Authored by: Arunav Chetia
Cover Photo taken by: Anuradha Roy
On August 1, 2019, the Indian Tea Association (ITA) made a public appeal to both the Centre and the state government of Assam for urgent intervention for the survival of the tea industry. Subsequently, the Consultative Committee of Plantation Association (CCPA) made a press statement on August 20 that the tea industry might not be able to pay more than the minimum 8.33% bonus under the Payment of Bonus Act, 1965.
On August 24, 2019, members of the Assam Tea Tribes Students’ Association (ATTSA) blocked National Highway 37, in Upper Assam’s Dibrugarh district, demanding a 20% Durga Puja bonus for tea workers, like previous years. The Assam Chah Mazdoor Sangha (ACMS), the largest tea labour union in the state, too, criticised authorities for not releasing their demanded bonus [1]. For an industry that provides direct employment to 12 lakh people, and supports more than 30 lakh dependents of tea garden workers [2], the tea industry is confronted with several challenges that are threatening its long term viability.
The Assam government was quick to respond to the situation, and announced that it would provide the 20% bonus to all the tea garden workers across the state ahead of Durga Puja celebrations. This, however, is just the tip of the iceberg. At the core of the ITA’s concerns about the ‘survival of the tea industry’ are falling profits due to market dynamics and a long-standing demand of tea workers for better wages and facilities. This paper shows the current state of affairs in Assam’s tea industry through the workers’ and the planters’ perspectives, and its overall implications on the state economy.
TEA PLANTERS’ PERSPECTIVES
For generations, the tea industry in Assam was a symbol of luxury, with tea growers enjoying the legacy and lifestyle of the British era. In the 1960s, the Indian Government abolished the managing agency system, which destabilised English stronghold on Indian tea estates and forced them to walk out of the tea plantations. Assam had the largest domain for tea plantations and, subsequently, became the largest producer of tea in the world.
Over the years, the tea industry has played a vital role in the state economy, employing about 17% of the Assam workforce [3], which is almost 1/6th of the population. According to the Indian Tea Association and the Consultative Committee of Plantation Association (CCPA), the two apex bodies of plantation owners and tea companies, there are several factors responsible for the current situation, some of which are mentioned below:
a) Supply and demand and competitiveness in the global market
Industry data shows that supply of tea has been outstripping its demand in recent years, leading to a fall in prices and profits. According to the CCPA, tea production has increased from 979 million kilograms in 2009, to 1339 million kilograms in 2018 [4]. However, the domestic per capita consumption has not kept pace with the rapid increase in production, sending roughly 100 million kilograms as surplus to the next year’s inventory [5].
b) High costs of production and falling prices
In the last 5 years, the production cost has grown at a constant rate, while tea prices have remained stagnant. There has been a decline in domestic demand for the more expensive tea variety with cheaper tea varieties available in the market, contributing to a fall in the profit margins of the tea industry.
Most large companies, like McLeod Russel India Ltd and Amalgamated Tea (Tata Group), have either exited or are concentrating only on the retail business [5]. Since the tea industry is highly labour intensive, the bulk of the input cost goes towards labour wages, fertilisers and other facilities, such as housing and medical, of the tea workers. Big companies are therefore reluctant to operate in the old system of production due to rising input cost, less demand and a fall in exports.
Most of the big tea producing firms are facing liquidity issues, and nearly 30% of Assam’s tea gardens have defaulted on their Provident Fund obligation, indicating a challenging situation [9]. There is a need for sustainable pricing practices to enable investment and long term viability of the industry.
c) Proliferation of small tea growers
The post-liberalisation period of the 1990s saw a phenomenal growth of tea gardens in India, mainly due to an increase in the number of small tea growers in Assam. In the tea belt of eastern Assam, unemployed youth in large numbers started growing the crop, even in land parcels as small as 3 acres. The arrival of small tea growers changed the demand-supply ratio by bringing in a huge amount of tea, which heavily influenced the market price. Within the next two decades, small tea producers contributed close to 52% of production in the state. According to the CCPA, there has been a 36% jump in annual tea production attributable to rising output from small tea growers [4].
The growth of small tea growers also affected the quality of tea. Small tea growers, ever since their proliferation in the 1990s, started hiring unskilled labourers at low wages to produce more at low input costs. However, not much attention was given to improve the quality of tea. Additionally, since they grew on a small scale and did not own manufacturing facilities of their own, they sold the leaves to larger tea estates or factories at a lower price. As a result, the quality of tea was adversely affected, and the demand for Indian tea in the international market declined due to competition from countries like Sri Lanka and Indonesia.
