DARJEELING – STORM IN A TEA CUP

By Ruma Dubey

Darjeeling. What does the mere mention of this name bring to mind?

Tea gardens and Kanchenjunga (K2). Yes, the toy train too.

Today, sadly, the lush green tea gardens and lofty peaks of K2 are shrouded in turmoil. The fight for a separate state by the Gorkha Janmukti Morcha (GJM) has quietened the Darjeeling hills.

The agitation started from 15th June and since then, there has been an indefinite close down. The 87 tea gardens, which should have actually been in the peak season which earns them 40% of the annual revenue are lying vacant and forlorn. Tea shrubs which should have been plucked by now have grown into trees and there is no more tea coming from these world class tea gardens. The GI tagged tea, which wakes up people right from India to Europe is itself in a deep sleep and the tea industry is sitting on a loss of some Rs.250 crore.

The tea industry, which has given Darjeeling its identity, is collateral damage in this political war.  Isn’t this how it always happens? When politics takes center stage, it is people who suffer.

The tea industry in Darjeeling employs some 4 lakh people, directly and indirectly. For the sector, cost of labour is its highest cost and even after the bandh is lifted, the after effects of this will be seen in the books the tea companies. Its almost two months since the bandh; when the strike gets called off, all the 87 tea gardens will clamor for labour and that is when the sector will face higher labour costs and shortage as all will require pruning and weeding at the same time and all in super urgency mode. The festive season and then the winter months – apart from labour shortage, surely India and the world will face acute shortage of Darjeeling tea this year. Actually not just this year, many say that if this not resolved soon, it could cause irreversible damage and many tea gardens could be forced to shut down.

The most badly affected listed company would be Goodricke India. It operates seven gardens in Darjeeling, estimates a loss of 10 per cent in annual production and a definite hit on the bottomline. One of its gardens is currently loss making but there is fear that if the agitation continues, the other six could also get dragged into red.

Goodricke turned in a good performance for Q1FY18 with net profit rising 57% (YoY) at Rs.22 crore on a 24% increase in revenue at Rs.152 crore. EBITDA for the quarter was up 66% at Rs.23 crore and margins jumped up sharply from 11.3% to 15.1%. This clearly shows- the going was actually very good for tea companies in Darjeeling but post the agitation, Q2 is sure to show strife.

Warren Tea, Jayshree Tea, McLeod Russel are also to be impacted.  Tata Tea of Tata Global as it is known now had de-risked itself long time ago -  it has progressively shifted away from the risk-laden plantation business into the marketing of tea.