Tea wage revision rates in Assam would materially impact profitability of the entire north India bulk tea industry, unless there is a commensurate increase in tea prices, credit rating agency ICRA said.
Assam is the major producer of bulk tea, accounting for 60 per cent of north India's production and 50 per cent of all-India tea output, it added.
ICRA Limited (formerly Investment Information and Credit Rating Agency of India Limited) was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency.
Wages for tea garden workers in Assam have been increased from Rs 205 to 232 which is an increase of Rs 27. The daily wage of the tea workers has become Rs. 232 for the Brahmaputra Valley and Rs. 210 for the Barak Valley.
There have been no comments from tea associations in Assam over the wage hike indicating that all have agreed.
"These decisions will finally lead to a wage structure that will lead to productivity linked wage rises. I for one feel that the Government is making every reasonable effort to keep the industry going" a tea planter in Assam said.
"Low wages will not bring prosperity to a completely worker based industry. We have rework many areas to make the work force more responsive and productive" another tea planter said.
The total wage rate per man day (including bonus, other cash components and benefits) for tea estate workers in West Bengal is estimated to increase by 12 per cent with effect from January 1, 2022. The hike follows an announcement by the state's labour department to increase the basic wages on an interim basis by 15 per cent to Rs 232 per day from Rs 202 per day, the report said.
The interim wage hike in West Bengal is likely to adversely impact the margins of tea estates in the state that contributes 37 per cent to north India's production, ICRA said in its report.
The impact would be lower for producers of quality tea, given the price premium they enjoy over the average market realisations, the report.
However, the impact would be lower for producers of quality tea, given the price premium they enjoy over the average market realisations, Icra said in a report.
As per Icra estimates, the wage hike would lead to an increase in the cost of production by Rs 16 per kg and would have a substantial adverse impact on the margins of tea estates in West Bengal which contributes around 37 per cent to north
"This interim wage hike is likely to result in a margin contraction of around 700 basis points on a year-on-year basis for bulk tea players based out of West Bengal at a steady state level of realisations. However, the impact is likely to be lower for bulk tea players focused on producing quality teas, given the high premium their produce fetches over the market prices," said Kaushik Das, Icra Vice President and Co-Group Head, Corporate Sector Ratings.
An analysis of the auction prices during the first half of 2022 calendar indicates that the price of north India CTC (Crush, Tear, Curl) teas produced by the top 50 estates, at Rs 319 per kg, was 79 per cent higher than the overall auction average, he said.
The premium has increased this year compared to 65 per cent in CY2021, Das added.
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