North Indian bulk tea players may witness contraction in financial performance in FY22 due to interim wage enhancement of plantation workers and a likely decline in prices in the second half of the year, according to a report.
The Assam government had notified an interim enhancement of wages for tea plantation workers by ₹50 a day with effect from February 22, 2021, till the finalisation of the revised minimum wages proposed earlier, ICRA said in a report.
However, the wage rate increase was stayed by the Gauhati High Court on March 16, while hearing a petition filed by the Indian Tea Association and several other bulk tea companies. The court also allowed the tea companies to set the enhancement until the final hearing was concluded.
Based on these instructions, the Indian Tea Association, by end-March, decided to increase the daily wages in Assam by ₹26 per day, in line with the wage rate increase announced in West Bengal in January.
The report further said while initial bulk tea prices are robust, a negative bias was likely from August, once the teas of the peak production months are available.
The extent of the decline in prices in the second half of the year would determine the level of financial performance in FY22, it noted.