Assam’s Rs 99 Crore Tea Incentive: A Game Changer Or Stopgap Measure?

Guwahati: The recent release of Rs 99 crore by the Assam government to 378 tea estates under the Assam Tea Industries Special Incentive Scheme (ATISIS) has set the tea industry abuzz. While the move is meant to support the production of orthodox and specialty teas, stakeholders are weighing its prospects for making the tea industry in Assam competitive in international markets in the long run.

Launched in 2020, ATISIS had been designed to provide financial relief and stimulate growth within Assam's tea sector. The scheme features several key components.:

• Interest Subvention on Working Capital: A 3 per cent annual interest subvention on working capital loans to reduce production costs for tea producers.
• Production Subsidy: A subsidy of Rs 10 per kilogram for producing orthodox and specialty teas, including green, white, Oolong, Singpho, purple, and other specialty varieties.
• Fixed Capital Subsidy: A 25 per cent subsidy on the cost of plant and machinery for units producing orthodox and specialty teas.
• Agricultural Income Tax Holiday: A three-year exemption from agricultural income tax to provide financial relief to tea estates.
  
  

In May 2023, the Assam government extended ATISIS for an additional five years until the end of the 2027-28 fiscal year. The agricultural income tax holiday was extended for three years, covering fiscal years 2022-23 to 2024-25. 

Key Benefits
 
     1. Rs 10/kg subsidy for Orthodox & Specialty Tea
     2. 3 per cent interest subvention on working capital
     3. 25 per cent subsidy on plant & machinery
     4. 3-year Agricultural Income Tax holiday

Government's Commitment to the Tea Industry

On the occasion of ceremonial distribution, Assam Finance Minister Ajanta Neog underlined 200 years of tea history and economic importance in Assam.

"The government is dedicated towards developing the tea industry not merely through incentives but by enhancing the healthcare, educational, and infrastructure facilities in the tea garden locations," noted the minister, highlighting that the tea industry continues to be the backbone of Assam's economy. More than 50% of its contribution goes into India's aggregate tea production, she revealed.

Commerce and Industry Minister Bimal Borah reasserted the government's commitment to push growth in Assam's tea sector. "This move will boost production capacity and continue our dominance in India's tea industry," said Borah. Yet, industry experts contend world price fluctuations, high costs of production, and export clogs are still key issues that require more policy interventions.

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Industry Leaders Weigh In

The announcement received mixed responses from tea industry players.
"We welcome the move, but prolonged policy intervention is required to compensate for financial distress in tea estates," said TAI Secretary Dipanjol Deka during an interview with Business North East (BNE). TAI has also made a forceful appeal to continue all pending claims to allow for a just distribution of the benefits.

Mitra Bhanu Das, Superintending Manager at Hathikuli Tea Estate, welcoming the initiative, emphasized its financial relief for tea producers facing difficult times in an interview with BNE, stating, “It’s a good initiative of GOA for giving the Orthodox Subsidy as it would be of immense help financially as the industry is going through tough times. Currently, the Orthodox market is good, and by introducing this subsidy, it will attract manufacturers to produce more quantum of Orthodox. This will also further improve exports as Orthodox tea is mainly exported. Specialty tea is a different ball game with more value and less quantum. TBOI also gives preference to producing Specialty teas. This year, the Orthodox market is good, and we need to produce more quantum. Hathikuli is organic and mainly produces Orthodox teas, as well as from bought leaf.”

Tea entrepreneur Ranjit Barua, the Founder of Aromica Tea, insisted on the international market potential of Assam's hand-rolled orthodox teas. "While this incentive is a move in the right direction, we require powerful branding and access to international markets to fully leverage demand," he said.

Secretary of Guwahati Tea Auction Buyers Association, Dinesh Bihani advocated extra incentives to drive direct exports out of Assam. "Even today, most exports continue through Kolkata, though Assam is the largest producer. A subsidy for the exporters procuring from GTAC and exporting through ICD Amingaon could reverse trade in Assam's favour," he claimed. He recommended that export customers buying tea from GTAC would be incentivised by paying them an extra Rs 10 per kg so that there would be more direct exports from Assam.

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Sudarshan Deka, co-founder of Deroi Tea, said the same thing, terming the incentives a long-overdue step for Assam's specialty tea manufacturers. "Assam Orthodox tea commands a high premium in the export market, and the specialty tea market is expanding at a fast pace. The incentive will ensure enhanced production sustainably in the long run," he added.

The Road Ahead: Incentives vs. Structural Reforms

With the ATISIS extended to 2027-28, the government hopes for a more robust tea sector. However, stakeholders believe that apart from fiscal support, Assam requires strategic changes to improve tea quality and streamline exports to put itself higher in the global tea market. According to experts, solutions to deep-seated problems like high production costs, labour issues and access to international markets, would be crucial to growth and sustainability.