Indian Tea Association, told BusinessLine.
Decline in orthodox crop
Orthodox accounts for nearly 10 per cent of the country’s annual production, which stands roughly at around 1,300 million kg (mkg). During calendar year 2021, orthodox production witnessed nearly 17 per cent decline at 115 mkg as compared with 139 mkg during the pre-pandemic period of 2019.
According to senior industry officials, orthodox production has witnessed a decline during the first two-to-three months of this year which is worrisome particularly when the country could have cashed in on the void created by lower crop in Sri Lanka.
“Sri Lanka’s production is estimated to be lower by around 18-20 per cent. It caters to majority of global markets including Iran, Iraq, Libya, Russia, Syria, Jordon etc, so there is an opportunity for India. But since the cost of production of orthodox is much more as compared CTC and the price differential is not too high, so producers choose to make CTC. We need something to incentivise and induce them to produce orthodox,” Azam Monem, Wholetime Director, McLeod Russel said.
May 24, 2022