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crisis in the tea industry


crisis in indian tea industry
Introduction
Centre for Education and Communication (CEC) initiated a Fact Finding Visit based
on reports of deaths of workers on tea plantations and the consequent closure of tea
plantations in Kerala and Tamil Nadu. A Team and their Terms of Reference were de-
cided at a meeting of central trade union leaders, social activists, academicians, law-
yers and journalists on November 6, 2002 in New Delhi. It was also decided that the
team would visit Kerala and Tamil Nadu as two independent functional sub-teams and
the reports would be integrated for publication. The India office of the International
Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers
(IUF) was later contacted to join the fact-finding exercise considering the work already
undertaken by IUF in the tea sector.
The Terms of Reference of the Fact Finding Visit were
1. Examine the condition of workers in the tea plantations of Tamil Nadu and Kerala in
the context of the present crisis.
2. Examine the current dimensions of the economics of the tea industry.
3. To specifically assess if the tea industry is experiencing a crisis and to identify the
various factors contributing towards the same.
4. To examine the various factors of price formation/ determination
in the Indian tea industry.
5. To examine the role of various stakeholders viz. management, government and the
trade unions.
6. Suggest various methods of campaigning to improve the condition of the workers.
The Team
The members of the Fact Finding Team that visited Kerala were Kanai Banerjee (CITU),
S. N. Thakur (AITUC), P. K. Walanj (HMS), Prof. Virginius Xaxa (Delhi University), J.
John (CEC) and Sindhu Menon (Labour File).
The Fact Finding Teaam that visited Tamil Nadu included Suneet Chopra (AIAWU), P.
A. Joseph (INTUC), Meena Patel (IUF), Ashim Roy (NTUI), M. Subbu (TMKTS) and
Shatadru Chattopadhayay (CEC).
Both the Teams met in Coimbatore on January 21, 2003 for mutual introduction, to
identify major concerns and work out the logistics. The field visits were carried out from
January 22-26, 2003 in the respective areas.
Plantation Areas Visited
The Fact Finding Team visited Pon Modi in the Trivandrum district and Peermade in
Idukki the district of Kerala. In Tamil Nadu, the Fact Finding Team visited Coonoor and
Gudulur in the Nilgiris and Valparai in the Coimbatore district.
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crisis in indian tea industry
Chapter 1
Structure of Indian Tea Industry
India is the largest producer and consumer of tea in the world. It produced 854 million kg of tea
and consumed 673 million kg. in the year 2001. Since independence, tea production in India has
grown over 250 percent and accounts for 31 percent of the global production of tea.
1
At present,
the total turnover of the Indian tea industry is around Rs. 10,000 crores. India also exports an
average 180 million kg. of tea every year. The total net foreign exchange earned by the Indian tea
industry per annum is around Rs. 1847 crores. The bulk of Indian tea is produced in the north-
eastern states of Assam and West Bengal, along with the southern states of Tamil Nadu and
Kerala. Tea production takes place in both large plantations and smaller gardens.
The tea industry is the second largest employer in India with more than 1.1 million workers on
permanent rolls. The number goes up significantly if the casual workers are also included. Most
of the tea plantations are located in geographically isolated areas, the so-called plantation en-
claves. These tea plantations are not just economic production units, but rather social institu-
tions, which control the lives of their resident work force to a large extent. The plantations do not
just offer employment; they are also responsible for providing housing, water, welfare and many
other facilities that affect the daily lives of workers. Most tea-producing countries including India,
have extensive legislation regarding the conditions on plantations but such laws have proved to
be very difficult to implement and monitor. Hence, their impact is often limited.
The sizes of big plantations vary between 500 to 1200 acres. These tea plantations focus solely
on the production of tea, to benefit from the economies of scale. These big plantations are often
part of a chain of plantations owned by large corporations and Multinational Corporations (MNCs).
There are in total 88115 tea estates in India covering an area of 4.5 lakh hectares.
2
From these,
approximately 98.2 percent of the estates belong to small growers with estates of sizes less than
10.12 hectares. Technically the growers holding up to 10.12 hectares under tea are considered
small growers. However, they only account for 14.5 percent of the total area under tea and 11.1
percent of the total tea production. The bigger size estates (>400 hectares) account for about
48.3 percent of the total tea area and 53 percent of the total tea production. The estates that are
between 200 to 400 hectares account for about 0.5 percent of the total number of estates but
have 24.1 percent of the tea area and 25.2 percent of the total tea production. These big planters
are the most influential players in the tea trade.
Table 1: Distribution of tea estates in India
Size of the registered tea estates (Hectares) Numbers (in %)
< 10.12 98.2
10.12 - 50 0.4
50 - 100 0.2
100 -200 0.3
200- 400 0.5
> 400 0.4
Source: V.N. Reddy, Analysis of Tea Industry, presented at IUF India Tea Workers Meet, December 2002.
1
V.N. Reddy, Analysis of Tea Industry, presented at IUF-India Tea Workers Meet, December 2002.
2
Ibid.
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Large Plantations
The Section 1 (4) of the Plantation Labour Act (PLA) 1951
3
provides a legal definition for the
plantations. It states:
A plantation is any land used or intended to be used for growing tea, coffee, rubber,
cinchona, or cardamom which measures 5 hectares or more and in which fifteen or
more persons are employed or were employed on any day of the preceding twelve months.
Most of these plantations are situated in remote and uninhabited areas, where crops have not
been previously grown. The plantation workers are usually immigrants. These labourers are
often provided housing in the estates itself along with shops, basic services and recreation and
cultural facilities.
4
These labourers are incorporated into a new form of society, the pattern of
which is dictated by the management of the plantation and designed solely to suit the needs of
the plantations. The owners of the tea plantations are also the rulers of their principality.
5
These plantation structures have been often criticised as being enclaves, alien and inward
looking and cut off from all links with the surrounding people and economy.
6
The labour is hired
from outside and given housing and incorporated into a new form of society, the pattern of which
was dictated by the management of plantations. The owners of tea plantations were also the
rulers of his principality.
7
Profiles of Some Big Tea Companies
Hindustan Lever
Hindustan Lever Limited (HLL) is Indias largest foods and beverages company. It also holds a
leadership position in consumer goods, personal care products and speciality chemicals. It has
around 36,000 employees, including 1300 managers all over India. HLL is a subsidiary of the
multinational Unilever Ltd, which holds 52 percent of the equity.
8
Unilever is a Fortune 500
multinational, which sells over 1000 food, home and personal care brands through 300 subsidi-
ary companies in 88 countries worldwide, with products on sale in another 70 countries. Unilever
dominates the world tea industry, spanning plantations, processing and marketing. The acquisi-
tion of Liptons in 1972 and Brooke Bond in 1984 effectively made Unilever the worlds largest
buyer and distributor of tea.
9
At present, it handles 19 percent of the world tea production and
has around 16,000 hectares of tea plantations in Kenya, Tanzania, Malawi and South Africa.
10
HLL has 15 tea estates and factories distributed between South India and Assam with a planted
area of over 6800 hectares. The tea estates under HLL are currently witnessing significant growth
3
The PLA of 1951 was enacted by the parliament to provide for the welfare of and regulate the conditions of
plantation labour.
4
Edgar Graham & Ingrid Floreing, The Modern Plantations in the Third World (London, Croom Helm, 1984), p.25.
5
G. E. Beckford, Persistent Poverty: Under-development in Plantation Economies of the Third World. (London:
Oxford University Press, 1972), p. 75.
6
Graham & Floreing, n. 4, pp. 33-35.
7
G.E. Beckford, Persistent Poverty: Under-development in plantation economies of the Third World (London: Oxford
University Press, 19723), p. 75.
8
The official website of the Hindustan Lever Ltd.< http://www.hll.com/HLL//businesscat.html> 6 Sep. 2001.
9
Unilever Tea <http://www.unilever.com/co/oc.html> 5 Oct. 2001.
10
Ibid.
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in tea production after a few years of low productivity. In the year 2000, the tea production in
HLLs plantations increased from 97,088 to 107.209 tons, which is an increase of 10121 tons.
Their tea gardens in Southern India registered an increase of over 6 percent in the year 2000 to
achieve an all time record average yield of 3419 kg per hectare (compared to an industry aver-
age in South India of around 2400 kg).
The yield per hectare from the Assam gardens at 2433 kg is again amongst the best in the
industry (compared to an all Assam Industry average of about 1800 kg).
11
Almost all the tea
produced at these plantations is now being used to support HLLs various packaged tea brands.
The leading HLL brands of packaged tea are Brooke Bond Red Label in the premium segment
and Brooke Bond A1 targeted at the lower end. Apart from these brands, HLL has several other
brands like Lipton Yellow Label, Green Label, Taaza and Brooke Bond A-1, 3 Roses, Super Dust,
Top Star, Ruby Dust etc., positioned in different price segments.
Tata Tea Limited
The Tata Group is one of the biggest industrial houses in India with interests in diverse busi-
nesses such as steel, automobiles, tea, hotels, information technology and chemicals. Tata Tea
has more than 50 tea estates in India.
12
It was the first tea company in India to set up processing
and packing facilities at the tea estates itself. Tata Teas Curl Turned and Cut (CTC) factory at
Kakajan in Assam processes nearly 0.1million kg. of tea per day. It also has a fully automated
advanced tea factory at Madupatty in Munnar, Kerala. The instant tea manufacturing facility for
exports, located at Munnar, is the largest instant tea factory outside USA.
13
Presently, Tata Tea is
the leading tea plantation company in India and the largest integrated tea producer in the world.
Tata Tea was incorporated in 1962 as Tata Finlay Ltd, and commenced business in 1963. Initially
the company started with the instant tea factory at Munnar, Kerala and a blending/ packaging unit
at Bangalore. The Company had a technical and financial collaboration with James Finlay & Co.
Glasgow, UK. In 1976, it acquired the Indian interests of James Finlay & Company along with its
7 associate sterling tea companies.
14
Tata also acquired the foreign holdings of James Finlay
and Mcleod Russell in December 1982. Consequently, in 1983, the Companys name was changed
to Tata Tea Ltd.
Tata Tea on March 31, 2000 acquired the entire shareholding of the worlds second largest branded
tea company, Tetley Group Limited, for 271 million. Tetley has a major presence in many coun-
tries and primarily blends, packs and distributes tea products (mainly in tea bags) in Canada,
Australia, USA, and number of European countries including Poland, UK and Russia. It is the
largest selling tea brand in the UK and Canada. The Tetley Group is still a profit making company
with a good cash flow.
15
The acquisition of Tetley has made Tata Tea the second largest tea
11
Hindustan Lever Ltd, n. 8
12
India Infoline Sector Report on Tea, www.indiainfoline.com
13
Tata Tea Ltd, <http://www.tatatea.com/varied.html> 26 Sep. 2000.
14
It was said that a consideration of about Rs115million was paid through issue of equity shares (Rs19.8million) and Rs. 95million was
retained as unsecured loans at 5% p.a. interest. (Tata Tea, http://www.indiainfoline.com
/comp/tate/mr01.html , 20 Jan 2002.
15
Tata Tea Ltd, Directors Report (Kolkata, 31st July, 2000).
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multinational company in the world. Tetley has six production centres - two in both UK and USA,
one in Australia and India each and all these centres have state-of-the art technologies and the
latest facilities for tea bag packaging.
Tata Tea has also witnessed a major growth in tea production. It went up from 71.1 million kg. in
1998 to 78.7 million kg. in 2000 to comedown at 73.4 million kg. in 2001. Most of the tea is sold in
the packet form under various brand names. Tata Teas flagship brand has a 12 percent market
share. Other Tata Tea brands are Kannan Devan, Chakra Gold, Gemini, Agni, and Lucky Cup.
The Tata Teas brands have a dominant hold over the markets in Southern India.
Tea Small Holdings
Technically the growers holding up to 10.12 hectares under tea are considered small growers. In
India, the small growers are mainly located in Nilgiris, Tamil Nadu but the numbers of small
growers are growing significantly in West Bengal and Assam as well. In the last 10 years, there
has been a phenomenal growth in the small growing sector as compared to the traditional organ-
ised tea sector in terms of area and production (See Table 2). At present there are around 230000
small growers engaged in the tea production.
Table 2: Small growers vs. Organised sectorte (
Heading 1991 2001
Cumulative
Growth Rate (%)
Area (Hectare)
Smal l Growi ng Sector 25108 101000
14. 9%
Organi sed Sector 395362 406196
0.3%
All India 420470 507196
1.9%
Production (M Kg)
Smal l Growi ng Sector 52 170
12. 6%
Organi sed Sector 702 684
-0.2%
All India 754 854
1.3%
S o u r c e : I n d i a n Te a As s o c i a t i o n , 2 0 0 2
% )
During the course of the 8
th
& 9
th
Plan periods, a substantial number of agricultural farmers in
Assam and North Bengal switched over to tea cultivation. During the mid 1990s, many small
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farmers started taking up tea cultivation on a large scale due to good prices prevailing in the
market during 1996-98. The contribution of this sector is now about 20 percent of all the tea
production in India.
Table 3: The profile of small growers
Headings 1991 2001
Cumulative
Growth
Rate (%)
Share in All India
1991 2001
No. of Holdings 33173 115000 13.24 ~ ~
Area under tea
(Hec)
25108 101000 14.93 5.97 19.73
Production (M
Kg)
52 170 12.53 6.92 19.91
Labour
Employed
66000 230000 13.30 6.32 18.67
Source: Indian Tea Association, 2002
The Tea Processing Factories
There has been a steady growth in the numbers of private tea manufacturing factories in India
during the 1990s. At present there are more than 135 tea factories in Assam producing 50
million kg. of tea, 42 factories in West Bengal producing 30 million kg. of tea, 173 factories in
Tamil Nadu producing 81 million kg of tea and 13 factories in Kerala producing 2 million kg. of
tea. Most of the small tea farmers sell their green leaves to these factories, and the factories after
processing the tea, sell it in the auctions.
