Darjeeling Unrest Will Cause 40% Loss of Revenue to Tea Industry

Whatever the industry’s lost so far cannot be recovered, therefore the annual production is expected to take a hit.

The Darjeeling tea industry is expected to lose 20 percent of its premium quality annual production and 40 percent of its revenue due to the ongoing indefinite shutdown called by the Gorkha Janmukti Morcha, say tea planters.

All plucking and manufacturing operations in the 87 gardens of the famed Darjeeling tea have been reported suspended since 9 June.

According to planters, whatever the industry has lost so far cannot be recovered, therefore the annual production is expected to take a hit.

According to industry estimates, a direct loss of more than Rs 100 crore mostly in foreign exchange has already been incurred till date as leaf tea is an exportable product, and the industry is looking at a further indirect loss of Rs 150 crore approximately.

The premium second flush period of production starts from end of May and lasts till mid-July, and the tea is known for its muscatel flavour which is produced in June.

“This is a season for producing high value second flush tea. All the gardens are closed in the peak season, resulting in a huge loss to the industry,” Darjeeling Tea Association’s (DTA) Chairman Vinod Mohan told IANS.

Even if the gardens open tomorrow, our losses will not be curtailed. The harvest has already been overgrown, which will be of no use. We have to wait for the next harvest, which will take another eight to 10 days.

Vinod Mohan to IANS

The first and second flush are considered as the premium flush contributing about 45 percent of the annual production, and the tea produced in these seasons is mostly exported, earning the country vital foreign exchange.

Darjeeling Produced 8.13 Million Kg Tea in 2016

“Literally, there was no harvest in the second flush period which contributes about 20 per cent of the annual production and around 40 percent in annual revenue of the industry,” DTA’s Secretary General Kaushik Basu told IANS.

“Due to the uncertainty, we do not know how much would be produced in the second flush period. We may lose the entire harvest during this period,” Basu said, adding that the loss may result in closure of the gardens even after normalcy returns.

In the last calendar year, the Darjeeling tea industry produced 8.13 million kg of tea.

The industry apprehends that if the tea gardens start operation even now, some crop that could be harvested would be of inferior quality, and this may result in a drop in price realisation.

Plucking of tea leafs is done on a weekly basis. If it is not done, the raw materials get spoiled. The industry will not be able to produce the superior quality tea and, accordingly, the price realisation would be impacted.

DTA’s former chairman Ashok Lohia to IANS

First & Second Tea Flushes

He explained that there were certain gardens which were famous for second flush tea while some were known for the first flush tea, depending on the location of the gardens.

The second flush contributes to over 50 percent of annual revenue in some gardens.

The industry was heavily dependent on the premium flushes for their profitability.

Post second flush, the Darjeeling tea harvest in monsoon and autumn is mostly sold at about or below cost of production. Tea produced during these periods does not woo foreign buyers.

Apart from the present political turmoil, the industry has faced challenges in the first flush period in March as well.

In the last five to six years, we have noticed the first flush production was more or less affected owing to erratic rainfall triggered by climate change. We also faced a drought-like situation in the first flush period in the current year. The quality has also been affected and so is the price realisation.

DTA’s Secretary General Kaushik Basu

“The industry believes that the price realisation was down by 10-15 percent in the first flush in the current crop season,” Basu said.

Along with political turmoil, the industry has also been facing challenges in the domestic retail market as Nepal tea is being sold in the market as Darjeeling tea, which is an infringement of the Geographical Indication protocol and Intellectual Property Rights.

"Nepal tea is imported in India as part of Indo-Nepal free trade agreement. We have no issues with that. But what is hitting the Darjeeling tea industry in the domestic market is the misuse of the brand equity of Darjeeling tea. Nepal tea is being sold in the name of Darjeeling tea," Basu said.

(This article was published in a special arrangement with IANS.)