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| India Infoline Sector Database | Wed, 18-Feb-2004 17:23:15 IST (GMT+5:30) | |
| Tea | ||
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Industry characteristics Productivity and quality The art of plucking, fine-tuned over the last 200 years, requires two fresh leaves and a bud to be plucked manually. Tea productivity can be measured as per unit of labor (man year) and per unit of land (hectare). Mechanized plucking (when labor is in short supply or expensive) enhances productivity, but with compromise on quality, as coarse leaves also get plucked. When tea is in short supply, some producers increase productivity by allowing plucking of coarse leaves with fresh ones. When premium for quality rises, producers improve the quality by compromising on productivity. The productivity also depends on the age of tea bushes, genetic material, irrigation, fertilizer, cultivation techniques, etc. Replantation (typically 2% of crop pa) to replace old bushes is done to improve productivity. Labor intensity This industry is very labor intensive. Labor cost is generally fixed and therefore lower production would result in higher unit cost of production. The proportion of variable elements in labor cost depends on labor legislation and extent of casual and temporary workers employed. If the production suffers on account of bad weather or pests, the per unit cost of production goes up significantly. Long gestation Tea bushes mature for commercial exploitation in 5-7 years and remain productive for over 100 years. Major part of capital expenditure is to be incurred in first five years, which then yields return over the next 100 years. Commodity nature Tea prices fluctuate widely with demand supply imbalances. The commodity is perishable and demand is relatively inelastic to price. While demand has a secular growth rate, supply can vary depending on climatic conditions in the major tea growing countries. Unlike other commodities, tea price cycles have no linkage with the general economic cycles, but with agro-climatic conditions. Inconvenient but healthy drink Tea is a very inconvenient drink to brew. The tendency to form a creamy layer of caffeine - tannin adds to the inconvenience. Tea besides having properties of fatigue amelioration has chemicals, which help in maintaining cholesterol levels and in preventing cancer. However, research work on the subject is not conclusive. Organized industry Tea industry is an organized agro industry. This implies that labor laws exists and since the dominant mode of tea trade is through auctions, a large number of small producers get fair prices.
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