1
1. INTRODUCTION
Tea, the most ancient beverage mankind has been enjoying, is
still the most popular drink in the world. In India, it is grown in
an area of 5.10 Lakh hectare. Since the first auction of Assam Tea
made from indigenous plants held in London in 1839, tea plantation
in India has been contributing immensely towards the socio economic
development of the people of the tea growing regions of the
country. Tea industry contributes substantially towards the
national and state economy by way of enriching the foreign exchange
reservoir and State exchequer besides employment. Today the major
tea growing states are Assam, West Bengal, Tripura, Tamil Nadu,
Kerala and Karnataka.
It may be observed that about 78 per cent of the country's total
area under plantation is located in North East India and Assam
accounts for nearly 53 per cent of the all India production. Assam
tea is well known for its rich taste and colour.
Being an agricultural plantation crop and a major revenue
generator, tea cultivation has become a lucrative profession in the
North Eastern region that has very few business opportunities and
plays a vital role in improving the socio-economic condition of the
region.
Along with large tea estates, cultivation of tea on small scale
basis is also gaining momentum since last two decades in the
region. Small tea grower has been defined by the Tea Board of India
as a person who is having tea plantation area upto 10.12 ha. Alone
in Assam there are 400 registered small tea growers whereas the
actual number is estimated to be above 50,000. According to the All
Assam Small Tea Growers' Association, the small tea growers are
coproducing over 65 million Kgs of green leaf which translates to
nearly 14 million Kgs of made tea out of a total Assam production
of over 345 million Kgs. These Small tea planters account for 29
percent of the states overall production and 14 percent of the
countrys overall production.
The small tea growers in Assam are mostly scattered in Sonitpur,
Karbi Anglong, Dibrugarh, Tinsukia, Golaghat, Sivasagar, and
Lakhimpur districts. But recently most of the farmers of other
districts of Assam have started cultivation of tea in small scale.
These tea growers are playing great role in the upliftment of the
rural economy of the problems hit state.
1.1 OVERVIEW OF PROBLEM
Small Tea Growing Industry in Assam has immense potential from
the points of both providing employment as well as generating
revenue. It can be a lucrative profession and can play a vital role
in improving the socio-economic condition of the economically
backward state. But the small tea growers are facing many problems
related to availability of finance, selling price, processing of
tea leaves etc. They are forced to sell their tea leaves to big tea
gardens at through away prices due to the absence of tea factories
of their own. Hence taking into consideration the above aspects
following objectives have been formulated.
1.2 REASERCH OBJECTIVES
1. To identify the constraints faced by the existing small tea
growers in Assam so as to create opportunities for the new small
tea growers.
2. To formulate a viable small tea growing model for the new
small tea growers in the state that can be supported by Financial
Institutions.
3. To study the feasibility of setting up of a Bought Leaf
Factory (BLF).
2. INDUSTRY OVERVIEW
2.1 Indian Scenario
The Tea Industry in India is about 170 years old. It occupies an
important place and plays a very useful part in the national
economy. Robert Bruce in 1823 discovered tea plants growing wild in
upper Brahmaputra Valley. In 1838 the first Indian Tea from Assam
was sent to United Kingdom for public sale. Thereafter, it was
extended to other parts of the country between 50's and 60's of the
last century. However, owing to certain specific soil and climatic
requirements its cultivation was confined to only certain parts of
the country.
Tea plantations in India are mainly located in rural hills and
backward areas of North-eastern and Southern States. Major tea
growing areas of the country are concentrated in Assam, West
Bengal, Tamil Nadu and Kerala. The other areas where tea is grown
to a small extent are Karnataka, Tripura, Himachal Pradesh,
Uttaranchal, Arunachal Pradesh, Manipur, Sikkim, Nagaland,
Meghalaya, Mizoram, Bihar and Orissa.
Unlike most other tea producing and exporting countries, India
has dual manufacturing base. India produces both CTC and Orthodox
teas in addition to green tea. The weightage lies with the former
due to domestic consumers preference. Orthodox tea production is
balanced basically with the export demand. Production of green tea
in India is small. The competitors to India in tea export are Sri
Lanka, Kenya, China, Indonesia and Vietnam.
