In view of the persistent under-recovery in price realisation, particularly in the tea sector, the plantation industry in Tamil Nadu is heading towards a looming financial crisis, according to Planters Association of Tamil Nadu (PAT).

The average South Indian auction price per kg for the period January/July 2015 for which price data is available, was Rs.80.75, compared to Rs.87.71 for the corresponding period the previous year, PAT Chairman, Suresh Menon, said here today.

The bulk of the tea production in South India emanated from Tamil Nadu and if teas originating from the State alone were taken separately, the average price realisation for it was much lower than the South Indian average auction price, he claimed.

This abysmal price realisation was against the average cost of production of a kg of tea in Tamil Nadu hovering around Rs.125 per kg, he said.

The cost of production included not only wages and wage related payments, but also the spiraling cost of inputs, enhanced electricity charges and expenses incurred by the plantation on several welfare measures like housing, medical, education required to be provided free of cost to their workers, in strict adherence to the statutory provisions, Menon said.

Adding to the peril, the past three months saw unprecedented heavy crop loss in tea plantations ranging between 30 to 40 per cent due to pest and diseases including severe attack by tea mosquito bugs. As there was no expected crop to be harvested, several man days had also been consequently lost. The quality of tea was also badly affected resulting in substantial monetary loss on the price realization.

In order to initiate actions for effective pest control, the plantations had to incur heavy expenditure compared to previous years, which also contributed to the heavy losses suffered already by the plantations, he said.

Stating that coffee prices had also been plummeting and the dire situation in natural rubber prices was all the more well known, Menon said that the industry was seeking a few immediate reliefs from the State Government to tide over the crisis.

For instance, the discriminatory VAT Sales Tax rate of 5 per cent on teas sold by corporate tea factories, as against just one per cent for teas sold by Bought-Leaf Tea Factories and INDCOSERVE Tea Factories, not only for auction sales but also their private sales of tea, should be done away with, Menon said.