Table 4: BLF and Cooperative Tea Factories in India (2001)

S t a t e s N u m b e r Pr oduct i on ( M Kg)
Assam 135 50
West Bengal 42 30
Tri pura 2 0.2
Hi machal Pr adesh 4 0.1
Tami l nadu 173 81
Keral a 13 2
Total 369 163. 3
S o u r c e : I n d i a n T e a A s s o c i a t i o n , 2 0 0 2
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Tea Auctions
The tea auction system brings the buyers and sellers together, to determine the price through
interactive competitive bidding on the basis of prior assessment of the quality of tea.
16
Manufac-
tured teas are dispatched from various gardens/ estates to the auction centres for sale through
the appointed brokers, on receipt of which, the warehouse keeper sends an Arrival and Weigh-
ment Report showing the date of arrival and other details pertaining to the tea, including any
damage or short receipt from the carriers.
The tea is catalogued on the basis of their arrival dates within the framework of the respective
Tea Trade Associations, the quantities are determined according to the rate of arrivals at a par-
ticular auction centre. In North India, brokers catalogue teas in the order of their arrival, and as
soon as the closing date for the catalogues of each sale is arrived at, the sale is closed and
subsequent arrivals are printed in the next sale in some other centre. In South India, the total
quantity that is offered is taken up for the sale. Registered buyers, representing both the domes-
tic trade and exporters receive samples of each lot of teas catalogued, which is normally distrib-
uted a week ahead of each sale, enabling the buyers to taste, inform their principals and receive
their orders well in time for the sale.
17
The brokers taste and value the tea for sale and these valuations are released to the traders.
Guidelines for the price levels likely to be established when the tea is sold are formulated on the
basis of these valuations and last sale price. The date of auction varies within the various
centres of auctions in India. Different days are set aside for separate auctions of leaf/dust
orthodox/CTC teas respectively. On the specified days, auctions commence in the morning and
go on till evening and each broker sells by rotation, while the buyers congregating in the auction
hall, openly bid and outbid against each other to win the tea at the highest price they can afford.
18
The rate of sales in the auctions is at the rate of 2.5 to 3 lots per minute. There are rules govern-
ing the division of each lot among various buyers and the rate of bidding. As soon as the tea is
knocked down under the hammer, the sale becomes binding on the buyer and seller alike. De-
livery orders of the teas purchased by the buyers are then issued by brokers on prompt pay-
ments made by the buyers as settlements following the sale, which when they present, the
buyers take delivery from the particular warehouses and arrange for their dispatch to the con-
sumer centres in India or abroad. The sellers are simultaneously sent documents confirming the
sale of tea and the payments made by buyers remitted to their bank accounts.
The brokers play a very crucial role here as well. They are solely responsible for collecting the
sales tax form from the buyer and the brokers account sales are taken as sufficient proof by the
sales tax authorities for the collection of the sales taxes.
19
The Calcutta Tea Traders Association
(CTTA) plays the role of arbitrator who amicably settles any claims that may arise regarding
quality or quantity discrepancies. The system of tea auctions which begun in the year 1861 has
become the integral part of selling tea in India.
16
Mahendra P. Lama, Integrating the Tea Sector in South Asia: New Opportunities in the Global Market. South Asian
Survey, 8.1 (2001), p.75.
17
Tea Web. Auction System. March 02, 2002 <http://www.teawebex.com/html/auction.html>.
18
ibid.
19
Tea Web, n. 17.
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Chapter II
General Observations on Vulnerability of Tea
Garden Workers in Kerala
1. The enclave economy of plantations is built on the principles of exclusion, dependence
and heightened vulnerability. Plantation workers are completely dependent on the plan-
tations management for water, electricity, firewood, food, health and education.
2. Plantations supply water to the worker households from a common water tank. Interrup-
tions in the supply of electricity stop the supply of potable water immediately and com-
pletely. People have no other option but to fetch water from available sources kilometers
away, usually down the hill, and in most cases, from scarce and contaminated sources.
This contaminated water affects the hygiene of individuals, families and the plantation as
a whole and increases recurrences of chronic water borne diseases.
3. Hospitals stop functioning when plantations close. Hospitals are exclusively run by the
plantations and the doctors, nurses and health assistants are paid by the management
and medicines are provided by them too.
4. In West Bengal and Assam, food is part of the wage packet. In Kerala, food is not part of
the wage packet but the workers get subsidized food from ration shops. However, at
both places, the closure of plantations forecloses peoples ability to access food, push-
ing people to the brink of starvation or acute mal-nutrition and even death. People tend
to opt for cheaper or available sources of food, resulting in chronic under-nourishment or
food poisoning and slow death.
5. The temporary workers are from the permanent workers households. Permanent work-
ers are mostly women, because in Kerala, plucking is a continuous activity and women
usually do the plucking. Temporary workers, usually men and other adults in the house-
hold, get work only for a few months in a year. As the main wage earners, women work-
ers are under tremendous pressure. They are restricted by a lack of skill into entering
other income earning activities, absence of alternate employment opportunities,
unfavourable conditions to migrate long distances in search of alternate opportunities of
work. They live through the experiences of husbands committing suicides, children starving
and discontinuing their education, and seeing off daughters to far away places, in inse-
cure conditions for jobs and voluntary or involuntary sale of their bodies.
6. The State government currently provides education, beyond the primary level. However,
the elementary schools are far away from the plantations. Children usually have to travel
more than 30 km every day, the transportation costs are partly borne by the plantation.
This stops when plantations close down. Children stop their education because they
have no money to commute to the nearest functional school (if any), no provision to
carry food, no means to purchase books or other educational materials and in most
cases no money to purchase the essential school uniforms. School children experience
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humiliation and prefer discontinuation of studies. Children may also stop going to school
to augment parents income and look for elusive avenues of alternative income.
7. The plantation workers do not have rights over the houses in which they live. They may
have lived in these houses for generations, but it remains the property of the plantation.
The live threat of eviction and the absence of alternatives increase peoples sense of
dependence on plantations and their incapability to respond to injustice.
8. Moreover, the plantation workers do not have access to any land, which could be utilised
for subsistence cultivation or rearing of cattle. This situation denies any alternative in-
come generation for plantation households.
9. The only income for plantation workers is the wage income, from either permanent or
temporary work in the plantations. Once the plantations stop providing wages, workers
face a sudden and dramatic loss of income. This pushes them to the brink of starvation
and a feeling of helplessness in meeting the essential requirements of living, like buying
essential food items, purchasing cloth for themselves and school uniforms for their chil-
dren, paying fees and providing for the purchase of educational items, providing for the
transportation expenses of their school going children, providing for the health require-
ments for themselves and their family members and providing for even the basic needs
of the elderly, physically challenged and sick among them.
10. When this happens to one family, others can help them. When it happens to a group of
workers in one plantation, it could still be thought as manageable; when it happens to
one plantation, workers may still explore possibilities of work in other plantations. But,
when it happens in plantations one after another, affecting thousands of workers and
their dependents, it develops into a situation of disaster, a calamity. It is important to note
that the workers do not have any control over the factors that lead to the calamitous
situation.
11. Fourteen plantations in the Peermadu and Vandiperiyaar regions of Idukki district, Kerala
have closed down, rendering about twenty thousand plantation workers jobless and their
family members are at the brink of starvation. Five plantations have closed down in the
Ponmudi region of Thiruvananthapuram district, affecting about 5000 workers and their
dependents.
12. How has this calamitous situation come about in the tea plantations of Kerala? Who
could be responsible? What are the crisis affecting tea plantations and what are the
factors that brought about this crisis? How have various stakeholders, the planters, the
government, the trade unions and the public responded to this crisis? What should be
done immediately to mitigate the sufferings of the people dependent on tea gardens for
their survival and livelihood? What long term measures could be taken to address the
causative factors of the crisis? The Fact Finding Team addressed some of these signifi-
cant questions during its mission.
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Chapter III
Tea Plantations in Kerala
The plantation sector plays an important role in the economy of the State contributing around
Rs.2911/- crores to the States GDP, which comprises 44.72 percent of the total agricultural
income and 10.38 percent of the States income. Kerala is the only State with a substantial stake
in all the major plantation crops of tea, rubber, coffee and cardamom. It accounts for 45 percent
of the planted area and 71 percent of the production of the plantation crops in the country. Plan-
tations are labour intensive and provide round the year employment mostly in rural and backward
areas where there is no other alternative employment opportunity. It is estimated that plan-
tations directly employ 4.45 lakh persons and around 10.13 lakh growers earn their livelihood in
this sector. In other words, a total number of 49.42 lakh persons or 17 percent of Keralas
population are dependent on the plantation industry in Kerala. Plantations are the mainstay of
Keralas economy, particularly in the rural sector.
1
The 1999-2000 data shows that Keralas poverty is only 12.72
percent compared to the all-India figure of 26.30 percent ranking it
fifth among states, allowing for the effects of a remittance
economy. This achievement in spite of low or moderate economic
growth further validates Keralas human development focus.
The Human Poverty Index (HPI) using the UNDP methodology
(Index of survival deprivation, deprivation of education and depri-
vation in economic provisioning with respect to safe water, health
services and under-nourished children) is 0.15 for Kerala whereas
it is 36.7 for the whole country. Similarly the Human Development
Index (1995) (Index of life expectancy, educational attainment and
income) for Kerala has been calculated as 0.628 whereas it is only
0.451 for the whole country.
Against the total area of 4.38 lakh hectares under tea (2001) in the country Kerala accounts for
only 0.37 lakh hectares. In respect of production, Kerala retains its share of eight per cent. Tea
plantations owned by big companies employ a labour force of over 84,000 in the organised
sector. Of late, small plantations of tea have started emerging in Idukki and Wayanad districts.
Tea has a prominent place in Keralas Plantation Sector; in 2001, Kerala produced 69355 tonnes
of tea from 36762 hectares of tea plantations in 154 estates. The State accounts for about 34
percent of the tea produced in South India and 10 percent of the national output. The tea planta-
tions directly employ 98000 workers.
Tea estates in Kerala are spread over the districts of Idukki, Thiruvanathapuram, Wyanadu,
Kottayam, Palakkad, Kollam, Alappuzha, Malappuram, Trichur and Pathanamthitta. However,
concentration of tea is in the districts of Idukki, Wyanadu, Palakkad and Thiruvanathapuram, in
that order, according to the production figures in 1998-99.
1
Draft of the White Paper, The Association of Planters of Kerala, 2003
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Table 5 Area Under Tea in Kerala - Districtwise

District 1994-95 1995-96 1996-97 1997-98 1998-99
1
Thiruvananthapura-
m
965 965 965 965 965
2 Kollam 1258 1258 1258 1258 1257
3 Pathanamthitta 91 91 91 91 91
4 Kottayam 2063 1947 1947 1947 1951
5 Idukki 23435 23402 23375 23375 23419
6 Eranakulam 2 2 2 2 2
7 Thrissur 496 505 523 523 529
8 Palakkad 825 829 829 829 829
9 Malappuram 174 174 174 174 174
10 Wayanad 5436 5432 5438 5438 5473
State 34745 34605 34602 34602 34690
Source: Agricultural Statistics, DES
(http://www.kerala.gov.in/dept_planning/ecnomicrvw_04.htm)
In 1998-99, of the 34690 hectares of tea grown in Kerala, 67.5 percent was grown in Idukki
district. In Idukki district, tea is grown in Peermade, Udumbunchola and Devikolam taluks. Ac-
cording to 1991 Census, the total area of the district is 5019 sq.km. with a population of 10.78
lakhs. The district accounts for 12.91 percent of the geographical area of Kerala State.
Idukki is one of the districts in the state where linguistic minority exists. While the population of
the district constitutes only 3.7 percent of the state, the migration to the highland region started
before the formation of Kerala at the end of 19
th
century. Tamilians came as plantation workers of
the European planters in Peermade, Udumbanchola and Devikulam taluks.
2
According to the figures provided by the Association of Planters of Kerala
3
, of 154 estates in
Kerala, Central Travancore has 36 estates covering 10,100 hectares of area and employing
2
http://www.kerala.gov.in/panchayat_statistics2001/idk_shis.htm
3
The Association of Planters of Kerala is a Company incorporated principally to look after the interests of the Member Plantation
Compani es who grow t ea, coffee, cardamom and rubber i n t he St at e of Keral a.
The primary objective of the Association is to represent producers interests at various forums and strive for the promotion of
plantation commodities. (petition submitted before the Standing Committee of the Ministry of Commerce, 2002)
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26,000 workers. Temporary workers directly employed in these estates would constitute an equal
number. As observed earlier, majority of these workers are Tamil immigrants.
Table 6 Profile of Tea Industry - Kerala and Central Travancore
Kerala Central Travancore
No. of Estates 154 36
Area (Hectare) 37000 10100
Production 66 million kgs 15.9 million kgs
Yield (Kgms/Hectare) 1863 1600
Labour Employed 98000 26000
Source: Petition submitted before the Standing Committee of the Ministry of Commerce by
the Association of Planters of Kerala, 2002
The 36 estates in the Central Travancore are located in the Peermade
4
and Vandiperiyar
5
re-
gions (Peermade Taluk and Azhutha block) of Idukki district. These are owned by 16 companies
namely:
1. Peermade Tea Co. 2. MMJ Plantations
3. Pullikanam Estate 4. Haileyburia Estates
5. RBT Group I & II 6. Hope Plantations
7. A.V. George 8. Malamallay Estate
9. Churakulam Estate (MMJ) 10. The Karimtharuvi Tea Estate Ltd.
11. Harrisson Malayalam Ltd. 12. Aban Loyd Ltd.
13. A.V.Thomas Co. 14. Alampally Estates
15 .Periyar Connemara Estate 16. Chidambaram Estate
4
Peermade, the famous plantation town, takes its name from the Muslim saint Peer Muhammed, a close associate of
the erstwhile royal family of Travancore. The tomb of Peer Muhammed is situated at Kuttikkanam about 6 km from
Peermade.
5
This town situated 18 km from Thekkady, lies on the Kottayam Kumily road. The river Periyar flowing through the
centre of this town nourishes its vast area. This is an important commercial centre in high ranges.