There has been a dramatic tilt in tea disposal in favour of
domestic market since fifties. While at the time of Independence
only 79 million Kgs or about 31 per cent of total production of 255
million Kgs of tea was retained for internal consumption, in 2006
as much as 771 million Kgs or about 81per cent of total production
of 956 million Kgs of tea went for domestic consumption. Such a
massive increase in domestic consumption has been due to increase
in population, greater urbanization, increase in income and
standard of living etc.
Indian tea export has been an important foreign exchange earner
for the country. There was an inherent growth in export earnings
from tea over the years. Till 70s, UK was the major buyer of Indian
tea Since 80s USSR became the largest buyer of Indian tea due to
existence of the trade agreement between India and erstwhile USSR.
USSR happened to be the major buyer of Indian tea accounting for
more than 50 per cent of the total Indian export till 1991.
However, with the disintegration of USSR and abolition of Central
Buying Mechanism, Indian tea exports suffered a set back from
1992-93. However, Indian tea exports to Russia/CIS countries
recovered from the setback since 1993 under Rupee Debt Repayment
Route facilities as also due to long term agreement on tea entered
into between Russia and India. Depressed scenario again started
since 2001 due to change in consumption pattern, i.e. switch over
from CTC to Orthodox as per consumer preference and thus India has
lost the Russian market. Another reason for decline in export of
Indian tea to Russia is offering of teas at lower prices by China,
South Asian countries like Indonesia and Vietnam.
The major competitive countries in tea in the world are Sri
Lanka, Kenya, China and Indonesia. China is the major producer of
green tea while Sri Lanka and Indonesia are producing mainly
orthodox varieties of tea. Kenya is basically a CTC tea producing
country. While India is facing competition from Sri Lanka and
Indonesia with regard to export of orthodox teas and from China
with regard to green tea export, it is facing competition from
Kenya and from other African countries in exporting CTC teas.
Tea is an essential item of domestic consumption and is the
major beverage in India. Tea is also considered as the cheapest
beverage amongst the beverages available in India. Tea Industry
provides gainful direct employment to more than a million workers
mainly drawn from the backward and socially weaker section of the
society. It is also a substantial foreign exchange earner and
provides sizeable amount of revenue to the State and Central
Exchequer. Presently, Indian Tea Industry is having-
Total Turnover of Rs. 10000 Crores.
31 per cent share in global production and 15 per cent of world
trade.
Total net foreign exchange earned per annum is around Rs. 1847
crores.
9 tea Auction centers at Calcutta, Guwahati, Siliguri, Cochin,
Coimbatore etc.
1655 registered Tea Manufacturers.
2008 registered Tea Exporters.
5148 number of registered tea buyers.
The labour intensive tea industry directly employs over 1.1
million workers and generates income for another 10 million people
approximately.
Women constitute 50 per cent of the workforce.
2.2 Small Tea Growing Industry in Assam
In Assam and other North Eastern States, the concept of growing
tea in small holdings was unheard of until 1975, when a small
beginning was made in Assam. Small farmers in these States started
taking up tea cultivation on a large scale during the mid 90's due
to good prices that prevailed during 1996-98. The average size of
such holdings is less than one hectare. These small and marginal
farmers are dependant on tea and derive major portion of their cash
income from tea. Presently around 45,000 small growers are
operating in the state of Assam and other North Eastern tea
producing states.
Since 1995, the quantity of tea produced and sold by the small
growers has gone up many folds over the years. At present, the
quantum of tea produced by the small growers in Assam and other
North Eastern States is around 65 million Kgs.
But many problems and constraints have weakened this small tea
growing industry in the state. The small tea growers dont get
proper price for their produce from the large tea estates or from
the BLFs often shown quality problem by the later. They dont have
possession certificates for their cultivating land due to which
they are unable to register themselves with the Tea Board of India
and get benefits from various policy initiatives. Due to the same
reason they are also unable to get loans from banks. Thus the small
tea growing industry in Assam is facing many problems which
requires urgent attention from the state government. Initiatives
should be taken to give them ownership titles of their lands to
help them getting financial assistances from the Tea Board of India
and financial institutions.
