Tea: India should strive to regain pre-eminence

If the tea plantation industry is to survive and sustain itself, the production margins must improve substantially.

India has lost its leading position in tea exports over the last 20 years due to failure in facing the competition from China, Sri Lanka and Kenya. Unless the margins of major companies in the industry improve, the country will be reduced to a small player in the international markets, according to the findings of a Commerce Ministry Committee on the competitiveness of the industry.

The panel findings gain a renewed significance in view of the statement made by Union Minister of State for Commerce and Industry Jyotiraditya Scindia recently that tea and spices were the two commodities that India could develop as brands in the international markets.

Since the scope for expansion of tea growing areas is limited, the committee, headed by former secretary S. N. Menon, recommends that India should raise its exportable surplus by increasing productivity, which will bring down the unit cost to some extent. India already has a handicap of being a high-cost producer.

Chiding the industry for having failed to respond to the global changes in consumer preferences in terms of product-mix (as the shift towards larger amounts of orthodox production has not been adequate), the panel admits that further cost reduction can take place through a host of measures within the control of managements but reduction of cost of certain items require the cooperation and action by unions, State and Central governments.

As the flag-bearer of Indian teas, Darjeeling should receive some special considerations. Due to its low productivity and high costs, which will continue to be endemic, some measures are needed to mitigate costs. This should include supply of steady and stable grid power and extension of transport subsidy, the panel report says. The average cost of production in the industry is Rs. 350 a kg, which can increase to Rs. 600 a kg during specific periods, the committee observes.
Problems of the South

The committee says that the acute shortage of labour, especially during the peak plucking season, is affecting the entire South and machine harvesting needs to be encouraged.

Tamil Nadu finds a special mention in the report, which says that the Government should speedily resolve the deadlock on the Gudalur Janmam Estates’ case for the tea industry’s benefit. There are also problems on application and interpretation of land and environment laws which should be settled. The State should set up an SEZ in Coimbatore with special facilities for tea, the committee says.
Social overhead costs

On the issue of social costs, the committee calls for a review of the 1951 Plantation Labour Act as it feels that many of the provisions have lost their relevance. Statutory social welfare measures as mandated in this Act add to the garden cost and reduce the competitiveness of the tea industry. It also recommends that as in Sri Lanka, the Union Government may consider the transfer of funds for programmes to be implemented in mitigating the burden of social overhead costs by extension of government schemes to the plantation sectors through a separate trust or an agency under the aegis of the Tea Board.

Indications that the government has already started thinking on these lines were evident during the recent visit of Mr. Scindia when he said that social cost was a major issue for the tea industry and the government was examining the possibility of as to how the Centre and the State could bear this cost.

According to the committee, if the tea plantation industry is to survive and sustain itself, the production margins must improve substantially.

Within the sector, margin improvement can take place by cost reduction. Productivity-linked wages on the lines of West Bengal and Tamil Nadu model will produce substantial cost reduction. There is a substantial difference between farm-gate price and the final retail price, all of which go to layers of intermediaries. A part of this difference must be made available to the producer.

Noting that the tea industry is characterised by high manpower intensity, the committee says that because of historical reasons, the industry has been burdened with social responsibilities to the workmen which should rightfully have been the territory of States. The industry has repeatedly pointed out that these provisions were initiated in early years when employment in remote areas was difficult because of inadequate facilities. However the Plantation Labour Act, 1951, which was enacted to make it incumbent on tea estate managements to provide certain facilities still exist, directly impacting the cost of tea production.

An inter-ministerial committee constituted by the UnionLabour Ministry has dealt with the subject in detail and has worked out the cost of social welfare provisions at around Rs. 5 a kg, excluding concessional rations in the North. The various components of labour welfare are medical, fuel, housing, education, drinking water, sanitation and conservancy. The committee finds that though there has been a substantial recovery in prices in 2009, continuing onto the current year, medium and long-term viability of tea production continues to remain uncertain. In a representation to the 13th Finance Commission, the Consultative Committee of Plantation Associations (CCPA) stated that the high cost production in India has been a critical factor impending India’s export competitiveness. It also sought reimbursement of the welfare expenditure. The report mentions several Central government schemes under the control of the Union Ministry of Rural Development, Panchayat and Urban Development and the Ministry of Social Justice and Welfare.

The schemes which are run by the government and which have the potential of being dovetailed into the tea sector schemes are: social security schemes, heath and hygiene schemes, employment generation and livelihood schemes like NREGs, education schemes such as the Sarva Shinksha Abhiyan.

However, although an indication of the government’s inclination to examine this issue was given by Mr. Scindia during his last visit to Kolkata, it is not easy to provide coverage and benefits from these schemes to the families of the workers living in the tea plantations. Among the issues which make the task difficult is the fact that ownership of land on which the workers stay is neither with them nor with the tea garden managements which only hold it as a lease. Sri Lanka has been able to extend government schemes through a trust through which funds are canalised. This could be examined by India too, the committee observes.


From The Hindu