21
crisis in the tea industry
crisis in indian tea industry
The yield and production of tea in the Peermade and Vandiperiyar regions (Central Travancore)
are as follows:
Table 7 Yield Level and Production of Tea in Central Travancore, Idukki District, Kerala
Year Kgs/hectares
Production from
Estates in Million
Kgs
Total Production
including Small
Growers in Million
Kgs
1999 2210 22.40 23.60
2000 2186 21.90 23.70
2001 1940 18.30 21.50
2002 (till Sept.) 1300 9.66 12.00
Source: Document supplied to the Fact-Finding Team by the Central Travancore Planters'
Association
6
through Vazhoor Soman of AITUC.
In the Ponmudi region of Thiruvanathapuram district, the major plantations are owned by Mahavir
Plantations and Jay Shree Tea & Industries Ltd. In Wayanadu, Assam Brooke Company is the
major planter.
6
CTPA Office, Glenmary Estate, Glenmary P.O., Idukki District, Kerala
22
crisis in indian tea industry
Chapter IV
Observations from the Field Visit
Both the Tamil Nadu and Kerala groups of the Fact Finding Team met in Coimbatore on January
21, 2003 with the objectives of introducing themselves, identifying major concerns and working
out logistics. The field visits were carried out from January 22-26, 2003 in the respective areas.
The Kerala Fact Finding Team visited the Bonacadu and Jay Shree Plantations in Ponmudi,
Trivandrum district
1
on January 22, 2003 and Peermade Tea Co., Pasumalai, Vagamon, Alampally
and AVT in Peermade Taluk of Idukki district
2
on January 24-26, 2003.
Crisis in Kerala Tea Plantations
The tea plantations in the major tea growing areas in the State, namely, the Central Travancore,
Ponmudi and Wayanadu are reported to be facing a crisis. However, Munnar, another tea grow-
ing region of Idukki district remains relatively unaffected. Moreover, a few plantations in the
Peermade and Vandiperiyaar region are also unaffected by the crisis. This raises questions on
the reasons for the crisis, and how some plantations managed to overcome it.
Profiles of Visited Tea Plantations
Bonacadu Tea Plantation
The Bonacadu Tea Plantation is situated in the
Vithura Panchayat of the Nedumangadu Taluk,
Trivandrum district, in the foothills of the
Agasthya Mountain range and surrounded by
Paruthippally-Peppara Game Sanctuary. The
company, which has a history of more than 100
years, is presently owned by Shailesh Bansali
and Brothers of Mahavir Plantations
3
. Of 519
hectares owned by Bonacadu plantations, tea
is grown in 376 hectares; cardamom in 76 hect-
ares, rubber in 50 hectares and pepper, coco-
nut etc. in 15 hectares. 460 permanent workers and 150 temporary workers are employed in the
plantation.
The Mahavir Plantation has other estates in Tamil Nadu.
The management closed down and fled from the plantation in 1999.The plantation has defaulted
1
Mr. Thankadurai of CITU leads the FFT to the tea gardens in Ponmudi, Bonacadu and Jayashree Plantations. Prior to
the visits to the plantations, the FFT met Mr. Viswambharan at the CITU office in Nedumangadu.
2
Mr. Vazhoor Soman of High Range Estate Labour Union (HRELU), AITUC made all arrangements for Fact-Finding
Teams visit to the plantations, meetings with employers at CTPA office, the President of CTPA, Panchayat officials in
Vagamon and various trade union leaders.
3
(Mahavir Plantations Limited (Tea and Spices Exports and Steamer Agents) Mahavir House, Milne Road, Wellington
Island, Cochin 682003)
23
crisis in the tea industry
crisis in indian tea industry
on plantation tax, electricity bills and panchayat tax. Electricity has been disconnected. As there
is no water supply; the pipes have rusted and disintegrated. The estate hospital is not function-
ing; there are no medicines, or the facility of an estate doctor or staff nurses. The estate school is
almost dysfunctional, with less than fifty students attending.
functioning; there are no medicines, or the facility of an estate doctor or staff nurses. The estate
school is almost dysfunctional, with less than fifty students attending.
Encounter with Workers
It was pitch dark, when we visited the place. Crying children, weak, pale, ailing people; their
stories of misery, poverty, starvation and their unsuccessful struggle for survival powered us.
Till now 14 people have died in the plantations due to starvation and lack of medical facilities.
Vijayakumari lost her child during delivery because there was no doctor to attend to her and the
family did not have a penny to take her to the far away hospital. Unable to bear the poverty and
starvation any more, 44 year old S Mani committed suicide. The relatives and neighbours could
not raise sufficient money to cremate the body.
When the factory was closed and the owner fled the estate, the workers plucked the leaves and
sold it to the planter in Kolachikkara estate in Ponmudi. They were paid Rs.4 per kg. Since the
factory is now sealed they cannot pluck the leaves any more.
The workers in the plantation go for cabling work, to cut reed in the forests, to plant saplings and
also do manual labour. Even such jobs have become rare because there is a scarcity of jobs
whereas there is no dearth of workers.
All the staff in the factory has abandoned the estate. The machines are rusting. The company
houses given to the workers are dingy one room sets in a very dilapidated condition. There are
no bathrooms or any sanitation facilities provided for the workers. People use the open area for
defecating and the river for their ablutions. The management provided electricity but, since the
company closed down owing lakhs of rupees the power supply has been cut off.
163 people who left their jobs have yet to receive their Provident Fund and gratuity. Workers are
still owed 40 months of salary. The management has not compensated the workers except for 40
kg. of rice and Rs.1000. Out of this, Chief Minister Antony gave 10 kg rice during Christmas.
There is a school up to the 5
th
standard run by the management, but the school is not functional
now because, there are no children.
The workers are members of different trade unions. But they feel that none of the unions have
intervened strongly enough to emerge from the present crisis. Trade unions will function prop-
erly only when the workers get their wages, says Babu Divakaran, a worker in the estate. Swarna
Bhai of INTUC, P Nayanar of CITU, Thankamani of BMS also feel the same. Many have come
up with the idea of co-operatives, but no concrete steps have been taken in that direction.
24
crisis in indian tea industry
According to the workers, the owner, Bansali owes Rs. One crore and eighty-five lakhs to the
government and the workers. They believe that he has taken loans offered by the government
and invested the money in businesses in foreign countries. The present crisis in the Bonacad
Tea Estate is man made. The owner is the culprit who has cheated the government and the
workers. He fled the place after making huge profits but the workers continue to struggle here in
the closed enclave of plantations without money to buy food or medicine.
Jayashree Tea Plantation (Merchiston Estate)
He explained that low productivity, high
labour cost and militancy of trade unions
have contributed to the sustained loss.
Labour cost is 70 percentof the cost of
production. Land labour ratio is one
worker per one acre. The Ponmudi Es-
tate pays workers Rs.77.26 per day as
wages, though in Tamil Nadu, there has
been a reduction of 10 percent in re-
sponse to the crisis.
The factory had almost closed down.
The garden covered about 400 hectares of land and had more that 1500 workers. We took the
opportunity of visiting the estate hospital. It had a capacity of 11 beds. The standard of cleanli-
ness was very poor. Since the doctor was not present, the two female staff members present
could not throw any light on the availability of medicines as also on the Zero occupancy of
hospital beds.
The manager himself had stated that the estate does not have a school and children have to go
to the government school, which is nearly 25 km. away. The frequency of government buses
from the estate is one per hour.
erved that no maintenance had been done since decades. Not only that there were no sanitary
blocks as required. The workers seemed to be very worried because the factory had almost
closed down.
Encounter with Workers
Padmini is a plucker in the Jayashree Tea Plantation in Ponmudi and she has been a permanent
worker for the last 12 years. The manager of the estate S K Kardile says that the workers of his
estate are paid Rs. 77.26 per day. Yet, what Padmini gets on the 10
th
of every month is a wage at
the rate of Rs. 70.00.
Padminis husband Surendran is unemployed. Their two daughters (22 and 18 years of age) go
to an NGO - Kudumbashree to learn basket weaving. Sometimes they get paid for the baskets
25
crisis in the tea industry
crisis in indian tea industry
they weave. This is the place we stay, says Padmini pointing to the one room set, which houses
the entire family. There are six such houses in each worker line. There are 300 such houses in
the estate. The houses do not have bathrooms or toilets. At the end of every worker line there are
the so-called bathrooms and toilets earmarked for each family. Most of them do not have doors.
Women do not use these for bathing. They go to the nearby river.
The management has allowed them to plant fruits and vegetables in front of the quarter.The
most commonly seen trees are papaya and plantains. Earlier most of the households had their
own cattle and the company employed people to graze them. Now the management has with-
drawn that facility as it says that the factory is a loss-making unit.How can we have cattle, when
no one is there to take care of it? asks Padmini. The management has even stopped cattle
grazing on the estate property, she adds.
Padmini quite often falls sick. The most common illnesses are body ache, fever and stomach
ache. Plucking is not an easy job, we have to stand
for hours with the heavy load of tea leaves on our back,
says Padmini. The workers, especially the pluckers have
to stand throughout their working hours.
According to the Manager of the estate, it provides medi-
cal facilities for the workers. There is a hospital with 11
beds for the workers run by the company. Dr. Mathews
and Nurse Beena take care of the patients adequately
and the medicines are pro- vided free of cost. According
to Beena, people who come normally are patients with
cold, cough, body ache and diarrhoea.
The doctor is there only for namesake. We cannot ap-
proach him after dark, be- cause he wi l l be total l y
drunk, says Padmini. All the workers in the plantation
made the same comment about the doctor. If he gives
us injection the pain lasts for more than three days and the
medicines are almost same for all illnesses. He gives the same medicine and injection for our
cattle also, she says.
There is electricity in the houses provided by the company. Since the management says it is
incurring a loss, the workers are scared about their future. Temporary workers are now seldom
taken. They are on the look out for jobs outside the estate. More than 150 people have opted for
the voluntary retirement scheme (VRS) from the factory. The workers in the estate fear closure at
any moment.
We were informed by the workers that other plantations in the region - Brymore Estate and
Inborcauld Estate had also closed down. We did not visit those gardens.
26
crisis in indian tea industry
Tea Gardens in Peermade Region
Thungamullay Estate
RBT (Rai Bahadur Thakur) group of companies have two divisions, RBT Group I, with four
estates (Munjamullay, Pambanar, Nellikai and Thengakal) and RBT Group II, with five estates
(Thungamullay, Pasumullay, Granby, Mount and Koliekanam) in the Vandiperiyar and Peermade
regions of Idukki district.
Thungamullay, part of RBT Group II, employs 246 permanent workers and around 250 tempo-
rary workers. The estate has been closed down since March 2000; the management left the
plantation unattended and the workers, destitute.
No wages have been paid for the last 20 months; the Provident Fund has not been deposited for
the last 4 years and bonus has not been given for the last 2 years. Electricity has been discon-
nected to the plantation and therefore, in the worker lines due to non-payment of dues. The
drinking water supply to the worker lines in the plantation has been stopped completely. The
estate hospital is non-functional with no medicines, doctor or nurse. The houses are in a dilapi-
dated condition as a result of age and the absence of maintenance.
Plucking of tea leaves or the necessary agricultural work is not carried out formally. Workers
under the guidance of the staff organise plucking with the knowledge of the trade unions and the
plucked leaves are sold outside.
Encounter with workers
No: 2325 is what she is known as.
A 46 year old woman, Mary has
this check roll number establish-
ing her permanent stature of work.
She works in the Thangumalai
estate in Injikkadu block as a
plucker.
There was pindrop silence when we
visited Mary in a one room house.
Her daughter in-law Palthankam
(23) had lost her baby girl three
days ago. The child had developed fever and became unconscious. Since the company hospital
was not functioning the child was taken to the Cherukulam hospital, where the doctors informed
them that as the case was serious the child had to be taken to the Kumili Periyar hospital, around 14
km. away. Neither Mary nor her son Ayyappadas (Palthankams husband) had the money to take
27
crisis in the tea industry
crisis in indian tea industry
the child to the hospital and the child died before they could raise enough money to do so.
Mary, her husband Palani (56), her sons Ayyappadas and Mohanadas (20), their wives Palthankam
(25) and Nagamma (23), Sophiya (2 ) her grand daughter - all stay in a one room company
quarter. Mary is the only permanent worker in this house. When there is work in the plantations,
Palani gets some manual work, as do Ayyappadas and Mohanadas.
There is no bathroom, toilet or sanitation facility in the company quarter. There is no electricity
either, as the company did not pay their electricity dues. They go to the well down the hill to fetch
water.
For the last 2 years there is no work in the estate. The owner and the managers have run away
from the area. The staff in the estate has coordinated the plucking of leaves. They have allotted
specified areas for each worker to maintain. The worker plucks the leaves of that particular area,
which are later sold by the staff. The workers are paid Rs.210 per week as store-cash
4
. When it
is off season (January April) and there are less leaves to pluck they get only Rs.75 per week.
Mary was paid Rs. 76.90 per day.
The government provided rations to the workers but, this rationing system lasted only 4 weeks.
The rice that was given was of very poor quality and the children who ate it had dysentery, says
Mariadas, a worker in the estate.
The middlemen are also using this opportunity to get labourers to work outside Kerala.
Jagadammas (Check Role No: 2328) daughter was taken by Pushpakar, a contractor to Gujarat.
Padmini, Maya, Nabeesa and Sara had similar stories to narrate about women being taken by
contractors to different states especially to Gujarat for the shrimp processing units. Last year
many people left the state but came back immediately. Many of them said that they were not
given the salaries which they had been promised and also because the climate did not suit them.
The contractors take only young people - especially girls of 18 to 20 years.
There is a hospital but, it is non-functional. Nurses, Ayyamma (53) from Rajapalayam (working
for the last 35 years), Anikkutty (48) from Changanasseri (working for the last 15 years) say
diarrhoea, vomiting, jaundice, skin diseases and body-ache are commonly seen among the work-
ers. Suma, a permanent worker says that she falls sick quite often and they have to go to the
Churakulam hospital which is far away, for treatment. Her husband, a manual labourer very
rarely gets work. The collection of firewood adds to their woes as they have to walk at least five
kilometres to gather firewood. If I manage to get some money, I prefer to buy firewood rather
than collecting it from such a distance.