Overview of the Small Tea Growing Industry in Assam
14 per cent of Indias overall production.
29 per cent of Assams overall production.
No. of Registered growers-400.
Actual no. of growers (estimated)-Above 50,000.
3. REVIEW OF LITERATURE
The available literature on Tea has been arranged as under:
Barlow and Jayasooriya (1986) studied how changes took place in
plantation sector in Sri Lanka due to the state interventions such
as small farm support programs, land reforms and setting up of
organizations for processing and marketing of tea.
Tallontire Anne (2001) described how Business and Market affects
the livelihood of small tea growers in Sri Lanka though they have a
major share in total production in the country. In this paper he
showed how the big companies though they assume themselves to be
ethical in sourcing the tea leaves from the small tea growers but
did that really help the poor?
Lele (2002) described how in Kenya, formerly a government
organization and now a private organization Kenya Tea Development
Agency Ltd (KTDA) has extended services to the small tea growers
such as green leaf tea collection, processing and marketing of tea.
It was a big problem for the small tea growers to bring the tea
leaves to the other factories as they are located at a larger
distance from them.
Herath D and Weersink A. (2003) in a presentation paper
emphasized maintenance of quality of tea and processing aspects.
They also discussed various aspects like transaction costs,
management costs and technologically determined production costs
etc. in tea cultivation.
Boruah et al. (2005) described how tea is suited to the north
eastern region and is a major revenue generator but facing
constraints like lack of proper extension services, timely
processing facilities etc. They also gave emphasis on the
requirement of adequate financial assistance, which is essential
for the promotion of small-scale tea cultivation.
NABARD, Tamil Nadu Regional Office, Chennai (2006) in its
research paper attempted to address issues like production,
processing, marketing and export of tea in Nilgiris and Coimbatore
districts of Tamil Nadu. Besides, the study also identifies
different stages in supply chain management, assesses the role of
credit, examines Government policies in tea Sector and also the
R&D initiatives undertaken by Tea Research institutions. In
this paper an alarming situation has been described where the
prices of green tea leaf have gone down from Rs. 18/kg during
1997-98 to Rs.6/kg during 2003-04. This has been the major factor
affecting the economics of tea gardens for the small growers.
Chattopadhayay Dr. Shatadru (2006) described how the price
obtained by the small tea growers have declined from Rs. 18/Kg to
Rs. 4/Kg which was resulted due to the reasons like quality aspect
and less price obtained at the auction houses. He described the
reasons behind getting fewer prices at auction houses to be market
rigging and cited that there was enough evidence of price fixing by
buyers in the auction houses.
Bordoloi Satyajit (2006) gave emphasis on the commercial aspects
of tea production. He hoped many more small growers would start
growing tea in Assam on cooperative basis by forming cooperatives
among themselves to gain more bargaining power and quality
improvement of green tea leaves.
Choudhury R. K. (2006) gave emphasis on how the small tea
growers are often exploited by the large tea estate owners due to
the absence of processing factories of their own. Also some major
problems like inefficient management, lack of infrastructure etc.
have been discussed by him.
4. RESEARCH METHODOLOGY
To fulfill the objectives of the study following methodology was
used during the study and for report preparation.
4.1 Research Design: Exploratory research design was adopted for
the study considering the objectives of the study. 4.2 Area of
Study: Sonitpur District of Assam of North East was selected as the
area of study. 4.3 Source of Data: The entire study was based on
secondary as well as primary data. 4.3.1 Secondary data: Internet,
Journals etc. were thoroughly used for secondary data.
4.4.2 Primary data: Primary data were collected from the small
tea growers with the help of both open and close ended
questionnaires and by in depth discussions with the personnels from
financial institutions and BLFs.
