Pratim Ranjan Bose
( My keynote address at the
“National Seminar on Sustenance and Development in the Tea Gardens of Northeast
India and North Bengal”, organised by Jadavpur University on March 27, 2017)
I am indeed delighted to be
present at this august gathering of researchers. Thank you for inviting me in
the National Seminar on Sustenance and Development in the Tea Gardens of
Northeast India and North Bengal.
As I was going through the
deliverables over the next two days, I didn’t find reference to one aspect: the
business of tea plantation. I, therefore, will use this opportunity to link the
social aspects with the business fundamentals to get an idea about life in tea
gardens in the years to come.
As I look at organised tea
plantation sector, I believe it is in deep trouble and is headed for serious
uncertainties in a decade or so leading to wide-scale disruptions.
It will have most serious
repercussions on the life of Tea Tribe or the migrants from Central
India. By repercussion, I am not merely talking about job loss but,
there may also be repeat migrations as is already evident in North
Bengal. In Assam
where production comes almost entirely from tea tribes, social conflicts may
arise.
The social problems might be
averted through rapid growth in investment and job creation in other sectors in
both North Bengal and Assam.
But the landscape of organised plantation should undergo a major change. Growth
in other business opportunities in the NE may also open options for the
planters to switch into more profitable businesses, leaving tea production
mostly in the hands of small growers.
The profit opportunity in
plantations has reduced drastically vis-Ã -vis risks. Technology solutions that
will replace labour reducing production costs and, large scale reform in
government rules and regulations may save the day for plantations.
Before I elaborate on the issue, I
would like to add a rider. I looked at the issue from a journalistic
perspective, meaning there is ample dose of observations. It would be the task
of researchers like you to see if there is empirical truth behind those
observations.
Tea in Trouble
That tea is in trouble
can be understood from many ways than one.
In 2012, the Parliamentary
Standing Committee on Commerce pointed out that India is the highest-cost producer
among all tea producing nations, while the price realisation has remained
stagnant.
At the country’s largest auction
centre in Guwahati, the average price tea per kg during 2011-2016 was Rs 141, Rs
135, Rs 143, Rs 145, and Rs 140, respectively.
Compare this with normal
inflationary pressure, especially on three major attributes water, energy and
fertiliser and you know bottom-line is under pressure.
The cash component in Tea wages, which
approximately 70% of the production cost, though still very low have also
increased. In Assam,
cash wages are up by three times to Rs 137 a day since 2001.
The impact of the current price
stagnation is significant because it is coming on the back of a six-year-long
price crash during 2000-2006. Add to this, increasing climate risks and the
industry facing serious headwinds.
Producing quality tea is a
solution but only as long as its preserve of very few.
Plantation has no control over retailing which
is a domain of marketing companies. Naturally, any mass shift towards orthodox
tea or some other variety, which is now fetching higher prices; will be futile.
This is why most of the gardens prefer to produce plainer verities and operate
at low-equilibrium.
Complaints about lack of investment by planters
are not entirely true.
Over the last decade or so, planters in North India paid significant attention to re-plantation. As
in 2012, the average age of bush
in North India was 35 years, which is reasonable.
But in South India, the age profile was as
high as 68 years. As an industry South Indian tea plantation should be headed
for more serious troubles in the days to come.
It would be interesting to point out here that
while its industry went downhill, South India
offered a better life to tea workers. I measure this by the incidence of
education and upward mobility. Over the last 20-25 years, South Indian gardens
produced many engineers and government officers. Such instances are abysmally
low Assam and West Bengal.
Another way of measuring the status of
plantation sector is by the presence of corporates and their influence in the
Indian economy or politics.
I joined the profession in early 1990’s. That
was a time when companies with retail marketing muscle like Tata Tea or HLL
were also major producers of tea. There were many foreign corporates like
Williamson Magor, Warren Tea. Assam Tea was a major company.
Twenty-five years later, big corporates mostly
exited South India. I know one company stuck there
because they are not getting an exit opportunity. Though officially, 40% of the
1000 odd gardens in the North (including approximately 800 in Assam and 195 in
West Bengal) are members of India Tea Association, there are barely two-three
corporates of repute and size in tea (like Goodricke, McLeod Russel).
The tea industry has lost the clout in the
national economy.
West Bengal suffers from low yield, high cost
and very low profitability. Unofficially barely 30-35 gardens (out
of 195) make profit. The rest are carrying on by cutting corners, which
includes PF default or not investing adequately in agri-input. So, future
sickness and closure are imminent. And tea gardens once sick never find buyers.
The situation is better in Assam due to high yield, lower
costs. Yet as in August 2014, 228 gardens,
approximately 30% of total, report PF defaults– a clear sign that people are
cutting corners.
Except some chit-fund buying, M&A (merger
and acquisition) activity is very rare in tea for more than a decade. McLeod, world’s
largest tea company has no plan to invest in India. They are investing in Africa
and Vietnam.
Government, Tea Board responsible
The root of the problem is very deep.
First, tea plantations were set up by the
English to cater the overseas markets. The model got a new traction through
Russian buying during the cold-war days in the 1970’s, when new plantations, like
Namsung in Dibru Shaikia forests in Dibrugarh, came up. Probably, the
government of the day encouraged it for foreign exchange earning. As in the
past this time too, the industry followed the wrong practices of bringing cheap
labour from the Central India.