4 people died in the estate last year. None of the workers families were given compensation or
4
During regular working conditions, the weekly payment given to the workers is called store-cash; which would be settled at the
end of the month against monthly wages. Currently, workers were given only store-cash.
28
crisis in indian tea industry
any other entitlement. Anthoniyamma, a permanent worker was granted gratuity after her death.
This amount was granted only after Vazhoor Soman of AITUC filed a case. He has filed 400 such
cases for the workers in the plantations.
Pasumullay Estate
Pasumullay Estate, part of
RBT Group II, is located in
the Vandiperiyar region of
Idukki district. In two divi-
sions, it employed 340 per-
manent workers and around
500 temporary workers.
Pasumullay Estate has been
closed down since March,
2000. The management has
left the estate.
Wages have not been paid for
the last 20 months. Provident
Fund has not been deposited for the last 4 years. Bonus has not been given for the last 2 years.
Electricity has been disconnected in the plantation and therefore, in the worker lines for non-
payment of dues. Drinking water supply to the worker lines in the plantation has been stopped
completely. The estate hospital is non-functional with no medicines, doctor or nurse.
Plucking of tea leaves or the necessary agricultural work is not being carried out formally. Work-
ers under guidance from staff organise plucking with the knowledge of the trade unions and the
plucked leaves are given outside.
Encounter with Workers
14-year-old Velankanni of Pasumullay estate committed suicide. She hung herself from the ceil-
ing of her house. Utter poverty and starvation were the reasons for her decision to end her life.
The immediate cause was that she did not have a school uniform. The doctor who did her post
mortem says that there was no sign of food in her intestine. The people who saw her body say
that her underwear was threadbare and full of holes. The girls stark poverty no food to eat, no
dress to wear, no books to study - what does it reflect? It is a manifestation of the vulnerability of
the members of the crisis-ridden families in the closed and abandoned tea plantations.
Mariaselvam, Velankannis 45-year-old mother was in tears when she tried to explain how dear
her daughter had been. Her husband Chinnapparaj could not control himself while narrating the
incident. Mariaselvam has been a permanent staff member for the last 27 years. Besides
29
crisis in the tea industry
crisis in indian tea industry
Velankanni, she has two sons and a daughter.
The estate had 17 staff out of which only 4 remain in the estate. Though the owner has aban-
doned the factory, the staff and workers are trying to manage it by plucking, pruning and main-
taining the bushes. 300 permanent workers are allotted specific bushes to pluck and maintain.
They are paid Rs.100 to Rs.150 weekly, according to the quantity of the leaves they pluck and the
supervisors get Rs.240 and the staff Rs.250.
According to workers, the estate owes Rs.67 lakhs for electricity. When the owner fled, there was
no one to pay the money. The workers quarters do not have electricity nor do they have drinking
water. They walk 5 km. to the Periyar River for bathing, washing and to fetch drinking water.
There is no way to send our children to school, the drop out rates have increased tremendously,
says Jaykumar. How can we send them to school if we cannot provide them with at least one
meal a day, he questions. 100 children might now be studying in the school; but children are
increasingly dropping out.
The eating habits of the people have changed a lot. They have stopped buying meat. They pick
up the cheapest vegetable available in the market. They have exhausted all their savings. No
new clothes are bought during the new season or at festival times. Some of the temporary work-
ers in the factory have gone to Tiruppur in Tamil Nadu to work in the garment factory.
In both the divisions of the estate, there were 14 deaths. Three were suicides due to poverty and
debt and 12 due to the lack of medical facilities. Besides this, there were 4 cases of unsuccessful
suicide attempts in the estate. Chinnayya who retired in 1996 did not get a penny from the fac-
tory. His daughters marriage, which was already fixed, could not take place because there was
no cash available. He pleaded with the management for help. Unfortunately, he died of a heart
attack.
According to the workers, the crisis in the estate is mostly due to mismanagement and partly due
to the fall in tea prices (70 percent mismanagement and 30 percent is due to the falling prices.)
The assets of this company are worth Rs 80 crore and the debt the company has is Rs.60 crore,
says Vazhoor Soman of AITUC.
Jayaraj, a supervisor in the estate, continues to live in the estate premises. N Dasan, the watcher,
does his work loyally. The company does not pay a penny to these people. Yet,,they continue to
look after the bushes and the machinery The management may come back one day, to start
afresh. At that time every thing should be in order, says Jayaraj. They are loyal to the estate. For
them the estate is the only option for survival. The estate will start functioning again - this is the
expectation that keeps the workers alive.
30
crisis in indian tea industry
Vagamon Estate
Part of MMJ (Mi chael
Manarcadu Joseph) Planta-
tions, Vagamon Estate is in
the Vagamon Panchayat of
Idukki district. MMJ Planta-
tions have two other estates
i n the regi on, namel y
Kottamalai and Bonami. All
the three estates together
have an area of 895.14 hect-
ares and employ 1650 per-
manent workers.
All the three estates are non-functional since October 2002. In the Vagamon estate, however,
salaries to the workers were not paid since July, 2001.
The electricity supply to the plantation, to the factory and the worker lines was disconnected.
There was no provision for drinking water. There was no ration supply, and workers did not have
cash to buy provisions from the market. Children stopped going to school. The estate hospital
was completely non-operational.
The houses of workers were in a dilapidated condition with cracked walls and disintegrating
roofs.
Trade Unions took the initiative and divided the bushes among the workers. The workers pluck
the green leaves and sell them outside.
Encounter with Workers
14-year-old Aneesh in the Vagamon estate has been
bedridden for the last 6 months. He is totally immo-
bile. At times, he convulses violently His illness started
with fever and spells of sudden unconsciousness.
Aneesh was an 8th standard student in the Vagamon
school. Now he has to be fed, dressed and all his
needs have to be taken care of. His parents man-
aged to take him to Kottayam Medical College Hospi-
tal, where he had three brain scans.
Every day he has to be given 12 tablets which, cost
about Rs.300 per week. His mother Saraswathi is a
permanent worker with MMJ Vagamon estate. The
31
crisis in the tea industry
crisis in indian tea industry
trade unions have divided the estate and she has 2000 bushes to maintain. She never gets more
than Rs.100 to Rs.150 a week.
Aneesh has three sisters and one brother - Mahalakshmi, Subbulakshmi, Anitha and Jayakumar.
His father Nagayyan is jobless and is rarely able to pick up some manual work. Since the child
requires 24 hours attention, he stays back with the child.
28-year-old Reji committed suicide by consuming poison leaving his mother Kaniyamma at the
mercy of others. Rejis 3 month old son and his wife are in Ettuanoor, his wifes house. Kaniyamma
is a permanent worker but there is no work at the factory. Reji who used to pick up temporary
work at the plantations was at a total loss when the company closed. He did not have any other
means of survival. The only person whom he could depend upon was his mother, but when she
also did not get work, there was no way for him to survive. Unbearable poverty and the added
pressures of the newborn child made him take this drastic step.
Davids polio affected child requires medicines worth Rs.200 a week. She has studied upto the
7
th
std. but, now the parents are not sending her to school. She may fall somewhere on the way
because the medicines are not regular, says David. Davids wife goes out for manual work but
it is not enough to help give them a decent survival.
Palraj committed suicide after sending his wife Karuppamma to Tirunelvelli. His son Kanakaraj
had gone to Tiruppur in search of a job when the mishap occurred. Palraj did not get any benefits
from the tea plantations for which he was working. He had not been paid for 16 months and
unable to look after his wife and children, Palraj ended his life by consuming poison. Kashi his
neighbour and friend found him in a critical condition and took him to Kottayam hospital, but it
was of no use.
58 year old Pazhani Swami says he is scared to stay in his house as it can collapse at any
moment. All the quarters in that estate are in the same condition. The house is worse than a
cattleshed and the roof leaks if it rains. The workers were given 6 weeks ration but, at present
there is no ration.
They have to walk more than a kilometre to fetch water.
Gomathy who is a permanent worker does manual labour. Her husband left her and migrated to
some other city. The Christian Sisters in the nearby Convent adopted one child and another
daughter stays with her.
Vasanthys problem is worse. One among her two sons has a kidney problem. 4 year-old Binu
requires proper treatment, and good food, but in this situation of utter poverty and starvation how
can she expect to feed her children.
50-year-old Chudala committed suicide because of poverty.
32
crisis in indian tea industry
Meeting with Ashok Alampally, President, AKPA
Ashok Alampally squarely blamed the export and import policy of the government for the crisis in
the tea industry. He said that the government of India is not giving importance to tea because it
has ceased to be an important foreign exchange earner since 1990. The Government of India
imposes uniform excise duties on the export of tea, despite huge differences in the quality of tea
from region to region. Vandiperiyar accounts for the second lowest quality of tea in India, yet it
has to pay the same excise duty.
In 1977, the Government of India imposed an export duty of Rs.5 per kg. It was removed in 1979.
The export of CTC tea was banned during the period 1983-84 in order to bring down the price of
tea in the domestic market. In 2001, the NDA government imposed a uniform central excise duty
of Rs.2 per kg of tea, which was brought down to Rs.1 in 2002. He argued that tea, which is
already under the Essential Commodities Act, is a mass consumption item, and therefore, should
be free from Excise Duty.
Table 8 Taxes and Duties Levied on a Tea Plantation
Ce n t r e State Local Bodi es
Income Tax Agricultural Income Tax Professional Tax
Cess under the Commodity
Act
Plantation Tax Building Tax
Excise Duty Land Tax Sanitary Tax
Sales Tax/Purchase Tax Water Tax
Central Sales Tax Lighting tax
Factory Li cence Fee Drainage Tax
Li cence Fee for
Machinery
Source: ' Draft of t he Whi t e Paper' , The Associ at i on of Pl ant ers of Keral a
According to Ashok, the Indian tea industry has been ruined by the Russian market, where bulk
tea was exported without any value addition. Once the Russian market was lost, it was not easy
to capture other entrenched markets. This has resulted in an oversupply of tea in the domestic
market. The crisis in the tea industry can be overcome if the Government of India facilitates the
export of tea.
He expressed concern that no value addition is taking place in duty free import for export,
though major exporters and brands are engaged in this exercise. According to him, the import of
Sri Lankan tea will not make a significant difference in the Indian market.
33
crisis in the tea industry
crisis in indian tea industry
Historically, Vandiperiyaar did not have a lobby and therefore our interests were not protected.
Besides our contributions to the Tea Board (0.30ps per kg. of tea sold), we are paying a high
agricultural income tax. Our hands are tied, we cannot do anything.
Meeting with the Central Travancore Planters As-
sociation (CTPA)
The FFT had a rare opportunity to
meet the managers of many tea
plantations in Vandiperiyaar at the
Vandiperiyaar Club, Peermade.
Among the participants were Mr. D.
B. King, General Manager (Opera-
tions), AVT; J. Jayachandran,
Group Manager, Hope Plantations;
Vinay Maira, Group Manager,
Harri sons Mal ayal am Ltd; B.
Ambalatharasu, General Manager
(Plantations), RBT and George P.
Jacob, Manager, Churakkulam Tea Estates. Besides the Fact-Finding Team members, Vazhoor
Soman of High Range Estate Labour Union (AITUC) also attended the meeting.
CTPA presented the incongruity between the fall in prices and the increase in wages the most
important factor that affects the survival of the tea industry. In 2001, compared to 1998, the prices
realized came down 29 percent, while wages went up by 27 percent.
Wages increase once in three years and DA increases every year. The DA increase is based on
the Consumer Price Index (CPI) of Cochin since there is no CPI for Peermade.
Table 9 Wages and Average Tea Auction Prices
Year
Auction Prices
per kg of tea
(Cochin)
Wages per day
1998 73.39 59.41
1999 62.04 67.68
2000 51.33 72.66
2001 52.21 75.62
2002 43/44 77.26
Source: As given by CTPA during the meeting with FFT
34
crisis in indian tea industry
The CTPA alleged that Kerala is the only place where the government declares a negotiated
wage as the minimum wage. Wages in tea plantations are negotiated with the Plantation Labour
Committee, a tri-partite body. The negotiated wage is Rs.77.26 in Kerala, which the government
has declared as the minimum wage. This should be seen in contrast to the situation in Tamil
Nadu, where the negotiated wage has been brought down by 10 percent due to a fall in tea prices
and the declared minimum wage is Rs.50.
Besides negotiated wages, the labour cost includes other benefits such as Provident Fund, gra-
tuity, medical benefits, crche, sanitation etc. Considering all these, the CTPA argued that wages
constitute 65-70 percent of the cost of production.
Secondly, the CTPA argued that wages in Kerala are not linked to productivity. In Kerala, the
standard output of plucked tea is 12-16 kg per worker per day, for which the wages are fixed.
Besides this, workers get an incentive at the rate of 42 paise for 16-26 kg of additional tea
plucked, 47 paise for 26-40 kg. of tea plucked and 50 paise for 40 kg or above. The CTPA alleges
that the ongoing standard output has been fixed in 1952, when the yield per hectare of made tea
per hectare was 652 kg. Now the yield per hectare of made tea has gone up to 1800-2000 kg in
Kerala. Event then, the standard output has not been changed. It is imperative that the standard
output be raised and the wages linked to productivity.
Table 10 Cost of Production of Tea per kg (South India) in 2000-01

1998-99 1999-2000 2000-2001
Cultivation 7.72 7.76 6.97
Plucking 10.64 12.17 13.92
Manufacturing 7.04 7.06 6.96
Packing 3.79 3.80 2.75
Upkeep 3.23 2.97 3.08
Selling/Distribution 0.86 1.35 1.41
Welfare 7.47 8.41 9.28
Bonus 3.15 3.41 3.66
Head Office 4.85 4.35 4.19
Interest 1.71 1.90 2.46
Depreci ati on 1.96 1.96 2.28
Total 58.73 60.97 63.08
Source: UPASI, 2003
35
crisis in the tea industry
crisis in indian tea industry
They alleged that wage negotiations are a political game in Kerala; therefore trade unions are
not willing to accept productivity-linked wages.