4.4 Sampling Plan
4.4.1 Sampling unit: Sampling units comprised of small tea
growers and personnels from financial institutions and BLFs.4.4.2
Sample Size:1. Small Tea Growers-30
2. Bank personnels-2
3. BLF Owner-1
4.4.3 Sampling Technique: Multi stage and purposive sampling
methods were adopted to carry out the study.
Multi stage sampling technique was adopted for selecting the
area of study and purposive sampling technique was adopted for
selecting small tea growers and personnels from financial
institutions and BLFs.
North East
Assam
Sonitpur
Sonitpur district was selected as the area of study due to the
presence of highest number of small tea growers in the district.
Table No. 4.1: No of Small Tea Growers present in Assam DistrictNo.
of Small Tea Growers
Sonitpur207
Karbi Anglong130
Dibrugarh115
Tinsukia99
Jorhat90
Source:-Tea Board of India, Regional Office, Guwahati, 2004
4.5 Research Instrument: Data were collected with the help of
both open and close ended questionnaires by interacting with the
small tea growers and by in depth discussions with the personnels
from financial institutions and BLFs.4.6 Data Analysis: Appropriate
statistical and financial tools and techniques like Average, graphs
etc. were used for the analysis of data. 4.7 Duration and Period of
Study: The project was of 45 days from 1st March to 15th April,
2008. 5. RESULTS AND DISCUSSION
5.1 Objective No. 1: To Identify the Constraints Faced by the
Existing Small Tea Growers in Assam so as To Create Opportunities
for the New Small Tea Growers.
Assam is a state facing extremists-violence, flood, poverty,
unemployment etc. problems since last three decades.
Industrialization process is still very slow compared to many other
states in India. Agriculture sector is still seeing traditional
ways of cultivation resulting in low output and thereby low income
which is insufficient to run their families. However a change is
observed in Assam with regard to tea cultivation which is a major
crop among the plantation crops. The number of growers taking tea
cultivation as source of income in Assam is increasing rapidly and
now it is over 50,000 in the state. They contribute about 29 % of
the total production in Assam. The government of India and the
state government are also trying to motivate this profession by
announcement of various schemes such as subsidy schemes to the new
planters, setting up of BLFs etc. The unemployed youths now in
Assam dont search jobs but want to become entrepreneurs and
obviously tea is the first choice. But though the number of small
tea growers in Assam has increased immensely in the last decade and
they are contributing to the economy apart from having
self-employment they are facing many problems in various
grounds.
Major Findings Were:
5.1.1. Requirement of Financial Assistance and Possession
Rights: Organized Small tea cultivation needs high initial capital
investment and continuous flow of working capital later during the
production phase. Tea Board of India has declared various subsidy
schemes for small tea growers and banks are also ready for
providing loans to them. But the most important problem in availing
these facilities is that most of the small tea growers dont possess
permanent land ownership titles for their lands. Normally banks
advance term loan for setting up of the tea plantation on the basis
of permanent land ownership title and registered with Tea Board of
India. But banks give working capital on temporary land ownership
title provided growers have some amount of permanent land. Hence it
is the duty of the state government to give permanent ownership
titles to the small tea growers for their lands having temporary
ownership titles so that they can avail these facilities for
cultivation of tea.
From this study it has been found that out of 30 small tea
growers only 9 have availed the loan facility from various banks in
the area. Other 21 growers have been using their own funds to raise
the plantation. Some of them are unaware and some dont have
permanent ownership titles for their lands so unable to avail the
facilities. [Exhibit 5.1]
Exhibit 5.1: Showing Percentage of Growers Taking Loan
FacilitiesSmall tea growers can avail facilities like subsidy from
Tea Board of India and loans from banks only if they are registered
with the Tea Board of India. They register themselves with TBI
through organization like Small Tea Growers Association. For
subsidy they have to apply directly to the TBI.
