Plantation crops unable to cover cost in south amid global competition

With high wage levels in south India compared to other plantation regions, there are questions about the viability of the plantation industry

Plantation crops are not able to cover the cost in southern India and there is an urgent need to enhance the income by engaging in other activities, say planters. The region is not able to withstand global competition.

A E Joseph, president, United Planters' Association of Southern India (UPASI), an apex body of planters in Southern States, said "the year that has gone by, was quite stressful for all the planters, as they faced distress due to climate change and by not being able to fetch profitable prices for the plantation commodities."

As the wage levels in south India are very high compared with the other plantation regions, significant consequences were seen on the viability of the plantation industry, said Joseph. 

Compared with the 1995 wages in Tamil Nadu, Karnataka and Kerala with the price of tea, coffee and rubber respectively, tea wages have gone up by 7.7 times but prices have increased by only 2.5 times; coffee wages have gone up by 9.7 times whereas arabica coffee prices increased by 1.9 times and robusta by 1.6 times; and rubber wages have gone up by 8.2 times compared to the price increase of 2.5 times. 

Inflation has gone up by 4.38 times in the last 25 years. If the average yearly inflation rates is factored in, from 1995, prices of tea should have been Rs 238 per kg now, whereas it is only Rs 111 per kg; coffee arabica is at Rs 193 per kg instead of Rs 440 per kg and Robusta in at Rs 134 per kg instead of Rs 370 per kg; rubber in place of Rs 223 per kg is at Rs 134 per kg.

South India had the lowest price realisation in dollar terms — at $1.45 per kg — despite the fact that it witnessed a drastic decrease in production. Export last year stood at 256.1 million kilograms from the region, which accounts for 67 per cent of the growers and 55 per cent of workers engaged in plantation activities all over India. To be specific — 1.26 million growers — most of them small and marginal are cultivating plantation crops in 1.157 million hectares and employee 1.347 million workers. The value of plantation commodities in 2017-18 was estimated at Rs 44,579 crore and the export realisation at Rs 12,910 crore. South's value of production contribution is 59 per cent, whereas its share in export is 69 per cent.

While insisting that there is an urgent need to enhance the income by engaging in other activities, Joseph noted that at present plantations are not permitted to engage in other activities other than the specific plantation crop. 

The Commerce Ministry has agreed to take up with the state governments to allow utilisation of 20 per cent of the land for other purposes other than planting. NITI Aayog also indicated that 'agricultural laws passed by various states between 1950s and 1970s are highly restrictive. He urged the Centre to help the plantation industry by implementing necessary legislative measures.

He added, "government policy as recommended by Dr Swaminathan Committee is to fix Minimum Support Price (MSP) at 150 per cent of the cost of production. Plantation commodities are not covered by MSP."

NITI Aayog is examining the need to replace the MSP by a minimum reserve price, which could be the starting point for auctions at mandis. Similar provisions should be mandated for the plantations commodities auctioned.

UPASI claims outstanding (money under various schemes) for tea growers alone around Rs 61 crore in South. Releasing the money would help planters tide over the critical financial crisis they are in today, to some extent.

The Government of India may consider coffee up to the stage of “curing” as an agricultural produce and not to be taxed under Rule 7B(1) and tax coffee only from the stage of roasting and powdering, where the actual value addition take place. This would enable the grower to sell coffee after curing thereby enabling them a better price, he requested.