Now, even the small tea growers are not able to obtain better prices for their produce as market prices have not increased in accordance with rising input costs. Small tea growers are obtaining around an average of Rs. 13-15 per kilogram, while the input cost is also around Rs. 12-14, which is making it difficult for them to sustain their businesses [5]. Moreover, since most of these tea gardens are not registered, they do not receive government subsidies and other financial benefits. As a result, there is a growing concern about the survival of these small gardens in the near future.
d) Falling productivity and challenges with storage
Most of the tea gardens in Assam are very old and in poor condition. Nearly 50% of the tea bushes in the plantations are more than 50 years old, which has impacted the quality of tea and led to a decline in productivity [10]. There is, therefore, an urgent need to replant older planting areas with new, modified tea types, in order to get good flavour and optimum production.
Another major issue has been the shortage of storing facilities. Due to inconveniences with transportation and a lack of storage facilities, most of the premium quality tea absorbs moisture from the atmosphere, which results in deterioration in quality.
e) Changing climatic conditions
The ongoing and future impacts of climate change have generated serious concerns for tea growers. Erratic weather conditions have hampered the quality of tea and its demand in the market. Studies done to gauge the extent of climate change in Assam conclusively indicate that the state, and particularly the Brahmaputra Valley, has been witnessing changes in rainfall pattern and temperature in recent years. The situation deteriorated further this year when floodwater submerged 1,53,211 hectares of farmland in 30 districts of Assam [11]. According to a report by the Tea Research Association, the growing inconsistencies in the rainfall, along with rising carbon dioxide levels and the loss of relative humidity required for plant growth, have largely affected the tea plantations in Assam, and will make the state unsuitable for tea production by 2050. As a result, plantation owners have requested the administration and state government to save tea garden lands and bushes from wilting.
WORKERS’ PERSPECTIVES
Tea workers in Assam mostly belong to Adivasi or indigenous communities forcibly brought from central India over 150 years ago under British rule. Ever since, the workers have been entrapped in a cycle of servitude for generations, dependent on their employer for almost every aspect of their lives [12]. Almost all of these workers live below the poverty line (BPL) and the poor working and living conditions, along with inadequate social services, continue to adversely impact them. The current situation has worsened their conditions, and many of their demands have not been fulfilled yet.
a) Non-payment of minimum wages
The daily wages of tea garden workers in Assam are very low; Rs.167 in the Brahmaputra Valley and Rs.145 in the Barak Valley. In comparison, wages in southern states like Kerala are Rs.350 per day. On the other hand, the MGNREGA wage rate in Assam for unskilled labour is Rs.182 [13]. Labour wages constitute around 60% of the total cost of production, which is fixed in nature. The tea producers in Assam are not bound by law to pay the statutory minimum wages, so they compensate the workers by providing them facilities like housing and education, among others.
According to the Assam Chah Mazdoor Sangha (ACMS), the only recognised trade union for tea plantation workers, minimum wages should be fixed by the state government. In the Brahmaputra Valley, there have been a series of agitations and demands for minimum wages. Although the government had promised to raise the wages to Rs.351, as per the recommendation of the labour commissioner, tea garden workers are still only paid a daily wage of Rs.167. Labour unions are, therefore, demanding that the state government ensure fair wages to the workers as per the Plantation Labour Act, 1951, and the Minimum Wages Act, 1948.
b) Violations of the Plantation Labour Act, 1951
Under the Plantation Labour Act of 1951, tea producers must provide various benefits to the workers, which includes subsidised rations, free housing, health and education facilities. With the rise in the input cost and stagnation of prices, the implementation of the Plantation Labour Act has been inadequate. In many of the tea gardens, the wages are paid after one or two weeks, and delay in providing ration is quite common [14].
There are also several cases of delayed payments and a lack of basic facilities in the tea gardens. Many of the primary health centers in the gardens do not have full-time residential doctors. The delay in payment of other non-cash statutory rights has similarly created several problems for the workers in the last few years [14]. Moreover, the lack of surveillance and monitoring has made violations of the statutory provisions of the Plantation Labour Act very common.
c) Lack of re-investment
According to the tea workers, one of the major reasons for the current situation is the lack of re-investment by big companies. Most of these companies have taken out money from the tea industry and invested it in other businesses. The tea workers’ unions have argued that these big companies siphon off profits to other investments and never reinvest in tea. Both McLeod Russell and Assam Company have done the same and invested their profits in other business [15].
d) Access to Provident Funds
In most of the tea gardens, workers do not receive Provident Fund receipts from the employers. As a result, workers do not have much knowledge of their pension fund. The violation of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, is common in the tea estates. As per available data, 227 tea gardens have defaulted in depositing provident funds amounting to Rs. 100 crore, and more than 50 tea gardens have failed to deposit the employers’ and workers’ share of the provident fund [16].