5.1.2 Awareness Level Regarding Various Aspects in Tea:
Government of India has declared many schemes for the promotion
of tea in the country because of the declining share of tea in the
international market the reason of which has been identified as the
deteriorating quality of tea. One important reason for this
deterioration is the age old bushes which not only decrease the
production of tea leaves but also quality of made tea. Hence
Government of India has declared many schemes like subsidy for
plantation and setting up of mini factories etc. to promote the
cultivation of tea in the country. But due to the inefficient
extension services in the country these schemes have not been able
to penetrate and hence lot of things have to be done to aware the
growers in the country.
Table No. 5.1: Table Showing Awareness Levels of Various aspects
of Tea Cultivation
ParticularsTotalNo. of Growers unaware% of Total
1. About Loan Facilities in Tea21419
2. Registration with TBI211047
3. About Subsidy Scheme of TBI.211047
From Table No.5.1 it has been seen that growers are not aware of
various aspects like subsidy scheme, importance of registration
with the TBI etc. and need proper help from extension services. Out
of these 21 growers, 11 growers are aware about TBI but as their
lands are not permanently possessed hence have not been able to
register with TBI through some kind of organizations like Small Tea
Growers Association etc. and needs proper action from state
government in giving them permanent ownership titles for their
lands and already proper steps have been taken by State Government
of Assam.
5.1.3 Problems Related to Marketing of GTLs:
There are many problems in this regard and these are:
1. Small tea growers are unable to get a fair price for their
produce from the big estates because the individual growers are
unable to make much impact on them. Factories often rejects leaves
showing quality complain.
2. The involvement of middlemen in the transactions of green
leaf from STGs to the big estates also enhances problem. The
middleman collects the leaves from the grower's plantation at Rs.50
less per kg of leaves which is said to be the transportation
cost.
3. The STGs sell their farm produce i.e., green leaf to the big
estates as they do not own processing factories. As there are a
large number of growers, an individual grower supplies only an
insignificant proportion of the total output and hence these
growers have very low bargaining power and are unable to influence
price for their produce. On the contrary, as the big estates owners
have a monopoly in purchasing green leaf from the STGs, they are
able to influence pricing. The problem of fair price realization is
further aggravated by the formation of cartels among the buyers.
Thus, the small growers occupy the most vulnerable position in the
tea supply chain.
4. The management of supply chain of tea is complex involving
intermediaries and the marketing margins are shared by the
intermediaries as the consumers do not purchase made tea directly
from the processing units or the auction centres. Auctions are the
primary marketing channel for tea. About 75 per cent are still
being sold through auction centres despite the relaxation given to
the manufacturers of made tea to sell tea in the market.
5. Differential pricing method may be followed by the big
estates, whereby quality leaf is paid a higher rate. This would
have a good impact on the quality of made tea produced.
Now by analyzing the above problems and constraints following
points can be derived:
1. As already proper steps have been taken by the Government of
Assam in giving permanent land ownership titles to the small tea
growers hence it is important to formulate and present feasible
plans for getting subsidies from TBI and loans from Banks.
2. Bought Leaf Factory (BLF) is a tea processing unit which can
be established by individuals or jointly. There are several subsidy
schemes of Tea Board of India for setting up of BLF. Establishment
of BLF will facilitate small tea growers to come together.
Government of India is also planning to set up BLFs at various
locations in various tea growing states. These BLFs will be managed
initially by government and later these units will be managed by
small tea growers on co-operative basis. Another benefit given by
BLF will be the elimination of intermediaries from the tea supply
chain which ultimately will provide benefits not only to small tea
growers but also to the consumers.
Keeping above factors in mind efforts have been done to create
new opportunities for the existing and new small tea growers in the
subsequent objectives 2 and 3.
5.2 Objective No. 2: To Formulate a Viable Small Tea Growing
Model for the New Small Tea Growers in the State that can be
Supported by Financial Institutions.
Tea plantation requires high initial fixed cost as well as
working capital during the subsequent periods for maintenance.
Generally in Assam the small tea growers employ their own funds to
start the plantation in a small scale in streaks over time. It has
been found that the area can go upto as less as 10 bigha. Hence
they dont attain economies of scale.
