The wage hike, as per ICRA estimates, would lead to an increase in the cost of production by Rs. 14 per kg for bulk tea producers based out of Assam, which contributes 60% and 50% of North India and all India production respectively.
ICRA, in its latest report on bulk tea, has indicated that the total wage rate per man-day (including bonus, other cash components, and benefits) for tea estate workers in Assam is estimated to increase by 9% with effect from August 2022, given the recent announcement made by the Assam government on increase in the basic wages on an interim basis by 13% to Rs. 232per day from Rs.205 per day.
The wage hike, as per ICRA estimates, would lead to an increase in the cost of production by Rs. 14 per kg for bulk tea producers based out of Assam, which contributes 60% and 50% of the North India and all India production respectively. Full-year impact in FY2023 would, however, be lower at Rs. 9/kg, given that the revised wage rate in Assam is applicable only from 2022.
Commenting on the recent announcement by the Assam government Kaushik Das, Vice President and Co-Group Head, of Corporate Sector Ratings, ICRA, said “Despite the back-to-back increase in wage rates in West Bengal and Assam from January and August 2022 respectively, which together contribute around 80% to the all India production, the pressure in the margin of large bulk tea players in North India (NI) may not be material, given the considerable increase in the prices of good quality crush, tear, curl (CTC) as well as orthodox teas in the recent past. The price trend is expected to be sustained, given the flattish trend in NI production, which is expected to support the CTC prices. An 18% drop in Sri Lankan production during the first seven months of calendar year 2022 is expected to keep the orthodox tea prices also at a significantly higher level on a Y-o-Y basis.”
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