Bad harvest: CAG report shows how Orthodox tea subsidy was wasted 

Jun 02, 2024

Where did the subsidy given to encourage production of Orthodox tea go?

An audit conducted by CAG found that the subsidy was used for consumption by factory workers and distributed as samples and/or gifts.

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Orthodox tea is produced primarily for export purposes, and it fetches a higher price in the global markets.

Orthodox tea refers to loose-leaf tea produced using traditional (orthodox) methods, which involve plucking, withering, rolling, oxidation/fermentation. It focuses on preserving the singular virtues of the leaf resulting in fermented tea leaves and getting high prices. Compared to CTC tea, orthodox tea provides the most authentic tea experience. There are different grades of orthodox tea: Fine Tippy Golden Orange Pekoe, Flowery Broken Orange Pekoe and others. To encourage tea producers to increase the production of orthodox tea in the country, the Tea Board framed a scheme for the disbursement of subsidies for the production of Orthodox tea.

The Audit observed that there was no provision in the scheme guidelines to furnish the data regarding the quantity of Orthodox tea, exported by the producers so as to measure the benefit derived from the subsidy.

The Management, while accepting the facts, stated (June 2022) that the distribution of labour tea from the garden was customary and had been followed for long. Sometimes, the manufacturers distributed the samples/gift tea as a marketing and promotion strategy adopted for domestic and international markets which helped in export also.

“The reply of the Management needs to be viewed in the light of the fact that the objective of the scheme was to produce Orthodox tea for export and hence the subsidy should have been limited to the quantity exported. Further, the distribution of Orthodox tea as labour tea did not fulfil the scheme objective, which aimed at the production of Orthodox tea for export purposes to fetch foreign earnings,” the Audit found.

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As per scheme guidelines, the subsidy was paid for the total production of Orthodox tea by the manufacturers.

“During scrutiny of records, Audit noticed that out of the total production, a considerable quantity of Orthodox tea was used for consumption by factory workers and distributed as samples/gifts etc. Thus, the subsidy was also paid for tea, used for the above purposes which defeated the very purpose of subsidy for the production of orthodox tea to promote/increase the export of Orthodox tea. Moreover, there were no records with the Tea Board from which it could verify the quantity of Orthodox tea exported by a producer for which the subsidy had been disbursed on earlier occasions,” the Audit found.

The Management stated that there was no provision in the scheme guidelines to furnish records by the beneficiary in support of the quantity of Orthodox tea exported for the said period.

“The reply of the Management may be seen in light of the fact that in the absence of any export data furnished by the producers, the impact of the subsidy disbursed under the scheme was not ascertainable and the Management was not in a position to assess the extent of achievement of the objective of increasing the export of Orthodox tea,” the Audit found.

As per general eligibility conditions for disbursement of subsidy, PF dues of the applicant tea garden/factory must not exceed Rs 10,000 at the time of submission of application and at the time of release of subsidy. In compliance with the above, the manufacturer has to furnish a copy of the latest PF challan payment receipt in support of payment of the latest PF dues.

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Audit observed that from the copy of the latest PF challans, only payment of current PF dues could be ensured. However, it could not be verified whether all the previous dues had been cleared. Hence, furnishing the latest PF challans could not ensure that the PF dues of the applicant tea garden/factory had not exceeded Rs 10,000.

“Hence, the conditions stipulated in the scheme guidelines regarding verification of PF challans were not adhered to before disbursement of subsidy. While accepting the audit contention, the Management stated (June 2022) that Tea Board had recently started verification of no dues certificate from the PF Authority. However, in the case of Assam, the PF authority declined to share the PF defaulter list,” the Audit found.

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