Now a days financial institutions like banks are coming into
this sector for providing credits to the growers. Banks provide
both term loan for establishment of new tea plantation and working
capital loan during production phases. To avail term loan for
setting up of a new plantation a small tea grower must submit
permanent possession certificate. But he can avail working capital
loan during production phases by submitting temporary possession
certificate provided a certain amount of land is under permanent
ownership of the grower.
A tripartite model is followed by the banks in case of providing
loans to the growers. The STG obtains loan from the bank branch.
They sale the green leaf to the Tea Estates. The green leaf Buying
Tea Estate makes payment to STG through the bank branch. The bank
branch deducts dues to the bank from the STG and then credits the
balance to the account of the STG. But to avail subsidy a small tea
grower must apply directly to the TBI.
Hence to avail subsidy and loan a grower must submit a feasible
plan including all the cash outflows and inflows of the plantation.
He also must have to submit soil testing report, weather report of
his area etc. Depending on his report banks go for project
appraisal and take decisions as required. A detailed model for an
area of 1 hac has been shown below.
5.2.1 Formulation of an Economically Feasible Small Tea Growing
Model for an Area of 1 Hac:
Area: 1 ha. Plant Population: 15000 Nos/ha. (Double Hedge
System)
Table No.5.2: Mandays Requirements for Tea Plantation
Sr. No.ParticularsNo. of Mandays
Year 1Year 2Year 3Year 45th Year
Onwards
1Clearing/Leveling and Land Preparation75----
2Drainage40----
3Application of OM30----
4Planting of Tea(Including Staking)1354025--
5Planting of Shade Trees(110 nos. for 1 ha)10----
6Mulching3020---
7Pruning/Tipping1020304040
8Application of Fertilizers2020202020
9Application of Plant Protection Chemicals1515151515
10Manual/Chemical Weed Control4035303030
11Maintenance of Drainage, Fencing etc.-10101010
TOTAL MANDAYS405160130115115
In Table No.5.2 various Mandays requirements have been shown. It
has been seen that the requirement of mandays are more in the first
year during setting up of the plantation and decreases in the
subsequent years and hence cost of cultivation also going down. It
has been found that the growers are following the double hedge
system due to which the production may be more but the quality may
deteriorate in the long run.
Table No.5.3: Investment in Mandays & Materials (Figs. in
Rs)
Sr. No.ParticularsYears
12345th Year
Onwards
A. MANDAYS (No.) 405160130115115
1Cost of Labour
@ Rs.45 / manday182257200585051755175
B. MATERIALS
2Rent of Hired Tractor
@ Rs.600/Bigha4500----
3Tea planting Materials
@ Rs.3 each4500045002250--
4Shade Tree Planting Materials @ Rs. 3 each330----
5Fertilizers
1. 55006,00060006,3006,500
6Plant Protection Chemicals
@Rs.300/lit.1,5001,7001,8001,9002,100
7Weedicides10001200120014001500
C. PLUCKING COST (Rs.2.40/Kg of GTL)NIL4320100801560021600
TOTAL(A+B+C)8622024920271803037536875
From Table No. 5.3 it has been seen that the costs are more in
the first year because of the costs like planting material costs
and labour cost. Costs again increase from 3rd year because of the
increasing plucking costs.
Table No.5.4: Yearwise Production of Green Tea Leaves (Figs. in
kg green leaf/ha)
ParticularYear 1Year 2Year 3Year 45th Year
Onwards
YIELDNIL1,8004,2006,5009,000
It has been seen that the production is less in the 2nd year
because of less branches and it increases from 3rd year because of
more branches. But from about 30 years production as well as
quality deterioration has been seen in case of Tea.
Table No.5.5: Table Showing Net Incomes of the Grower
(Rs/ha)YEARS12345thYear
Onwards
GROSS INCOME
@Rs.12/kgNIL216005040078,000108,000
TOTAL COST8622024920271803037536875
NET INCOME-86220-3320232204762571125
From Table No.5.5 it has been seen that no income is obtained in
the first year as plucking is not done. But in many cases plucking
is done in the very first year which is not a healthy practice.
Also it has been seen that upto the 2nd year net incomes are
negative as income does not exceed costs.