Let us quote extensively from a document provided to us by the Chairman of The Association of
Planters of Kerala,
Plantations are highly labour intensive and labour wages and benefits constitute
50-60 percent of the cost of production. Kerala tea plantation wages are the highest
for plantation labour in the world and the Kerala plantation industry has the dubious
distinction of having the lowest labour productivity, lowest price realization and high
cost of production. The standard output is the lowest in the country.
Table 11 Comparison of Wages, Land and Labour Productivity and Prices with
otherStates
Kerala
Tamil
Nadu
Assam West Bengal
Labour Productivity 16Kgs. 25 Kgs. 20 Kgs. 24 Kgs.
Labour Wages Rs.77.26 Rs.72.00 Rs.65.88* Rs.49.25*
Minimum Wages Rs.70.79 -Rs.53.00 Nil Nil
Land Productivity,
yield etc.
1887 2468 1685 1909
Tea Prices South India Rs.43.79 North India Rs.66.17
*This includes concessions on food grains supply.
The above coupled with the fact that plantations in Kerala, operate in relatively less congenial
agro-climatic conditions, affects both land yields and tea quality, rendering the industry in Kerala
to be very unviable.
It is the above factors, which are particularly accentuated in the Peermade/Vandiperiyar area,
that have led to the closure of 6 estates and 14 factories, where remedial measures have to be
devised and implemented. And if timely intervention is not done many more estates will collapse.
The industry has been requesting the trade union representatives in the PLC for substantial
increase in the labour productivity since 1989. However, there has not been a positive reaction to
the proposals made by the Industry. Realising the magnitude of the crisis and the plight of indi-
vidual plantations, in the Tamil Nadu industry senior Trade Union leaders took the enlightened
and pragmatic view that a time had come when sacrifice must be made all round and in the
interest of salvaging the industry and in order to protect continued employment, agreed to a
wage reduction by more than Rs.5, along with a substantial increase in productivity. While half a
dozen plantations have closed in Kerala and many more are on the verge of closure, Tamil Nadu
36
crisis in indian tea industry
was able to avoid a similar disaster because of the agreement for a moderate wage reduction
coupled with higher labour productivity in the organised sector. It may be noted that out of nearly
two lakh workers employed in Tamil Nadu plantations, only 60,000 workers receive wages at the
settlement rates and the remaining 1,40,000 workers receive only about Rs.53 which is the
statutory minimum wage in that State. The organised sector employing these 60,000 workers
had the benefit of the recent reduction in the wages. The Governments declared policy on labour
and industry is to link long term settlements with increased productivity. We would urge the
Government to implement its policies without delay.
The wage productivity linkage has a historic angle. Prior to 1950/1951 the daily crop to be har-
vested by a plucker each month, fortnight or week was decided by the planter himself taking into
consideration the agro-climatic conditions and the seasonal crop pattern. However, the Mini-
mum Wages report of 1952 decreed an annual plucking average based on the crop from the
years 1950-1951. The yield levels have since increased many fold but there has not been a
suitable increase in the standard output. Besides, the threat of minimum wage revision has
always made it impossible to really negotiate wage/productivity linkage. The result is there for all
to see with ever rising wages and ever rising labour cost per kilo. In the recent wage reduction
settlements, bills for two major planting regions in Tamil Nadu, the plucking scheme has been
made more realistic enhancing the base outputs to 15 -30 kilos linked to green leaf yield of an
estate for the moth cultured.
Higher Wage or Continued Employment
The question before us is whether the industry should survive with continued employment even
if it means workers accepting a sacrifice in terms of a lower daily wage or higher wages and
imminent closure of the estates. The Tamil Nadu experience is an eye opener, which the Kerala
Trade Union Leaders should try and emulate. In the current scenario, the employment is more
important than the wage level. Therefore, the workers and the trade union leaders cannot close
their eyes to what is happening across the border. A State like Kerala should learn from past
mistakes of having long and protracted strikes/lockouts, which has ultimately forced many of the
industries to close down. This should not happen in the plantation sector, which is labour inten-
sive and located in rural areas where alternate employment is just not there. Plantation sector is
the largest single employer in Kerala.
5
UPASI has worked out the labour cost of plantation workers by monetising the benefits the plant-
ers are expected to provide to the workers by law, mainly under the Plantation Labour Act. It is
given in Table 7.
5
The Draft of the White Paper, The Association of Planters of Kerala, January 2003
37
crisis in the tea industry
crisis in indian tea industry
Table 12 Wage & Fringe Benefits of a Tea Plantation Worker Per
D a y
KERALA
(Wage
Under the
expired
Settlement
as on
31.03.02)
KARNATAKA
(Wage Under
the expired
Settlement as
on 31.03.02)
TAMIL NADU
(Wage Under
the expired
Settlement as
on 31.03.02)
Nilgiris
(From 01-01-
2002)
Nilgiris-Wayanad
(From 01-01-
2002)
1
Basic Wage +
Dearness Allowance
77.26 60.70 76.85 70.00 71.00
2
Incentive Wage
(Average)
4.44 3.22 3.68 1.75 2.00
3 TOTAL 81.70 63.92 80.53 71.75 73.00
4 Wage Related Statutory Benefits
5
Provident Fund (12
percent)
9.81 7.29 9.67 8.61 8.76
6
Deposit-Linked
Insurance
0.41 0.31 0.41 0.36 0.37
7
Gratuity (15 day's
wage/year)
4.38 3.26 4.32 3.85 3.91
8
Bonus 15 percent
(Average)
12.26 9.11 12.08 10.77 10.95
9
Leave with Wages
(Average 14 Days)
4.09 3.20 4.03 3.59 3.65
10
Paid Holidays (Kerala
13 days, Karnataka
and Tamil Nadu 9
days)
3.80 1.96 2.59 2.31 2.35
11
Sick Leave with
Benefit (14 days at
2/3rd of wages)
2.58 2.03 2.57 2.34 2.37
12
Maternity Benefit for
Women workers
(Average)
2.46 1.83 2.42 2.16 2.19
13
Statutory benefits
unrelated to wages
such as free housing,
medical care,
protective clothing,
sanitation &
conservancy, water
supply, education,
crche & child care,
LTA etc., constitute
another 20 percent of
wage
16.34 12.79 16.11 14.35 14.6
TOTAL 137.83 105.70 134.73 120.09 122.18
Source : UPASI, 2003
38
crisis in indian tea industry
Thirdly, CTPA holds that the fall in exports in India has contributed to the crisis in the tea industry.
South India exported 100 million kg. of the 200 million kg. of tea produced. Currently the export
has come down to 70 million kg., resulting in an over supply of tea in the market.
We lost the export market, because of the export policies of the government. Kenya, Sri Lanka,
China, Vietnam, Indonesia and Turkey have captured Indias export market.
Fourthly, the auction system has failed completely. Auction is an adjustment. It has not stabilized
domestic prices of tea. The Ferguson Committee was highly critical of the present auction sys-
tem. But, nothing substantial has come out of it. Hindustan Lever in India is both a trader and a
distributor. They are powerful and cannot compete with them.
On a specific question, why plantations have closed down in Peermade, the planters represen-
tatives gave various reasons:
i. Land productivity is very low;
ii. Tea bushes are very old, around 100 years
iii. Tea is affected by pests, mosquitoes and diseases
iv. Only those plantations that encourage multi-cropping are surviving. Pepper, carda-
mom, coffee and rubber are allowed. Medicinal plants, cashew and vanilla could
also be planted but, these come under the Land Ceiling Act, therefore, we cannot
diversify.
v. Labour is organized and powerful. All benefits for the permanent workers are also
given to the temporary workers. Labour is not agreeable to a reduction in wages. If
trade unions in Tamil Nadu have agreed to bring down wages, why not in Kerala?
vi. Absenteeism is high among workers. Drinking habit is high; Pentecostal Churches
influence workers away from work. Sometimes workers go to work in another fac-
tory for fear of moneylenders.
Meeting with Gram Panchayat, Vagamon
On 23 January 2003, the Fact Finding Team met with Gram Panchayat members in Vagamon.
Among those who attended the
meeting were M. P. Jayadevan,
Member, Vazhutha Bl ock
Panchayat and O. V. Kuttan Nair,
Member Trithala Panchayat.
They said the Gram Panchayat
does not have any funds to provide
relief or employment to the jobless
workers in closed down/abandoned
plantations.The Gram Panchayat
does not have rights over the plan-
39
crisis in the tea industry
crisis in indian tea industry
tation land , it only has a right over the buildings The revenue goes to the government and the
plantations are not paying building tax, using the crisis as an excuse.
Gram Panchayat has the right only over the buildings. In the name of crisis, plantations are not
paying building tax.Currently, the Gram Panchayat is under severe pressure, because the planta-
tions have stopped taking care of the basic needs of the workers and their families such as food,
water, health and education.
Central Government schemes like SGRY are not very practical, because most of the roads and
open spaces belong to the plantations. Only 25 percent of the land is agricultural land. About 75
percent of roads are within plantations, over which the Gram Panchayat does not have any right.
The Gram Panchayat has the right to collect cess from the planters and has initiated recovery
procedures. Notices were sent to the management without any effect. In some cases, workers
did not allow recovery procedures from plantations, because the managements had not given
them their dues.
Closure of the plantations has affected the economy of the region, business has been badly hit.
Children are not going to school.
In Peermade taluk 14 people have died due to illness, starvation and the absence of medical
help.
Meeting with a Team of Trade Unions in Peermade
The FFT met with local leaders of AITUC, CITU, INTUC, HMS, BMS, UTUC on 24 January 2003
in Peermade. Among those who attended the meeting were Bhaskaran, Cyril Thomas, P R
Gopalakrishnan, Ayyadurai, Soman and Rajan.
They said that no new workers were being employed in any of the plantations. No super-annuation
benefits were being given to workers who retire. Only two major companies AVT and Harrison
Malayalam were functioning in the region.
They have cited mismanagement as the most obvious reason for the crisis, closure and aban-
donment of tea plantations in Peermade and Vandiperiyar region. Plantation owners do not have
any interest or tradition in managing tea plantations. They have looted plantations and diverted
profits to other enterprises to the detriment of the tea plantations. They said that 80 percent of the
plantation area in Peermade is covered with bushes aged more than 75 years. The manage-
ments have not taken steps for re-plantation. They have also not bothered to engage in neces-
sary agricultural activities in the plantations, which have adversely affected the productivity in the
area.
Loans taken from public financial institutions have not been invested in the plantations by the
40
crisis in indian tea industry
management. Trade unions wonder where the provident fund and gratuity of workers has gone.
Managements of the crisis-ridden companies are not paying the workers their dues.
Trade unions pointed out the misuse of auction system by traders and brokers as an important
reason for the present crisis in tea plantations. The big buyers form cartels and bring down the
auction prices. In this context, trade unions demanded the implementation of the recommenda-
tions of the Ferguson committee to strengthen the auction system. However, they also said that
the producers should be free to sell their products wherever they fetch remunerative prices.
Trade unions felt that the import policies of the government are adding to the tea crisis. Tea is
imported from many countries consequent to the removal of quantitative restrictions as man-
dated by the WTO. The South Asia free trade agreement allows import of 15 million kg of low
priced tea from Sri Lanka. Import of tea is allowed into the Export Processing Zones for re-
export. Tea is also allowed to be imported duty-free for re-export. This has brought down prices
in the domestic market.
Trade unions strongly felt that Tea Board
6
should have acted promptly to address the problems
of tea gardens by procuring tea under remunerative prices, facilitating cooperativisation of aban-
doned gardens and by encouraging timely re-plantation of tea plants.
Trade unions did not agree with the proposition of the planters that low productivity is a reason for
the crisis. They argued that at 2.01 labour per hectare and 894 kg of production per labour,
productivity in Kerala plantations is higher than in other tea growing regions except in Tamil
Nadu.
AITUC quoted their submission on the issue of productivity before the Parliamentary Committee
on Commerce, which visited Peermade on November 14, 2002,
All the crops tea, coffee, rubber and cardamom made substantial increase in yield de-
spite huge cut in manpower. The Association of Planters of Kerala in their presentation
dated 9-9-2002 to the Parliamentary Committee agreed that average yield during 2000-
2001 is increased to 114% in rubber and 116% in coffee and 266% in cardamom and 26%
in tea, compared to the crop position of 1980-81. The production per labour is substan-
tially increased in major crops of plantation in Kerala which kindly note. Take the specific
case of Tea plantation.
6
Tea Board Constituted by the Government of India has vast powers and many functions for promoting and develop-
ing the tea industry. A few of them are as under :-
i. Improving the quality of tea
ii. Promoting co-operative efforts among the gardens, and manufacturers.
iii. Increasing the consumption of tea in India or elsewhere.
iv. Improving the market of tea in India and elsewhere.
v. Collecting statistics from growers, manufacturers, dealers.
vi. Securing better working conditions and improvements and incentive to workers etc.
41
crisis in the tea industry
crisis in indian tea industry
Table 13 Productivity and Labour per Hectare (Tea)
Labour Per Hectare
Production per
Labour in kg
Assam 2.34
772
West Bengal 2.34
783
North India 2.30
786
Tamil Nadu 1.80
1152
Kerala 2.01
894
Source : Tea Statistics 98-99 page 154-155
The Honourable members may kindly note that tea production per labour in kgs. in Kerala plan-
tations is comparatively much higher than other tea growing areas except Tamil Nadu. Therefore,
the accusation against productivity of Kerala labour in tea estates is proved baseless. According
to the above authentic data, Kerala stands second in the productivity per labour.
In regard to the area of tea plantation and yield of tea in Kerala, the latest annual reports of
many leading companies show that their yield per hectare has increased further to an average
level of 2000 to 2500 kg. per hectare.
3) We would like to point out certain negative features of tea cultivation in Kerala in this connec-
tion. In regard to production per hectare, Kerala is lagging behind Tamil Nadu because of rea-
sons beyond the control of workers. Kindly note that out of 36775 hectares of tea area in Kerala,
approximately 70 percent area (25720 hectare) came under bushes having age of 50 years or
above where as in Tamil Nadu out of 55590 hectares approximately 33 percent area came under
such aged plants.