It is the duty of the Provident Fund Commissioner to not only monitor and regulate the implementation of the Employees’ Provident Funds Act, but also lodge a criminal case against the defaulting employer. However, despite such large-scale defaults, the state government authorities have failed to secure the rights of tea workers.
IMPLICATIONS FOR ASSAM’S ECONOMY
The tea industry in Assam is about 172 years old. It occupies an important place, and plays an integral part in the state and national economy. Further, Assam Tea has an international reputation and commands significant share in the world tea market. The total area under tea cultivation in Assam accounts for more than half of the country’s total area under tea. Assam alone produces more than half of India’s tea production [17], standing at 676.31 million kilograms in the year 2017-18 [3].
Therefore, if immediate action is not taken to revive the tea industry in Assam, it will directly affect the livelihood of lakhs of people and cause direct economic loss to both workers, management and the state’s revenue.
THE WAY FORWARD
Considering the present crisis, both the Centre and the State governments need to intervene immediately, providing financial assistance and support for the development of the tea sector. There must be structural reforms if the Indian tea industry is to compete at the global level. The government could consider taking over the employers’ portion of contribution to the provident fund for at least three years. This would be in line with the spirit of the Pradhan Mantri Rozgar Protsahan Yojana.
The unit cost of production has to be lowered for the tea industry to survive and compete in the global market. Alternative measures must be encouraged to reduce the other input cost, considering labour wages cannot be lowered further. Organic farming, for instance, can help to decrease the input cost of production and provide better quality tea in the long term.
There is also an urgent need for close monitoring of the tea quality by the Tea Board. It has been pointed out that the Bought Leaf Factories (BLF) acquire bad quality leaves at a lower rate and sell it in the market, which affects the price of tea [18].
It is seen that the fall in prices of Assam tea are only for bulk selling, while the retail price of tea in the market is quite satisfactory. The falling prices for bulk selling can be prevented if tea growers sell with their own branding and packaging, as the Assam brand has high demand [10].
The state government must also invest in promotional activities by bringing in celebrities, which will give the tea industry a competitive edge and increase the demand. The health benefits of tea as a beverage must also be promoted for more consumption of tea.
ENDNOTES:
[1] https://www.sentinelassam.com/north-east-india-news/assam-news/assam-chah-mazdoor-sangha-reiterates-20-bonus-to-be-disbursed-before-durga-puja/
[2] https://www.indiatoday.in/business/story/economic-slowdown-assam-tea-industry-under-severe-stress-1592339-2019-08-27
[3] https://www.ibef.org/download/Assam-May-20181.pdf
[4] https://www.telegraphindia.com/states/west-bengal/tea-planters-appeal-to-centre-for-loan-sops/cid/1699579
[5] https://www.eastmojo.com/in-depth/2019/07/21/assams-175-year-old-tea-industry-is-in-deep-red
[6] CTC (curl-twist-cut) variety is a method of processing black tea in which the leaves are passed through a series of cylindrical rollers with hundreds of sharp teeth that crush, tear and curl the tea into small hard pellets.
[7] Orthodox Tea has loose tea leaves produced in a traditional method which involves plucking, withering, rolling, oxidation and drying. This tea produces a more authentic tea experience as a result of which it has a higher market price.
[8] https://economictimes.indiatimes.com/news/economy/agriculture/assam-tea-planters-to-move-centre-against-asean-free-trade agreement/articleshow/61691587.cms?from=mdr
[9] https://www.thehindubusinessline.com/opinion/troubles-brewing-in-indias-tea sector/article21979485.ece
[10] https://www.researchgate.net/publication/329245915_A_study_on_the_present_scenario_of_tea_industry_in_Assam-Challenges_ahead
[11] https://economictimes.indiatimes.com/markets/commodities/news/assam-tea-output-may-drop-8-on-rain-floods/articleshow/70270262.cms
[12]. https://www.accountabilitea.org/
[13] https://pnrd.assam.gov.in/schemes/mahatma-gandhi-nrega-0
[14] https://www.firstpost.com/india/adivasis-and-the-indian-state-abysmal-wages-ineffective-labour-unions-leave-tribal-tea-garden-workers-high-and-dry-7331001.html
[15] https://www.youtube.com/watch?v=e8X_MAmq9Cc
[16] https://www.telegraphindia.com/states/north-east/tea-gardens-yet-to-clear-pf/cid/1427296
[17] https://industries.assam.gov.in/portlet-innerpage/about-tea-industries
[18] https://economictimes.indiatimes.com/news/economy/agriculture/small-growers-contribution-rise-tea-board-voices-concern/articleshow/63138111.cms?from=mdr