Table No.5.6: Table Showing Various Constituents of the Finance
Scheme
Sr.NoPARTICULARSAMOUNT (Rs)
1UNIT COST138320
2MARGIN MONEY (10% OF THE UNIT COST)13832
3SUBSIDY GIVEN (25% OF THE UNIT COST )34580
4BANK LOAN (65% OF THE UNIT COST)89908
It has been seen from Table No.5.6 that Unit cost is Rs.138320
which is taken for the first 3 years. Out of this total unit cost
amount 10 per cent will have to be margin money i.e., will have to
be provided by the grower himself. Subsidy amount (25%) will be
given by Tea Board of India in two installments. First installment
will be given immediately after the completion of planting by the
grower and the second installment will be given after 12 months
after planting. The subsidy amount will have to be collected by the
growers by applying directly to Tea Board of India through
institutions like Small Tea growers Association etc.
Bank will provide rest 65 per cent money as term loan the
interest of which is 11 per cent now and from the 3rd year bank
will advance money as working capital as required by the grower the
interest of which is 7 per cent. Government of India and respective
state governments give 2 per cent subsidy each on interest rate to
keep it at 7 per cent. The Bank Loan and Repayment Schedule have
been shown in Table No.5.7. Banks finance small tea plantation as
term loan and working capital loans. Term loans are given for
setting up of the plantation and working capital during the
operational period and it starts from 4th year. It has been
stipulated by NABARD that term loan will have to be considered upto
3rd year and from 4th year working capital schedule starts. There
is an initial moratorium of 4 years after which repayment schedule
starts and within 8 years the term loan has to be repaid and
working capital advancement continues.
5.3 Objective No.3: To Study the Feasibility of Setting up of a
Bought Leaf Factory (BLF).
BLF is a tea processing factory owned by individuals of which
two third Green Tea Leaves should be from outside growers.
Government of India has declared subsidy of 25 per cent for various
machineries of this tea processing unit. BLF can be owned by
individual grower or in groups. Government of India is encouraging
setting up of BLF management of which will be headed by Government
chosen personnels initially and later will be managed by small tea
growers as cooperative societies. BLF is a capital intensive unit
and hence requires support from various fronts such as Government
and financial institutions like banks. Below a model for setting up
of a BLF has been described.
Table No.5.8: Various Costs involved in Plant & Machineries
(in Rs Lacs)
Sr. NoParticularsProcessesAmount
1Axial Flow Fan (2 nos.)W
I
T
H
E
R
I
N
G
2
2Coal/Firewood Heater (2 nos.)1.5
3Chain Grate Stoker10
4Closed Withering Trough (10 nos.)5
5RotovaneROLLING25
6Conveyor 2.5
7Rolling Table1.5
8CTC machine20
9Rolled Leaf Sifter / Googie1.5
10CFMFERMEN-
TATION
30
11Centrifugal Spot Humidifier Fan
12Food Grade Stainless Steel Sheet on Fermenting Beds1.2
13Super Indirect Fired Coal/Firewood HeaterDRYING2.5
14Speed Fibre ExtractorSORTING & GRADING12
15Colour Sorter 15
16Electronic Cleaning Machine8
17Tea Packing TablePACKING
1.5
18Storage Bins with Dehumidification System
With Fan6.3
19Cartoon/Pouch Packing Machine4.5
TOTAL150
Various machineries as shown in Table No.5.7 have been used in a
BLF. Various operations after which we can get made tea are
withering, rolling, fermenting, drying, sorting & grading and
packing which have been shown in the Exhibit No.5.1 below.
Table No.5.9: Table Showing various Operational Costs (in Rs
Lacs)
Sr. NoParticularsAmount
1Electricity11.5
2Coal/Firewood8
3Generator & Lorry Maintenance4.5
5Transport Charges for GTLs10.4
6Salaries2.5
7Taxes0.50
8Insurance0.50
9Wages5.4
10Packing Costs4
11Brokerage2
12Cess1.5
13Loading/Unloading Charges0.20
14Warehousing1.6
15Transport to Auction Houses2.5
16Agent Commission for GTLs2.4
17Repairs for Machines5
TOTAL62.5
In Table No.5.8 various operation costs or working capitals have
been shown of which electricity costs is highest.
