Goodricke Group Limited is one of the leading tea producers in India. Atul Asthana, Managing Director and CEO of Goodricke Group Limited, spoke to BE’s Ellora De.
Q. What is your view about government subsidy on tea?
A. The government is currently providing subsidies on the orthodox production of tea. For a very long period that subsidy has been Rs. 3/kg. The cost of producing one kilogramme (kg) of orthodox tea involves at least Rs. 35 rupees. We would like this subsidy to be increased to Rs. 6 or Rs. 7 per kg.
Q. What challenges are faced by Indian tea growers?
What policy interventions would you suggest to deal with these?
A. Tea, being an agricultural produce, is cyclic and sinusoidal in nature. Sometimes, the production peaks while at other times, it drops. The Indian tea industry has been on the lower side of the production curve for the last two years and I expect it to remain low for the next two years. Previously, there were no records from the small tea growing segment. It has started recently and that can be a reason for the present spike in the statistics of tea production. Moreover, this year the cost of production has gone up by almost 28-30% because the government has increased wages. It is Rs. 30 in Assam and Rs. 43 in Doars, West Bengal. This sudden and drastic increase has put tea growers under tremendous pressure. The price realisation of the tea sold is not commensurate with the increase in wages, which is directly affecting the tea market.
Currently, production in our industry exceeds consumption. The government should stop allocating new land for tea estates. We have seen in the last few years that the cultivation of crops like pineapple, jute and others are being replaced by tea production. This should be checked immediately. Additionally, in Assam, a lot of forest land is being transformed into tea estates. This is negatively impacting the ecological stability of the region and impacts the quality of the tea that is being produced. The government should also fix the base level quality as well as the base level price for tea.
Q. How is the export potential of the Indian tea industry? Who are our competitors?
A. The Indian tea industry has a very good export potential as we produce the best quality of tea. Sri Lanka and Kenya are our main global competitors. They export nearly the entire quantity of their produce. That is not the case for us as we consume a lot of our tea. We need to explore the export potential of our tea industry better.
Q. What sort of governmental policies will you suggest to enhance the export capacity of the Indian tea industry?
A. The Indian government at present gives a 5% rebate on the total value of tea export. This is insufficient. As an important player in the market, we would like to suggest an increase in this subsidy to at least 11%-12%. That will promote exports. The tea growers will produce more tea for exports to avail greater subsidy. Automatically the quality of the tea will pick up. The total production of tea in India is around 1325 million kg at the moment, out of which 280-290 million kg gets exported. The balance is consumed in the domestic market where the price rate is not too good. For our company, we produce 28 million kg of tea, out of which the export quantity is around six million kg which is of premium quality and of sustainable variety. Once you make sustainable tea, you are spending more than what you would for producing normal quality tea. So instead of 5%, we should get 11-12% subsidy on exportable tea.
Q. Between tea bags and tea leaves, which has more market share in India?
A. At the moment, the tea leaf segment has the bigger share of the market. But the market for tea bag is also picking up as the tea making process is shorter in that segment.
That is exactly the requirement of the new generation and their fast-paced lives.
Q. How has your company featured in the last fiscal year? Have you launched any new tea brands?
A. Goodricke increased its production to 11 million kg in the last fiscal from eight million kg in the previous one. We procured Godfrey Phillips India’s (GPI) tea brand last year, which added four million kg to our bottom line. We also acquired the seven tea brands of GPI that can be now considered the new brands under our umbrella. We made a record crop of 36 million kg which is the highest in the last 20 years. We have also introduced a third vertical – instant tea - which is totally export dependent and gets shipped to markets in Japan and several European countries.