Orthodox tea sector rues subsidy condition

Tea industry rues subsidy condition

The Tea Board of India’s proposal to route orthodox teas through auctions to make producers eligible for a subsidy hike has met with stiff opposition from the tea industry.

“The subsidy is paid to produce more orthodox teas for export and imposition of such a condition will hamper export to overseas buyers,” Indian Tea Association chairman C.S. Bedi told The Telegraph.

The proposed hike is from Rs 3 to 5 per kg. This was recommended by consultancy firm KPMG.

The furore comes in the wake of the Tea Board decision, taken during its 217th meeting at Coonoor, to introduce a slew of changes in its orthodox tea subsidy scheme, following a rap by the CAG in its last audit report on the board about the scheme being generic and not performance-oriented.
“The eligibility conditions were deficient to the effect that subsidy was paid on the quantity of production without making it mandatory to increase a minimal percentage of the production of orthodox tea,” the CAG report had said.
The report had also stated that an independent professional agency entrusted with the evaluation of the scheme had opined that because of the generic nature of the subsidy scheme across all regions and for all tea companies producing orthodox tea, irrespective of volume and quality of tea produced, the exact impact of the scheme could not be evaluated.
KPMG, the consultancy firm engaged by the board to study its schemes ahead of the Twelfth Plan period, had also suggested that a garden should show at least a five per cent hike in its production during the past five years to become eligible for subsidy.
The board, however, increased the benchmark to a 15 per cent increase in production and proposed to pay subsidy only for the volume of tea being sold through auctions, inviting sharp opposition from the industry.
To achieve this objective, the board said gardens would not receive subsidy for teas sold privately through registered brokers or directly to merchant exporters. “Even those factories manufacturing 100 per cent orthodox teas will have to route their teas through public auction in order to claim the subsidy,” the board said.
Orthodox tea producers sell their teas privately and get handsome returns. They have also developed good markets in the West over the years.
Bedi said orthodox e-auction was already facing problems and to put more tea into the auctions would be damaging, and added that he was sure the government would consider the industry viewpoint.
The industry has been calling for continuation of the subsidy scheme in the Twelfth Plan period in order to encourage gardens to produce larger quantities of orthodox tea.
Reacting to the auction condition, an official of a company producing orthodox tea said, “It would not be of any benefit to us, as middleman will make the money.”
The official said production of orthodox tea itself was an expensive affair and required deft handling, which helped them get niche customers in the country and abroad.
The markets for Indian orthodox tea are West Asia, the UK, Germany, Japan and former Soviet Union countries.


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