The grower in study has a land size of 26 hac from where he gets
about 3 Lakh GTLs so he requires about 17 Lakh GTLs to feed his
BLF.
Table No.5.10: Table Showing Net Income
ParticularsAmount
Total Costs incurred in GTLs purchased-17 Lakh Kgs
@Rs.10/Kg170
Made Tea Produced@1Kg/4Kg GTL5.20
GROSS INCOME @Rs.65/Kg at Auction Center 338
TOTAL OPERATIONAL COST62.5
NET INCOME105.5
From Table No.5.9 it has been found after analysis that the BLF
owner has earned a net income of Rs. 105.5 Lac. He has purchased 17
lac Kgs of GTLs from other small tea growers @ Rs. 10/Kg on an
average. Every Kg of GTL gives 1 Kg of made tea. At Auction Center
per Kg made tea was sold at Rs. 65.
Table No.5.11: Table Showing Cash Flows for 5 Years (Figs in
Lakhs)
Sr. NoParticularsYears
12345
Investment Costs
1Plant & Machinery150----
2Civil Works100----
Operational Costs
3Operational Costs-62.565.570.275
4GTL Purchased-170170178178
Total Cost250232.5235.5248.2253
Provision for Depreciation
(10%)1513.512.1510.939.84
Salvage Value----88.5
Gross BenefitNil338338345345
Net BenefitNil105.5102.596.892
In Table No.5.10 cash flows for 5 years have been shown. Net
benefits have been calculated by taking operational costs only.
Provision for depreciation has been taken as 10 per cent. Salvage
value has been obtained by applying continuous depreciation
method.
6. CONCLUSION
Small tea growing industry can boost not only the economy of a
state like Assam but also can contribute immensely to the nations
exports hence it is urgent to take care various problems existing
in this industry from all fronts. Lots of things are to be done and
initiated as the popularity of Indian Tea has decreased
internationally. Hence by various schemes like replantation,
technology upgradation etc. efforts have been made to get back that
popularity again in the international market. The problems of not
only of the small tea growers but also of the big estates should be
solved without taking much time by seeing the increasing shares of
various countries like Sri Lanka, Kenya etc in the international
market. Soil testing facilities, extension services like use of
proper doses of pesticides, fertilizers, giving the small tea
growers permanent land ownership rights, encouragement of setting
up of tea processing units, increase the subsidy level from
existing 25 per cent to 33 per cent can revive and boost the
existing small tea growing industry in the country. 7.
SUGGESTIONS
Important suggestions and Recommendations have been given
below
1. As the most important problem is of finance hence individual
new and existing growers should be a part of some associations like
Small Tea Growers Association, SHGs etc. so that they can register
with the Tea Board of India (TBI) to avail the subsidy facilities
and finance from banks. On Governments front initiatives should be
started taken to give the small tea growers permanent land
ownership rights without which they can not avail subsidy and loans
from banks.
2. As awareness level regarding various subsidy schemes of
government is low among some growers hence extension system should
be made strong.
3. Healthy agricultural practices such as soil testing,
application of pesticides, fertilizers and plucking operations
should be followed and it needs proper extension service efforts
from agricultural universities, KVKs etc. It has been seen that tea
from India have been sent back due to pesticide residual complaints
from various countries like Germany, Saudi Arabia etc.
4. If more numbers of Associations, SHGs exist then the
bargaining capacity of the small tea growers will increase and will
be able to get fair price for their produce.
5. Government of India should encourage setting up of more
numbers of tea processing units in the state through setting up of
Tea Growers Association, SHGs etc. which not only will give them
better price for their tea leaves but also for their made teas as
now such type of cooperatives, associations etc can sell their
produce in the market directly after allowing by the government to
sell in the market. This will also remove various intermediaries
from the tea supply chain. PAGE