42
crisis in indian tea industry
Table 14 Age Group of Bushes in Kerala

Ag e Gr o u p Ar e a Cov e r e d ( I n He c t a r e s )
Bel ow 5 year s 4 3 3 2
6 t o 10 year s 5 5 0
11 t o 20 year s 4 5 1
21 t o 30 year s 7 5 2
31 t o 40 year s 1 3 5 9
41 t o 50 year s 3611
Above 50 year s 2 5 7 2 0
Al l Gr oups 3 6 7 7 5
Source : Tea St at i st i cs 98-99 Page 28, 29
The fact that productivity of tea bush is adversely affected by age related deteriorations
more than anything else. Bush potentiality is generally observed to be at optimum up to 40
years of age beyond which depending on climatic condition and management practices
gradually declines. According to experts, productivity of tea bush in Kerala reached to a
saturation level because of the above stated reasons. This position could be changed only
through replacement of dead or aged tea plants and replantation. In the absence of such
steps, yield per hectare and productivity or workers could not be increased further sub-
stantially.
7
The trade unions contested the planters contention that in Kerala, the wage is not linked to
productivity. They said that the planters demanded, in the Plantation Labour Committee, an in-
crease in the standard output from the current 14-16 kg per worker. This was not accepted.
However, planters have illegally withheld payment of DA.
The wage structure in Kerala is linked with production and productivity. The productivity
and production thereby only registered upward increase. Generally, majorities of workers in
tea estates are females. More than 75% of workers are employed in plucking in estates
and rest in other works and they are doing hard work also. The period of wage settlement
of plantation workers in Kerala is over by the end of 31-3-2002 and a new increased wage
should have been made with effect from 1-4-2002. The workers Dearness Allowance due
from 1-4-2002 is also withheld. The employers are trying for a wage cut while employees
are demanding for an increased wage. The employers are exploiting the present unfortu-
nate situation in tea estates at Peermade are for their narrow gains
8
7
Before the Honourable Parliamentary Committee on Commerce at its camp at Peermade on 14-11-2002,
submission by C A Kurien, President AITUC, Kerala State Council, Thiruvananthapuram, P. S. Bhaskaran, Working
President, HEL Union, AITUC, Peermade, Vazhoor Soman, HEL Union, AITUC, Peermade.
5
ibid
43
crisis in the tea industry
crisis in indian tea industry
The trade unions unanimously demanded that the government takes over the plantations. In
Kerala, the Plantation Corporation of Kerala runs plantations profitably.
The government should also take steps to intervene in the market to stabilize prices, by purchas-
ing tea directly.
Trade unions further demanded that the government should facilitate the formation of workers
cooperatives to manage and run the crisis ridden and abandoned tea plantations.
Mr. Hariharan P.S., Iduki District Secretary, UTUC, in a separate meeting with the FFT, attributed
mismanagement as the main cause of the closure of tea plantations in Peermade and Vandiperiyar.
He recalled that in some plantations in the region, which are functioning well, the management
has introduced harvester machines. He said that a harvester machine that plucks 1500 kg of
green leaves in four hours consuming 300ml of petrol employs only three people. Every machine
displaces 15 people.
.
Status of Crisis Ridden or Abandoned Tea Plan-
tations in a Nut-shell
A note prepared by the Central Travancore Planters Association gives the following details
regarding the extent of the crisis in the estates in the region. Details are provided for the
following: 1. Estates not functioning, 2. Estates being run by workers and staff, 3. Estates on
the brink of closure, 4. Estates struggling to survive because of the crisis and labour unrest
and 5. Estates Struggling to Survive.
44
crisis in indian tea industry
Table 15 Status of Tea Plantations in Central Travancore
Name of t he
Company &
Area (hectares)
Name of Estates
No. of
Permane-
nt
Workers
Date of
Cl osure
Status
Estates Not Functioing
1. Peer made
Tea Co.
1. Pi r med
2. Lone Tree
1200 Oct . 2002 Workers are plucking the
leaf and selling it to
bought leaf factories
illegally with the support of
union leaders.
1. MMJ ( M. M.
Joseph)
Pl antati ons
3. Kottamal ai
4. Bonami
5. Vagamon
1650 Oct.2002 Sal ary not pai d si nce
August, September & July
2001 respectively, Green
leaf being plucked and
sol d to bought l eaf
factories illegally.
2. Pul l i kanam
Estate
6. Pullikanam 400 Sept.200-
2
P.F. not remitted for one
year. Wages not pai d for
8 months.
3. Hai l eyburi a
Est at es
7. Hai l ey buri a
8. Chi nnar
9. Semi ni val l ey
1200 Dec. 2002 One month.
Estates Being Run by Workers and Staffs
4. RBT (Rai
Bahadur Thakur)
Group II
10. Tungamullay,
11. Pasumullay,
12. Granby
13. Mount
14. Kol i ekanam
2500 Wages due for 19 months
& P.F. for 4 years. Bonus
due for 2 years. No
executives in the 5
estates.
Workers & Staffs have
organi sed pl ucki ng and
selling the leaf outside
and paying store-cash to
the workers and staff with
the money.
Estates on the Brink of Closure
15. RBT Group I 15. Munjamullay
16. Pambanar,
17. Nellikai
18. Thengakal
1650 12 month' s wages & 1
year's bonus are due. P.F.
not paid for 4 yrs.
16. Hope
Plantations
19. Glenmary
20. Ladrum
21. Koduvakaranam
2000 - Wages due for 6 months
and bonus for 1 year. P.F.
not pai d si nce Apri l 2001.
17. A.V. George 22. Stag Brook Ashl ey 500 - Wages not pai d si nce
March 2002 & 1 year' s
bonus yet to be pai d.
45
crisis in the tea industry
crisis in indian tea industry
18. Mlamallay
Estate
23. Mlamallay 400 - Wages not paid since
February 2002.
19. Churakulam
Estate (MMJ)
24. Churakulam 400 - Wages not paid for 3
months.
20. The
Karimtharuvi Tea
Estate Ltd.
25. Karimtharuvi
26. Penshurst
600 - Wages not paid for 5
months.
Estates Struggling to Survive due to Crisis and Labour Unrest
21. HML Ltd. 27. Moongalar
28. Wallardi
2500 - Wages due for 1 month.
Lot of unrest like assault
of Manager, gheraos, go-
slow etc.
22. ABAN LOYD
Ltd.
29. Tyford
30. Rohit
1200 - Wages not paid since
August 2002. Only 60
percent bonus has been
paid so far for the year
2001/01. Workers are
indulging in go-slow,
lightning strike etc. &
demanding that the
management abandon
the estate so that they can
run it.
Estates Struggling to Survive
23. AVT 31. Arnakal
32. Carady Goody
33. Pasuparai
1700 - Despite of the crisis all
labour amenities and
welfare measures are
being continued. Though
they have made loses on
tea, they manage to pay
all wages, bonus, P.F. and
gratuity with the other
crops.
24. Alampally
Estates
34. Alampally 270 - Despite the crisis all
labour amenities and
welfare measures are
being continued. Though
they have made losses on
tea they manage to pay
all wages, bonus, P.F. and
gratuity with the other
crops.
25. Periyar
Connemara
Estate
35. Periyar Connemara 400 - Functioning normally as
above.
26.
Chidambaram
Estate
36. Chidambaram 100 Functioning normally as
above.
Source : Compiled from a note prepared by the Central Travancore Planters' Association, January 2003 and supplied to us through Vazhoor
Soman.
46
crisis in indian tea industry
Name of the
Company &
Area (hectares)
Name of
Estates
No. of
Permane-
nt
Workers
Date of
Closure
Status
1. Mahavir
Plantations
1. Bonacadu
Tea Estate
460 October
1999
Workers are plucking the leaf and
selling it to bought leaf factories
illegally with the support of union
leaders.
Wages and bonus not paid since
October 1999. Provident Fund not
deposited since October 1977.
Gratuity not paid to 180 workers
who left the plantation.
2. Jayashree
Tea & Industries
Ltd.
3. Ponmudi Tea
Estate
300 Not closed Seven month lock out in 2002.
Workers being compelled to accept
reduction in wages.
All the tea plantations in Central Travancore are reported to be going through the crisis, though at
various stages of intensity (Table 2). Except for six estates belonging to AVT (Arnakal, Carady
Goody, Pasuparai), Alampally Estates, Periyar Connemara Estates and Chidambaram Estates,
all the other estates in the region have defaulted on payment of wages and Provident Fund. Even
these companies are reported to be on the brink of closure.
All the four major tea plantations in Trivandrum district namely, Bonacadu, Ponmudi, Barmore
and Invarcode Tea Estates were reported to be going through a crisis. The Fact-Finding Team
visited Ponmudi and Bonacadu Tea Estates on January 22, 2003.
47
crisis in the tea industry
crisis in indian tea industry
Table 16 Status of Tea Plantations in Ponmudi Region, Trivandrum District
1973 1985 1998
Size of Estate (ha) No.
Average
area per
estate
Yield
per ha.
No.
Average
area per
estate
Yield
per ha.
No.
Averag-
e area
per
estate
Yield
per ha.
< 8.09 6069 1 _ 6353 1.3 _ 50571 0.6 1898
8.09 -50 347 11.4 427 131 17.5 547 109 20.2 1352
50 -100 23 73 1404 20 75.8 1483 27 71.3 1227
100 -200 26 156 1830 25 151.1 1632 23 152.5 1502
200 -400 41 300 2309 46 294.3 2663 54 297.9 2696
> 400 15 481 2241 16 480.6 2086 16 534.1 2192
All 6521 5.4 1599 6791 5.5 1670 50800 1.3 2079
Source : V.N. Reddy, Analysis of Tea Industry, presented at IUF India Tea workers Meet, December 2002.
Planters and their organizations justified closure and non-payment of workers dues citing the
crisis as the reason and insisted on governmental intervention and workers acceptance of their
line of thought.
Employers argue that the cost of production (COP) of tea is higher than the price the commodity
fetches, making plantation uneconomical. Many factors push up the cost of production and pull
down the commodity prices. Among the factors that push up COP, they say, are increasing input
costs and some of the taxation policies of the government. Nevertheless, they tend to over-
emphasise labour productivity, wages and social welfare cost. The misuse of the auction system
by brokers and traders and the excess supply of tea in the market because of export and import
policies are listed among factors that pull down prices.
Workers and their organizations do not entirely accept these arguments. For them, joblessness
and hunger are the immediate realities. They put forward mismanagement by the planters as the
primary reason for the crisis in the tea plantations. They disagree with the planters that the
increase in COP is a reason for the crisis and emphasise structural and geographical reasons.
There are similarities in perspectives between the planters and the workers on the misuse of
auction system by brokers and traders, taxation and export-import policies of the government.
48
crisis in indian tea industry
Chapter V
Major Findings and Observations
1. Closure of Estates and Abandonment by the Management
1.1. Fourteen tea estates in Peermade taluk, Idukki district belonging to the Peermade Tea
Company (Pirmed, Lone Tree), MMJ Plantations (Kottamalai, Bonami, Vagamon ),
Pullikanam Estate, Haileyburia Estates (Hailey buria, Chinnar, Seminivalley), RBT Group
II (Tungamullay, Pasumullay, Granby, Mount, Koliekanam) have been closed down com-
pletely. Top managers have left their respective plantations.
1.2. Four tea estates in Ponmudi region, Trivandrum district namely, Bonacadu, Ponmudi,
Barmore and Invarcode Tea Estates have been closed down completely. Top manag-
ers have left these plantations.
1.3. Nine estates belonging to Peermade Tea Company, MMJ Plantations, Pullikanam Es-
tate, Haileyburia Estate are not functioning at all. Plucking in these plantations is carried
out illegally, which means that it is done without the formal approval from the respec-
tive managements.
1.4. In five estates belonging to the, RBT Group II, under a tacit understanding with the
management although the management has deserted the plantations, staff and work-
ers are plucking tea and dividing the proceeds. This is also true in the case of Bonacadu
Estate.
2. Non-Payment of Wages
2.1. Besides the fourteen estates listed above, seventeen more estates report non-payment
of wages to workers. At the time of investigation, the duration of non-payment of wages
varied from one month to nineteen months. The two estates of Peermadu Tea Com-
pany have not paid wages to the workers since October, 2000. Vagamon, Kottamalai
and Bonami Tea estates of MMJ Plantations have not paid wages since July, 2001,
August, 2001 and September, 2001 respectively. Workers in Bonacadu Tea Estate have
not received wages since October, 1999.
2.2. Workers have not received their wages since July, 2000, in the five estates of the RBT
Group II and since December, 2000, in the four estates of the RBT Group I. In the three
estates belonging to Hope plantations, workers have not received wages since June,
2002 and in two estates of Karimtharuvi Tea Estate Limited workers have not received
wages since July, 2002.
3. Non-Deposit of Provident Fund
3.1. Most of the crisis ridden plantations have reported non-remittance of Provident Fund.The
worst case of default, non-remittance for four years, has been reported from the nine
estates of the RBT Group I & II companies and Mahavir Plantation.
49
crisis in the tea industry
crisis in indian tea industry
4. Job-loss and Absence of Alternative Source of Income
4.1. The closure, abandonment or lock out of tea plantations in Ponmudi and Peermade
region has rendered 60,000 workers jobless creating a catastrophic situation for them
and their families. The situation has been made worse due to the non-availability of
alternative sources of income in the plantation enclaves.
5. Absence of Drinking Water
5.1. The supply of potable water has stopped completely. People have no other option but to
fetch water from available sources kilometres away, usually down hill, and in most cases,
from scanty and contaminated sources.
6. Health Seriously Affected
6.1. Hospitals are not functioning in the closed down/abandoned plantations and the supply
of medicines has stopped. Doctors are not attending to patients. Nurses and health
assistants remain moot/silent witnesses to the unfolding tragedy.
