International Tea Day: Effects of Demonetization on the tea industry

Tea is more than just a drink. It’s a connection among Indians. Tea generates valuable revenue through exports, filling the country’s coffers with foreign currency. On the 12th International Tea Day, let’s look at the effect demonetization has been having on the industry and its workers. The government has banned Rs. 500 and Rs. 2000 currency notes. Around 86% of the money in circulation has been invalidated. The tea industry on the whole has taken a bad hit, as it is one of the few businesses dealing in pure cash. Of the industries hit, it stands out for the drastic effects of demonetization. On the 12th International Tea Day, let’s look at the effect of Demonetization on the Tea Industry.

The industry faces problems at every step, ranging from plucking to selling the produce. Most of the tea workers receive payments in cash. Tea garden owners are unable to pay wages to laborers due to which production is falling down and even the market is nose-diving.

“The market has already fallen by 10–15% since there are no buyers for tea and its products. In fact, we are now ready to sell it at 10–15% lower price; however, the market is still not ready to accept. We are really concerned as there are predictions that the market will fall further,” says Satish Ghosh, a tea factory owner, adding: “Tea industry solely depends on cash. Particularly, laborers and the running of warehouses requires a constant supply of cash. Most workers don’t have a bank account. Consequently, we are facing lots of problems as without cash, we can’t pay our laborers.”

He is right. Customers usually pay in bigger denominations and have few small denomination currencies.

“Our tea business will not work with small currency notes since the payments take place in crores and lakhs. Payments in installments can create a lot of problems. We are losing business fast,” he said.

There is another problem too. Workers are usually located far from towns; this makes accessing banks and ATMs difficult and most of them don’t even have bank accounts. Additionally, the workers are usually catered to by small mobile shops that sell everything of day use and deal only in cash.

“We have been left completely stranded. We can’t buys things of daily use like flour and wheat. We are not getting our wages too. We may have to go back to our village,” says Mukesh Kumar, a tea plantation worker from Begusarai, Bihar.

With the worsening situation and the government hardly doing anything, people from the industry are left to their own devices. For the bare minimum, workers will have to be educated about financial services, opening back accounts, savings clubs, household budgeting, etc.

Demonetisation is killing businesses and all in the name of black money and now digitization. It would be interesting to see how these industries survive the cashless drive. Maybe only the fittest will survive.

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