Rs 2000 cr of losses brewing for tea cos this year

Rough estimates from plantation companies have pegged production loss in excess of 100 million kg (mkg) across India which is valued at around Rs 2000 crore. Usually, plantation companies in Assam and West Bengal produce around 15 per cent of the total tea during March-April.

Tea plantation companies in the country maybe heading towards a consolidated loss of around Rs 2000 crore this calendar year as all estates have been shut to contain spread of the deadly coronavirus.

While the estates were initially kept open with plantation companies arguing that the risk of infection was extremely low on the estates, the call was taken following the announcement of the 21-day shutdown by the government and various state governments passing orders for lockdown.

All of the 1422 registered tea estates and more than 250,000 micro-small planters have stopped production citing safety precautions for workers, unavailability of transport to ferry finished tea and practically no demand either domestically or from importing countries.

“At the moment it is of utmost importance to stop the spread of coronavirus and estates are thus closed," Arun Kumar Ray, deputy chairman, Tea Board.

Rough estimates from plantation companies have pegged production loss in excess of 100 million kg (mkg) across India which is valued at around Rs 2000 crore. Usually, plantation companies in Assam and West Bengal produce around 15 per cent of the total tea during March-April.

Usually referred to as the tea-pot of India, Assam produces around 50 per cent of the total tea in the country annually, which stood at around 1390 mkg in 2019.

The closure has incidentally affected the prime first flush in the Darjeeling and Dooars region, where teas from this time of the year are sold at a premium, as there aren’t any buyers.

“Even after the estates open, another 10 days will be needed for skiffing to clear overgrown leaves”, Atul Asthana, managing director at the Goodricke group said.

Plantation companies are of the view that if the estates are shut till mid-April, production would not commence before May. The second flush season, which produces the best quality teas priced extraordinarily high, begins from May.

“However, a lot of preparation is needed to produce the best teas from the second flush. If operations start from May itself, it may be too late to produce the priciest teas”, a planter from Darjeeling said who usually exports luxury teas to Germany and Japan.

Earlier, citing the isolated nature of tea estates, companies had chosen to keep the gardens operational till the state governments ordered for closure.

On the other hand, exporters cited that there is practically no demand from major importing countries as most of them, including Iran, Japan, Germany, UK, USA and others are currently busy grappling the spread of the contagion. It in fact led to the cancellation of Mombasa auctions as well as buyers are unable to travel.

“Hardly any forward contracts have been signed and only goodwill buyers are showing interest. However, the demand is extremely low”, an exporting firm from Kolkata said.

Photograph: Rupak De Choudhuri/Reuters.