Taking advantage of the Rupee-Rouble trade and
captive market in the erstwhile COMECON, Russians used to offer artificially
high prices for Indian tea. In Calcutta Auction Centre other buyers used to
wait till Russian buying was over. In other words prices in domestic market
enjoyed traction in the export market.
The price-traction ended with the collapse of
the USSR
in December 1991. In that year, India
produced 754
million kgs of tea and exported 203 million kgs or 27% of total production. In 1992,
the very next year, our exports dropped to 175 mkgs. Now jump cut to 2015-16. India
achieved record production and exports of 1233 kmgs and 233 mkgs respectively. The
share of exports was down to 19 per cent. It was the best year.
Generally exports are stagnant at 200-210 mkgs range, for last 25 years vis-Ã -vis
62 % rise in production.
Increase in production at times of weak price
traction is an anomaly. It was possible due to completely wrong policy push by
the Tea Board and Government of India. While USSR
was breaking, Tea Board announced a plan to expand India’s tea production to 1000 mkgs
in 10 years. They also promised marketing push both in India and
abroad.
In the end, they were only successful in
increasing production. For quick increases, they opened a new avenue called
small growers or farmers, operating outside the purview of Plantation Labour
Act. To serve small growers came bought-leaf factories (BLF). Both the small
grower and BLF remained largely outside the clutches of various regulations
governing organised plantations. With low costs, small growers started flooding
the tea market.
Alarmed, some organised players took State
politics by its side to bypass to regulations. So came “project Gardens” which
are nothing but, small private lands taken on lease and stitched together. Plantation
Labour Act is not applicable in such gardens. There are 70 such project gardens
in West Bengal, all came up in the 1990’s, distorting the price economics.
The 471 mkgs capacity added over the last 25
years is mostly, if not entirely, through this route. The quality of such tea
is inferior. But since India
largely consumes tea blended with many other ingredients starting from Gur to
Ginger; quality is not a major issue.
Allowing contract farming and freeing organised
plantation from highly restrictive control-era regulations could have been a
logical free market option. That didn’t happen either. Tea Board wouldn’t lose
the opportunity to dictate every step of planters. There are even incidences of
holding up court approved merger proposals for years.
Over-regulated
A planter should renew five
licenses every year and has to deal with dozens of inspectors from the Tea
Board, Central Excise, Inspector of Factories, Weights and Meteorology, FSSAI, Employment
Exchange, Sales Tax, Agriculture Income Tax, Income Tax, Labour department, Revenue
Department, Provident Fund, Pollution Control Board etc. There is complete
inspector Raj in Tea. And, that only breeds corruption.
For State politics, large
workforce in organised plantations is a vote bank. They are not only asking
planters to pay higher cash wages, which is a just demand; they are also
forcing too many social responsibilities on planters which are contrary to the
free-market mechanism.
During the peak of price crash in
2003, Assam
handed over a new prototype for labour quarters that includes one living room, two
bedrooms of 100 sq ft each, a verandah, kitchen and toilet. Naturally, the
industry failed. And failure means more bribe. The other option is compromising
with quality.
As per rules tea gardens are to
provide rice or atta at 50 paise a kg to the plantation worker. Traditionally
State offered low-cost supplies to tea estates. Assam now withdrew the facility, forcing
the planters to fill three times wider gap.
I am sure many planters will even
try to manage finances by compromising seriously on quality. Workers are also
learning the trick fast. Since there is no AADHAR in Assam, enjoying dual benefits of
State provisions and garden supplies is common.
Way ahead
Taking small growers into
consideration, who now contribute nearly 40% of production, tea is still a
factor of cheap labour and is increasingly becoming so due to expanding share
of small growers. Considering market glut, this surely deserved a shakeout of
smaller players, opening space for only a few deep-pocket long term players
focusing on high-value teas.
I recently met two small but very
interesting planters. Both are engineers by training and of the same age group.
One joined the family business straight from the college in early 1990’s. The
other one was working for a vendor of Apple in the US.
He comes back to parents and entered plantation in 2009.
Both did excellent work over last
10 years. One created a local brand that fetches a premium. Teas produced by
the second were listed among the top five at Guwahati auction in 2016. Yet, both
are now looking for a slow but sure exit from tea. Since there are no buyers
for plantations, slow killing is the only option.
I don’t think politics or trade
union is prepared for this. The government still talks about tea tourism, which
to my mind is no solution at all. Allowing planters to switch over to other
commercial farming, was a possibility. But except in growing creepers on shade
trees, they have no other right. Tamil Nadu planters are better off as they own
the land.
It is to be seen how things pan
out especially on tea tribes. Hard to believe that one-third of the State
population in Assam
lived in estates without land rights for so long. They have already started
flooding the cheap labour market in the region. Any further pressure may create
cause for conflict.
Meanwhile, in Bengal Tea Tribes
are the worst sufferers of the all-pervading sickness. Unlike in Assam, here the
workspace is divided between Tea Tribes and the Nepalese, who were
traditionally a tool to the management to divide and rule. With time they have
shown right aspirations to control power and resources. Their economy is also
boosted by remittance earning. At the closed Bandapani tea estate the Nepali
line is dotted with palatial buildings and cars, trucks etc.
In contrast, tea tribe is often
deprived of the legitimate dues like old age pension from the government due to
lack awareness, low political aspirations and low adaptability.
***
