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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 state’s
overall production and 14 percent of the country’s 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 don’t get proper price for their produce from the large tea
estates or from the BLFs often shown quality problem by the later. They don’t 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 India’s overall production.

• 29 per cent of Assam’s 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

District No. of Small Tea Growers


Sonitpur 207

Karbi Anglong 130

Dibrugarh 115

Tinsukia 99
Jorhat 90

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 don’t 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 don’t 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 don’t 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 Facilities

Small 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 Grower’s 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

No. of Growers
Particulars Total % of Total
unaware
1. About Loan Facilities in Tea 21 4 19
2. Registration with TBI 21 10 47
3. About Subsidy Scheme of TBI. 21 10 47

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 Grower’s 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 don’t 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

No. of Mandays
Sr.
Particulars 5th Year
No. Year 1 Year 2 Year 3 Year 4
Onwards
Clearing/Leveling and
1 75 - - - -
Land Preparation

2 Drainage 40 - - - -

3 Application of OM 30 - - - -

Planting of Tea(Including
4 135 40 25 - -
Staking)

Planting of Shade
5 10 - - - -
Trees(110 nos. for 1 ha)

6 Mulching 30 20 - - -

7 Pruning/Tipping 10 20 30 40 40

8 Application of Fertilizers 20 20 20 20 20

Application of Plant
9 15 15 15 15 15
Protection Chemicals

Manual/Chemical Weed
10 40 35 30 30 30
Control

Maintenance of Drainage,
11 - 10 10 10 10
Fencing etc.

TOTAL MANDAYS 405 160 130 115 115

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)

Years
Sr.
Particulars 5th Year
No. 1 2 3 4
Onwards
A. MANDAYS (No.) 405 160 130 115 115
Cost of Labour
1 18225 7200 5850 5175 5175
@ Rs.45 / manday
B. MATERIALS
Rent of Hired Tractor
2 4500 - - - -
@ Rs.600/Bigha
Tea planting Materials
3 45000 4500 2250 - -
@ Rs.3 each
Shade Tree Planting
4 330 - - - -
Materials @ Rs. 3 each
5 Fertilizers 5500 6,000 6000 6,300 6,500
Plant Protection
6 1,500 1,700 1,800 1,900 2,100
Chemicals @Rs.300/lit.
7 Weedicides 1000 1200 1200 1400 1500
C. PLUCKING COST
NIL 4320 10080 15600 21600
(Rs.2.40/Kg of GTL)
TOTAL(A+B+C) 86220 24920 27180 30375 36875
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 3 rd year
because of the increasing plucking costs.

Table No.5.4: Yearwise Production of Green Tea Leaves (Figs. in kg green leaf/ha)
5th Year
Particular Year 1 Year 2 Year 3 Year 4
Onwards

YIELD NIL 1,800 4,200 6,500 9,000

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)

5thYear
YEARS 1 2 3 4
Onwards
GROSS INCOME
NIL 21600 50400 78,000 108,000
@Rs.12/kg

TOTAL COST 86220 24920 27180 30375 36875

NET INCOME -86220 -3320 23220 47625 71125

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.No PARTICULARS AMOUNT (Rs)

1 UNIT COST 138320


MARGIN MONEY (10% OF THE UNIT
2 13832
COST)
SUBSIDY GIVEN (25% OF THE UNIT COST
3 34580
)

4 BANK 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. No Particulars Processes Amount


W
1 Axial Flow Fan (2 nos.) 2
I
T
2 Coal/Firewood Heater (2 nos.) H 1.5
E
3 Chain Grate Stoker R 10
I
N
4 Closed Withering Trough (10 nos.) G 5

5 Rotovane 25

6 Conveyor 2.5

7 Rolling Table ROLLING 1.5

8 CTC machine 20

9 Rolled Leaf Sifter / Googie 1.5

10 CFM 30
FERMEN-
11 Centrifugal Spot Humidifier Fan TATION

Food Grade Stainless Steel Sheet on


12 1.2
Fermenting Beds

13 Super Indirect Fired Coal/Firewood Heater DRYING 2.5


14 Speed Fibre Extractor 12
SORTING
15 Colour Sorter & 15
GRADING
16 Electronic Cleaning Machine 8

17 Tea Packing Table 1.5

Storage Bins with Dehumidification System PACKING 6.3


18
With Fan
4.5
19 Cartoon/Pouch Packing Machine

TOTAL 150

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. No Particulars Amount

1 Electricity 11.5

2 Coal/Firewood 8

3 Generator & Lorry Maintenance 4.5

5 Transport Charges for GTLs 10.4

6 Salaries 2.5
7 Taxes 0.50

8 Insurance 0.50

9 Wages 5.4

10 Packing Costs 4

11 Brokerage 2

12 Cess 1.5

13 Loading/Unloading Charges 0.20

14 Warehousing 1.6

15 Transport to Auction Houses 2.5

16 Agent Commission for GTLs 2.4

17 Repairs for Machines 5

TOTAL 62.5

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

Particulars Amount

Total Costs incurred in GTLs purchased-17 Lakh Kgs 170


@Rs.10/Kg
Made Tea Produced@1Kg/4Kg GTL 5.20

GROSS INCOME @Rs.65/Kg at Auction Center 338

TOTAL OPERATIONAL COST 62.5

NET INCOME 105.5

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. Years
Particulars
No 1 2 3 4 5

Investment Costs

1 Plant & Machinery 150 - - - -

2 Civil Works 100 - - - -

Operational Costs

3 Operational Costs - 62.5 65.5 70.2 75


4 GTL Purchased - 170 170 178 178

Total Cost 250 232.5 235.5 248.2 253

Provision for Depreciation


15 13.5 12.15 10.93 9.84
(10%)

Salvage Value - - - - 88.5

Gross Benefit Nil 338 338 345 345

Net Benefit Nil 105.5 102.5 96.8 92

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 nation’s 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 Government’s 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.

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