Rating agency ICRA has said that the proposed wage hike in the tea estates of West Bengal is likely to see a margin contraction of the bulk tea players by around 500 basis points at a steady state level of realisation.
"However, the impact is likely to be lower for bulk tea players focused on producing quality teas, given the high premium their produce fetches over the market prices. An analysis of the auction prices during CY2022 indicates that prices of North India (Assam and West Bengal) crush, tear, curl (CTC) teas produced by the top 50 estates, at Rs. 306/ kg, was 59% higher than the overall auction average," said Kaushik Das, Vice President & Co-Group Head - Corporate Ratings, ICRA.
ICRA, in its latest report on bulk tea, has highlighted that the total wage rate per day (including bonus, other cash components, and benefits) for tea estate workers in West Bengal is estimated to increase by 6% w.e.f. June 1, 2023, given the recent advisory issued by the Labour Department, of the West Bengal government to hike the basic wages by 8% to Rs. 250/day from Rs. 232/day.
This increase is part of the long-term wage settlement, pending finalisation of the revision in minimum wages. As per ICRA estimates, the proposed wage hike would increase the cost of production by Rs. 9/ kg, resulting in margin pressure for tea producers in West Bengal, which contributes around 37% to the North India production.
Following the advisory issued by the Labour Commissionerate of West Bengal government with regard to the proposed wage hike w.e.f. June 1, 2023, the basic wage rate in West Bengal would increase to Rs. 250/ day vis-à-vis Rs. 232/ day currently in Assam. Wage rates in West Bengal and Assam have historically moved concurrently. Any near-term hike in wages in Assam, a major producer of bulk tea contributing to ~50% of the all-India production and ~60% of ..
Source Name:Economic Times