Cost/Benefit Analysis of Tea Production in Pakistan

Abstract

Tea is common beverage all over the world. It starts production in the fourth year of tea plantation. Its production increases for the first three to four years and reaches the maturity stage of maximum production in the ninth and tenth year. After reaching the maturity stage it is deeply pruned every fifth year to maintain it at desirable height, which is suitable for fresh leaves plucking. Pakistan has long tradition in tea consumption. However, its cultivation started in 1986 at Shinkiari, Hazara Division. Presently, 700 acres of land is under tea plantation. The aim of this research is to identify and evaluate various determinants of production, cost of production and return of tea cultivation in Hazara Division. The study overviews the existing tea production status and estimates its cost and revenue using primary data. To assess financial viability method used is long term benefit-cost analysis. The analysis is based on 25 years and 80 years data. The benefit-cost ratio is calculated for an average grower and the results show that tea is presently showing no profit-no loss situation at farm level in Pakistan. The result is not different if analysis is based on 25 years or 80 years data. Tea growers make an initial investment for 3-4 years without any returns and then wait up to year 28 th to 29 th to reach breakeven point. Credit providing institutions should take note of this fact and make plans to help tea growers in this period of tea production. Agriculture experts (researchers and extension personnel) should pay attention to the need of reducing the breakeven period through efforts aiming at greater productivity of tea per unit area because presently there is a big difference in actual and potential production of tea in Pakistan at farm level. Agriculture extension personnel should arrange special training to enhance labor productivity in picking fresh leaves per day from an actual average of 20-25 kg/ day to potential average of 35 kg/day. The government should take step to increase the present purchase price of Rs. 15/kg of fresh tea leaves to a level acceptable to both the tea farmers and government.