A prospective tax hike dampens the euphoria over a record crop
THE mood, on the surface, was upbeat. At its annual general meeting at Tezpur, the Assam Branch of the Indian Tea Association (ABITA) had reason to rejoice: this year saw a record crop of over 425 million kg out of the total production of nearly 785 million kg nationwide. But the euphoria was tempered by the realisation that all is not well with the industry.
To begin with, the industry is apprehensive of an all-round tax hike in the coming months. The Assam government, strapped for cash, is likely to increase at least two major taxes levied on the tea industry, adding to the already rising cost inputs. The state's finance department now wants the tax on green leaf to be raised to 50 paise per kg up from 18 paise. Another hike is likely in the land revenue charged from the industry. Currently the rate of land revenue charged in various districts ranges from the lowest at Rs 1.25 per bigha to a maximum of Rs 4 per bigha in high tea producing districts. The state government has now indicated that it wants to raise the land revenue to Rs 12 per bigha across the board.
Says ABITA secretary, Pradip Bhattacharyya: "The proposed hikes would be disastrous for the industry already burdened with rising costs and heavy taxation. We have, therefore, held discussions with the government to work out a mutually agreeable rate of taxes." Adds Nitin Baruah, secretary-general of Tea Association of India (TAI), which mainly represents smaller and proprieto-rial tea gardens: "For individual planters and single-garden companies, a massive tax hike will come as a crippling blow. Already the financial condition of most of our member gardens is precarious." One estimate puts the cost of one kg of 'made' tea in Assam at Rs 62 per kg whereas the average price of tea sold at the Guwahati Tea Auction Centre over the last two years has fluctuated between Rs 50 to Rs 55 per kg.
Planters point out that in West Bengal and Kerala, other major tea producing states, the cess on green leaf is just 12 paise. Even the agricultural income tax in Assam, at 60 per cent, is a good 10 per cent higher than West Bengal, according to a source in a leading tea company. Even at the current rate of taxation, the tea industry's contribution of nearly Rs 150 crore is the highest collected by the state government.
The state government, aware of the tea industry's feeling, is proceeding cautiously. Says Revenue Minister Zonnath Sarma: "No final decision on increasing the land revenue has been taken yet." The state government is also taking its time in reassessing the lease on the land occupied by the tea gardens although a section of the intelligentsia wants the government to take away a substantial amount of land from the industry and use it for other crops.
The state government grants-the lease for a period of 30 years. While the lease is coming up for review in certain districts later this year, in other areas, it is not due until the year 2000. In any case, reassessing 30 lakh bighas of land currently under occupation by the 850 tea gardens of the state, is not a task which can be done at one go, revenue department officials point out.
A high-powered committee comprising top officials of the state government and office bearers of various tea organisations has been constituted to fix the cess on green leaf and land revenue rates. The tea industry, sources said, is willing to pay up to Rs 8 per bigha as the maximum amount of land revenue as against the Rs 12 demanded by the state government. Similarly, the industry is willing to pay a little more than 18 paise per kg of green leaf but not 50 paise as suggested by the government. As a leading planter said: "The government must get rid of the tendency of treating the tea industry as a milch cow."
Increasing productivity is one obvious answer to the problem. Currently, the average yield in Assam per hectare is 1,700 kg compared to 3,000 kg in the South. Value-addition is another way out feels ITA chairman and Tata Tea Managing Director R.K. Krishnakumar. The tea industry is negotiating a Rs 2,600-crore World Bank loan to utilise for modernisation of factories, research and development and for welfare measures for the workers.
What's clear is that if precautionary measures are not taken soon, the 175-year old, Rs 2,000-crore, Assam tea industry is headed for difficult times.