7. Starvation and malnutrition
7.1. The closure of plantations has effectively curtailed the workers ability to access food,
pushing them and their families to the brink of starvation or acute malnutrition. Since,
the absence of food over a long period of time means death, people go for any food
which is available and cheap, resulting in chronic under nourishment or food poisoning
and slow death.
8. Added Burden on Women
8.1. Closure/abandonment puts tremendous pressure on women workers, the main wage
earners in tea plantations. They are constrained by the lack of skills, absence of alter-
nate employment opportunities, unfavourable conditions for migrating long distances in
search of alternate opportunities of work. They have to live through the experiences of
seeing their husbands commit suicide, children starving and discontinuing their educa-
tion, seeing daughters leave for far away places, insecure job conditions and the
voluntary or involuntary sale of their bodies.
9. Children Stop Schooling, Look for Avenues of Income
9.1. Children have stopped their education in large numbers because they have no money
to commute to the nearest functional school (if any), no provision for food, no means
to purchase books or other educational materials and in most cases no money to
purchase the essential school uniforms. School children also reported feeling humili-
ated and have preferred discontinuing their studies. It has also been seen that chil-
dren discontinue their studies to augment their parents income and they look for
alternative sources of income which are elusive.
10. No Right to Housing, No Right to Land
10.1 Workers do not have any right over the houses in which they live. They do not have
the right to use the land for subsistence cultivation or rearing of cattle, denying them
any chance for alternative income generation.
50
crisis in indian tea industry
11. Peermade & Ponmudi Contradicts Keralas Claim on BPL
11.1 In the early 90s, a break-through was made in the assessment of poverty.
1
The analy-
sis of the survey led to the development of nine criteria for identifying the most vulner-
able families, who were classified as risk families. The risk index or poverty index was
formulated consisting of the following nine, non-monetary factors each reflecting a
kind of deprivation: 1. Kutcha house, 2. No access to safe drinking water, 3. No ac-
cess to a sanitary latrine, 4. Illiterate adult in the family, 5. Family having not more than
one earning member, 6. Family getting barely two meals a day or less, 7. Presence of
children below 5 years in the family, 8. An alcoholic or drug addict in the family, 9.
Scheduled caste or Scheduled tribe family. A family, which had four or more of the
above risk factors, was classified as high risk poor.
11.2 About 26,000 tea estate workers in Peermade Taluk fall under the category of high
risk poor, since these families have all the nine risk factors. This is a wake up call for
the people and the government of Kerala and contradicts its claim on people below
poverty line.
12 Overall Degeneration of Plantation Areas
12.1 The closure of plantations has resulted in the overall economic and cultural degenera-
tion of the respective panchayats and talukas.
13 Planters Justify Closure
13.1 Planters have overtly and covertly justified closure or abandonment of tea plantations
pointing out the unprecedented and continuous fall in tea prices and increase in the
cost of production. The cost of production has been higher than the price realization
from bulk tea resulting in continuous losses.
14 Planters allege Wage-cost increases Cost of Production
14.1 Planters hold that in a labour intensive sector like tea, an increase in wages is the
most important factor that pushes up costs. Moreover, statutory compulsions from the
Plantations Labour Act to provide social welfare to workers further pushes up the total
labour cost.
15 Planters Demand Reduction in Negotiated Wages
15.1 To reduce wage cost, the planters have demanded from the workers a reduction in
wages from the negotiated wage of Rs.77.26. They have denied the increase in DA
due from January, 2002. They also wanted an immediate stop put to the practice of
the government of Kerala declaring the negotiated wage as the minimum wage in
plantations.
1
The pilot project on Urban Basic Services Programme in Alleppey Town, was supported by UNICEF. It was felt that
the conventional head count system was much too remote from the people and that a transparent index based on well-
recognised features of poverty would be more acceptable. A survey of 5728 families was conducted by trained Com-
munity Volunteers and ICDS Volunteers in seven Wards of Alleppey. (Source: Economic Review, website, and Gov-
ernment of Kerala.)
51
crisis in the tea industry
crisis in indian tea industry
16 Planters Demand Productivity Linked Wages
16.1 Planters want workers to agree to productivity linked wages and to increase the standard
output norms.
17 Workers Assert Mismanagement
17.1 Workers point out that mismanagement is the main reason for the present crisis in the
plantations in Peermade and Ponmudi. They allege that the managements of the
closed or abandoned tea plantations have not nurtured the plants for a long time. No
efforts were made to replant bushes over 50 years.
18 Workers Point out Structural Factors for Cost of Production
18.1 Workers blame structural problems such as the age of the tea bushes for low produc-
tivity in the Peermade and Ponmudi region.The productivity of tea plants deteriorates
after 50 years. About 70 percent of the tea bushes in the crisis-ridden region are more
than 50 years old.
19 Workers Reject Call for Wage Reduction
19.1 Workers have rejected the call for a reduction in wages as a method of reducing the
cost of production and the suggestion to notify reduced wages as the minimum wage.
20 Workers Consider Wages Linked to Productivity
20.1 Workers consider wages in Kerala are already linked to productivity.
21 Planters & Workers Blame the Export and Import Policies of the Government
21.1 Planters, workers and trade unions agree on the point that the government has not
done anything to promote market access after the collapse of the easy market in the
Soviet Union. On the other hand, duty free imports of tea to Export Processing Zones,
under the import for export scheme or under SAFTA are pushing down domestic
prices.
22 Planters and Workers agree on the Misuse of Auction System
22.1 Planters and workers also agree on the fact that brokers and traders are misusing the
auction system to bring down the prices of tea. However, while workers forcefully
argue about the formation of cartels in auctions by powerful traders and multinational
corporations, the planters do not accept this phenomenon.
23 Inactive Government
23.1 No evidence has been found to establish any creative or concerted effort by the gov-
ernment either to revive the crisis-ridden plantations or to give succour to the suffering
workers.
52
crisis in indian tea industry
Chapter VI
Tea Plantations in Tamil Nadu
In Tamil Nadu most of the tea plantations are situated in the Coonoor and Gudulur areas of the
Nilgiris along with the Valparai region of Coimbatore district. The Nilgiri district alone produces
around 80 million kgs. of tea, which is roughly 50 percent of the total tea produced through out
South India. The total acreage under tea in Tamil Nadu is 1.25 lakh acres and the tea industry of
Tamil Nadu gives employment directly or indirectly to 1,50,000 workers. The Valparai region has
the highest concentration of tea plantations in the Annamalai hills.
Between 1985 and 1998, the number of small tea growers (tea produced in less than 10.1 hec-
tares of land) has gone up significantly from 6353 to 50,571. The biggest estates (>400 hectares)
have also gained marginally but the medium tea plantations (<200 hectares) have either shown
very little or a negative growth.
Table 17 General Profile of Tea Plantations in Tamil Nadu
The 1991 data shows that Tamil Nadus human poverty index is 29.28 in com-
parison to national average of 39.36. In terms of human development index,
using the National Human Development Report (Government of India) Tamil
Nadu is in the 14
th
position vis--vis other Indian states. Per Capita Net State
Domestic Product (at 1993-94 prices in Rs) during 1998-99 is Rs. 11,775
compared to national average of Rs. 9,647.
The Literacy Rate in 2001 was 73 percent compared to the national average
of 65 percent. Life Expectancy at Birth during 1992-96 (yrs.) was 64 com-
pared to the national average of 61. Maternal Mortality Rate - 1998 (per 100,000
live births) is 79 compared to the national average of 407. The percentage of
houses with access to safe drinking water in Tamil Nadu during 1991 was 67
compared to national average of 62.
1973 1985 1998
Size of Estate (ha) Number
Average
area per
estate
Yield
per ha.
Number
Average
area per
estate
Yield
per ha.
No.
Averag-
e area
per
estate
Yield
per ha.
< 8.09 6069 1 _ 6353 1.3 _ 50571 0.6 1898
8.09 -50 347 11.4 427 131 17.5 547 109 20.2 1352
50 -100 23 73 1404 20 75.8 1483 27 71.3 1227
100 -200 26 156 1830 25 151.1 1632 23 152.5 1502
200 -400 41 300 2309 46 294.3 2663 54 297.9 2696
> 400 15 481 2241 16 480.6 2086 16 534.1 2192
All 6521 5.4 1599 6791 5.5 1670 50800 1.3 2079
Source : V.No. Reddy, Analysis of Tea Industry, presented at IUF India Tea workers Meet, December 2002.
53
crisis in the tea industry
crisis in indian tea industry
There are a total of 89 big and medium tea estates in Tamil Nadu. The Nilgiri region has around
58 tea estates which are affiliated to two major planters associations-Planters Association of
Tamil Nadu and Nilgiri Wayanadu Planters Association. Some of the major companies operating
in the region are the following:
Staines Company Ltd.
United Nilgiris Tea Estates Company Ltd.
Coonoor Tea Company Ltd.
Craigmore Planters India Pvt. Ltd.
Hindustan Liver Ltd.
Mahavir Plantations Ltd.
Kotagiri Tea and Coffee Estates Company Ltd
Warwick Estates Syndicate Company Ltd.
Nilgiri Tea Estates Ltd.
Kodanad Tea Estates Ltd.
Harrison Malayalam Ltd.
Manjushree Plantations Ltd.
Rousdonmullai Tea Estates Pvt. Ltd.
Silver Cloud Estates Pvt. Ltd.
Glenrock Estate Pvt. Ltd.
Parry Agro Industries Ltd.
TAN Tea Ltd.
There are in total 31 big and medium tea estates in the Valparai region in the Annamallai Hills.
Some of the major tea plantations are:
Hindustan Lever Ltd.
Tata Tea Ltd.
Bombay Burma Tea Company Ltd.
Parry Agro Ltd.
Jayashree Plantations Ltd.
National Energy Processing Company Ltd.
Mahavir Plantations Ltd.
54
crisis in indian tea industry
Observations from Visits to the Large and
Medium Tea Plantations
The Fact Finding Team along with the regional trade union leaders visited some of the major tea
plantations in the Gudulur and the Valparai region from the 22
nd
of March 2003 to 25
th
of March
2003. Given below are some of the observations made during the visit.
Liddellsdale Tea Estate, Mahavir Tea Plantations (Gudulur)
The Mahavir Plantations (3000 workers) are in very bad shape. The company has not paid
gratuity to approximately 135 workers who have retired. Most of these workers have been wait-
ing for their gratuity for the last five years and some of them have died without receiving a penny.
The daily wages were initially reduced and are now only being given in an irregular manner. The
company has withdrawn more than Rs. 2 crore from the provident fund deposits of the workers
and has invested it in other sister concerns. The workers are now plucking tea themselves and
selling it with the help of trade unions. An interesting aspect of these estates is that the workers
are paying wages to the managers, who help them sell tea. The owner has abandoned these
estates and the workers on an average get around Rs.30 per day by plucking leaves themselves.
However, the amount earned depends upon the amount of tea plucked by a worker, as the flat
rate is Rs. 2 per kilogram of plucked tea. If for any reason the worker is not to able pluck tea s/he
does not get any payment. Moreover, this facility is only available to the permanent employees.
The condition of the casual workers is the worst, as they are not allowed to do any plucking.
The Fact Finding Team visited the Liddlesdale Tea Estate of Mahavir Tea
Plantations on 23.1.03 and found that most of the line rooms visited were in bad shape
and needed urgent repairs. There is no electricity and the sanitary conditions are
appalling. Right in front of the workers houses there are open drains and heaps of
garbage, which have become a breeding ground for many diseases. There are no toilet
facilities in the estates and the workers have to go to the jungle, where many of them
have become victims of snakebite.
The crche, in Liddellsdale tea estate, which used to take care of 40 children, has been closed
down since October 2002. There are primary schools in the tea plantations but these are situated
very far, at least 6-7 kms away from the line rooms of the workers and there is no proper trans-
port facility available in the tea plantation. The estate hospital has closed down and there are
hardly any medicines available for the injured or indisposed workers. The workers are either
starving or taking meals on alternative days. It was reported that they do not even have any
money to cremate the dead. This situation is slowly spreading to many other tea gardens of Tamil
Nadu.
55
crisis in the tea industry
crisis in indian tea industry
The condition of the workers in the closed Liddellsdale Estate
CHEINBASUAVA, 55
Cheinbasuva of Liddellsdale Estate, Mahavir Plantations Ltd. is suffering from nerve problems
for the last few years. After the closure of the estate hospital, his health has further deteriorated.
He went to the hospital in Gudulur, but it cost him Rs. 250, which he raised with a lot of difficulty.
However, he could not go to the doctor after that. Since he is unable to work, the whole family is
dependent on his wife, Puttubasuvi, 45, a frail woman, who manages to get an average income
of Rs. 36 per day. She has to work everyday, so that she can feed the family. The line room is
dark and resembles a cave with mud
walls. Cheinbasuva has four children, two
boys and two girls. The boys Siddharaj,
26 and Kempraj, 23 were studying in
Chennai but had to discontinue their stud-
ies because of the crisis. They have come
back to the estate and have nothing to
do, as they are not allowed to pluck tea.
His daughter, Mahalaxmi (18) is a ma-
triculate and wanted to become a teacher,
but now helps her mother in cooking. Her
father doesnt have enough money to
marry her off. Cheinbasuava is already under a debt of over Rs.15,000, which he thinks he will
never be able to repay.
THAYAMMA (55)
Thayammas husband, Varadha was a worker of
Liddellsdale estate taking care of pruning and weeding,
who died last year from tuberculosis. Though he used to
visit the estate hospital daily he was given medicines for
common cold and cough. Soon that also stopped as the
hospital was closed due to the crisis and slowly he died.
After his death, his children left his wife, Thayamma (55)
as they suspected her of having acquired tuberculosis.
She was the only person who was taking care of Varadha
during his last days. Thayamma stays all-alone in one small
hut, with no visitors. Fortunately she was not stopped from
plucking but, on a rainy day, an already ill Thayamma, car-
rying a heavy load on her back slipped and broke her foot.
No treatment was given to her, as the estate hospital was
not functioning. She could only apply some oil to the in-
jured foot. Presently she is earning around Rs. 21 and
leading a miserable life.
56
crisis in indian tea industry
Nulkcathu Division, Sirikundara Estates, Hindustan Lever Ltd.
(Valparai)
A visit to the line rooms revealed that most of them are in bad condition and require immediate
repairs. Maintenance work was last done 15 years back. Hence, when it rains the room gets
flooded. In one line room, there are more than 7-8 people living with great difficulty. There is a
group hospital but most often there are no medicines available here. Hence, often the workers
have to go to hospitals in Valparai town which leads to huge expenses for the workers. The
workers engaged in sprinkling pesticides are not provided protective clothing. The crche is
functioning properly in the estate and the workers are getting piped water for drinking purposes.
Sholyar Estates, J ayashree Plantations (Valparai)
The Fact Finding Team visited Sholyar estates on 24. 1. 2003 and found that the estate is not in
very good condition and the workers facing a lot of difficulties in their day-to-day life. The task
work has been increased many folds. For example, each worker used to prune 200 bushes
which has been increased to 500 bushes. The ratio of weeding was 1 acre per worker earlier and
now it has been increased to 2 acres per worker. Chemical spraying, which used to be 2 acres
per worker has been increased to 5 acres per worker. It was reported that task work is assigned
at the managers discretion and whatever the manager says becomes the task work. The work-
ers reported that though the task work has increased the wages have come down. The hospitals
are not functioning properly and store only some basic medicines.
Sushila, Age- 38 years, C.R. No: 1592
Sushila was a permanent worker in Birla owned Sholyar Tea Estate. One evening (May
2000) while carrying a weight of around 30 kgs on her head she slipped and fell down
from a height. She was severely injured with multiple fractures. Her right leg was broken
at two places. The company refused to give any compensation. However, the trade
unions took up her case under the Workmans Compensation Act. The company settled
the case by paying some paltry amount to Sushila. The company however, refused to
give her any employment after the accident. She is the sole bread earner in the family.
She has to support four daughters. One of her daughters, Gandhimadi, (19 year old)
has got a job as a temporary worker with a flat wage rate of Rs. 2 per kg of plucked tea.
Unfortunately she has developed tuberculosis. The family is surviving because of the
loan they have taken from the moneylenders with an interest rate of 8 per cent per
month. Sushila does not know how she will pay back the loan.
The sanitary conditions in the Sholyar estate are also pathetic. There is no drainage facility, and
the line room blocks stink because of accumulated garbage. Most of the line room roofs leak
during rains. No maintenance work has been done for years and some of the line rooms are on
the verge of collapsing. The workers who are engaged in spraying pesticides are not given any
protective clothing. Many such workers complained that they are affected by allergies and skin
diseases. The workers are not even provided with a raincoat. The condition of the temporary
workers is worst, as they are not given any medical facilities or provident fund and gratuity. The
temporary workers are given a kitchen of 11 by 5, where they stay with their families.
57
crisis in the tea industry
crisis in indian tea industry
Pannimade Tea Estate, Tata Tea
The line rooms were constructed in 1950 and have rarely been repaired so their condition is very
bad. The roofs leak when it rains. There is no water in the bathrooms and toilets are situated in
the jungle where wild animals like cheetahs and wild bears are regularly seen. There are open
and over flowing drains. More than 9 people are living in one line room. The hospital is located 4
km away from the line rooms. There are hardly any medicines available in the hospital. There is
no doctor in the hospital and the pharmacist is taking care of the day-to-day health problems of
the workers.
The Point of View of the Planters Association of Tamil Nadu
1
1. The present crisis is not of the making of the industry, but was brought about by the policies
of the Central Government, who in turn have declared that the policies are dictated by the
larger national interest. All State Governments, including Tamil Nadu, have supported and
endorsed central policies.
2. The financial viability of every plantation has been eroded.
3. What we have today is the implementation of a policy of globalisation of trade - in other
words, global free trade. This has brought a sea change in the market place from larger
supplies of plantation products through imports, resulting in a steep crash in prices.
4. When the Industrial Policy Resolution and the Labour Policy Resolution were drafted and
adopted in 1948 in free India our planners, political parties or the Government of India could
never have imagined a scenario of global free trade. Nor did any distant possibility of global
free trade influence the making of the Constitution of India, and the passing of the plethora of
labour and welfare legislation under the Constitution.
5. There is a delicate balance built into the Constitution between the fundamental right of the
employer to carry on his trade or business, and the right of the employees to decent wages
and humane conditions of work, which are referred to in the directive principles.
6. Part XIII of the Constitution declares that trade and commerce throughout the territory of
India shall be free only for Indian citizens and also to non-citizens when they are permitted to
carry on trade and business in India. Hence, the entire scheme of our Constitution has looked
at industry, trade and commerce only in the national perspective and not in global terms.
7. The fundamental right to carry on any occupation, trade or business is the right to carry on
such activities profitably and not at ever-incurring losses.
8. At present due to globalisation the traders, foreign and Indian could bring in cheaper tea and
other plantation products. Thus the guarantee of the fundamental right to the Indian citizens
to carry on trade or business and to equality has been made in to a dead letter.
9. In many competing tea producing countries, labour laws are far less developed than India.
The workers are not well organised, wages are lower, and the range of welfare and social
security benefits are very meagre. Apart from Provident Fund, there are no other burdens on
1
As mentioned in a letter to the trade unions by C. Shankaranarayanan, Adviser, PAT, Coonoor, Tamil Nadu, 2001.
58
crisis in indian tea industry
the employers in those countries. The other benefits, if any, are provided by the government
themselves. These competing countries dont have to pay Dearness Allowance, and the
income taxes do not exceed 15 percent to 30 percent, against our Agricultural Income Tax
rates of 65 percent. Our competitors are therefore able to export their products to India at a
far cheaper price, thereby forcing Indian products to be sold at distress prices. Thus the
Indian producers lack a Level Playing Field (Emphasis in original) vis--vis our competitors
from abroad, even within the domestic market.
10. South Indian tea had a monopoly in the former USSR under the rupee-rouble bilateral trade
agreement, but that market was lost after the disintegration of the USSR. The present posi-
tion is that except for the orthodox Nilgiris tea, South Indian teas because of their lower
quality arising from location and climatic disadvantages are available and are used as fill-
ers in the packaged teas. A similar variety of tea from other countries is available at Rs. 20
per kg, which is cheaper than the South Indian tea, even after paying 100 percent import
duty.
11. Direct retail marketing is not possible for individual plantations as the volume of production of
the majority of the companies is too low to justify a marketing setup at the retail level which
will be capable of competing with well entrenched giants in the blending and packaging
trade. Moreover, unless tea of different regions and of different growth seasons is bought,
blended and packaged, it would not be possible for a tea producer to offer a standard prod-
uct.
12. In the new situation, the only option available to the employer is the freedom to discontinue
the working of his plantation. If a plantation is closed down, it will not be regarded as a
violation of the wage settlement. A dispute on whether that closure is justified or legal would
be raised, but that is an altogether different issue.
Apart from these written points of view, more than one planter in Tamil Nadu has called for land
reform restrictions to be waived and other agricultural commodities like pineapple should be
allowed to be cultivated in the tea plantations.
Meeting with a Team of Trade Unions and Workers at Gudalur
The Fact Finding Team met a team of trade union leaders and workers at Gudalur on 23rd
January, 2003. The trade union leaders present in the meeting included:
1. K.P. Moohammed, President and S. Balan, General Secretary, Nilgiri District Estate
Workers Union (INTUC), Coonoor.
2. G. Suresh, General Secretary, Nilgiri Estate Workers Union (CITU)
3. T. Balakrishnan, President, Plantation Labour Association, (AITUC)
The workers from Devershola Factory and Devershola Plantation, Manjushree Plantation, Parry
Agro Plantation, Sussex Plantation, Wood Briar Pla2ntation, Harrison Malayalam Plantation and
Silver Cloud Plantation were also present.
59
crisis in the tea industry
crisis in indian tea industry
The trade union leaders and the workers pointed out that the present crisis is due to the opening
of the tea market because of pressure from WTO. This has led to a fall in tea auction prices.
However, they stressed that mismanagement by local companies is also a factor responsible for
the present crisis. They felt that there is an attempt by the planters to change the labour laws
under the pretext of the crisis and stressed that the hard earned rights under the present labour
rules and regulations should not be changed at any cost. This is being done by the management
in spite of the fact that the workers have cooperated with the management in dealing with the
present crisis. They felt that all the trade unions and other support organisations should build up
adequate pressure on the government by raising this issue in parliament. The problem of the
workers needs to be adequately highlighted. The workers and the trade unions want the industry
to survive but at the same time say that their conditions are gradually worsening and hence, are
willing to support any agitation planned by the trade unions.
A Profile of Government Owned -Tamil Nadu Tea Plantation
Corporation Ltd. (TAN Tea)
2
Under the Indo-Sri Lanka agreement signed in the year of 1964, some repatriates, numbering
6926, were settled on Tamil Nadu government plantations. Only large families were selected for
permanent employment, the husband and wife were provided employment and the rest of the
family continued to be treated as dependents. The project was initiated with financial assistance
from the central government and the state government leased out the land.
Tan Tea plantations are situated in Gudalur, Coonoor, Kotagiri, Naduvattam in Nilgiris district and
Valparai in Coimbatore district. Apart from permanent workers, there are around 10, 000 casual
workers in Tan Tea. After the steep fall in tea prices most of these casual workers were denied
employment, in spite of the fact that they had been working in Tan Tea for years. The shortfall in
family income is affecting many families.
One of the major reasons behind Tan Tea making losses is the government levy of Rs. 12,500 as
lease amount per hectare, whereas private tea plantations pay only a pittance of Rs. 25 per
hectare. Moreover, most of the income goes in providing salaries and other emoluments to the
deputation staff from the forest department. It was alleged that Tan Tea is spending the income
from plantations to maintain Forest Department guesthouses and vehicles. All the department
staff claims LTC and other benefits from Tan Tea. Many government employees who are on the
verge of retirement come to Tan Tea to claim their retirement benefits, which causes significant
losses to Tan Tea.
2
As per the memorandum submitted to the Fact-Finding Team by the Plantation Labour Association, (AITUC),
Gudalur, Tamil Nadu, 2003.
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crisis in indian tea industry
Observations on the Workers Conditions in the Large and
Medium Tea Estates
Wages
The employers view the high wage rate as one of the major reasons for the crisis in the tea
industry. Hence they have resorted to major wage cuts in Tamil Nadu.
Table 18 Break-up of workers wages (per day) in Tamil Nadu
Heading Wage as on 31.3.2002
Basic Wages+ Dearness Allowance 76.85
Incentive Wages (Avg.) 3.68
Total 80.53
Wage-related statutory benefits
Provident Fund (12 percent) 9.67
Deposit- Linked Insurance 0.41
Gratuity (15 days' wage/ year) 4.32
Bonus 15 percent (Average) 12.08
Leave with wages (Avg. 14 days) 4.03
Paid Holidays (9 days) 2.59
Sick leave with benefit (14 days at 2/3 of wage 2.57
Maternity Benefits for Women Workers (Avg.) 2.42
Statutory benefits unrelated to wages, such as free
housing, medical care, protective clothing,
sanitation and conservancy, water supply,
education, crche and child care, LTA, etc.
constitutes another 20 percent)
16.11
Grand Total 134.73
Source: Data provided by UPASI to the Fact Finding Team, January 2003.
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The wage reduction: A case of Sirikundra Estate, (Hindustan
Lever Ltd.), Nilgiris
The Sirikundra Estate of HLL served notice reducing the workers wages to Rs. 60 per day as
fixed rate. They also fixed the base for tea, which has to be plucked by the workers as (average)
27.5 kgs. for hand plucking, 41.5 kgs. for shear plucking and 110 kgs. for mechanical harvesting.
It was decided to reduce 28 paise per kg. for every kg. of output falling below the base kg.
Table 19 Movement of Wage, Price and Overall COP at Sirikundra TE (HLL)
Year Wage Rate
Avg. Auction
Prices
All inclusive COP
1998 57.18 68.8 53.06
1999 70.42 57.1 57
2000 74.22 44.6 60
2001 76.02 48.48 64
Source : Data collected by the Fact Finding Team, January 2003.
Year
The logic behind such arrangement
a) The COP has increased by Rs. 10 per kg between 1998 to 2000 because of increase in
wages and because of imposition of excise duty of Rs. 2 per kg.
b) Increase in the cost of fertilisers and petroleum products and all other inputs.
c) High agricultural income tax in Tamil Nadu (65 percent) and central income tax (35.7
percent), which makes the average corporate tax 53.28 percent. This is much higher
than the taxes of other producing countries, where corporate tax rates are below 30
percent.
d) Productivity is much lower than in other tea producing countries.
e) Wage rates are much higher than in other producing countries. Moreover, they dont
have to spend too much on the welfare of the workers.
f) The current crisis is due to the governments economic liberalisation policies and also
due to globalisation.
g) The fall in exports to Russia and other CIS countries.
h) Import of cheaper tea from countries like Vietnam and Indonesia, which remains profit-
able even after paying 100 percent import duty.
62
crisis in indian tea industry
The FFT feels that the cost of producing tea needs further examination. It is however apparent
that many of the provisions mentioned in the break up of labour wages did not exist in the tea
plantations when the crisis began. At present the daily wages in most of the tea plantations have
been reduced from Rs. 76 per day to Rs. 72 per day in consultation with the plantation trade
unions. However, some major trade unions like CITU and HMS were not part of it. The wage
reduction has created lot of hardship for the workers.
Productivity Factor
The companies are saying that productivity of the workers has gone down. However, the trade
unions reported that the volume of plucking per-worker has actually gone up due to the introduc-
tion of shear plucking. Moreover, unlike northern tea plantations, most of the men are also in-
volved in tea plucking. Earlier there used to be only six to seven months of plucking, but the
companies are now plucking through out the year. This has lead to an increase in the volume of
tea production.
Increase in Workload
While the daily wages have come down, the workload in all the tea plantations has increased in
a major way. The managers are setting tasks in an arbitrary manner. The number of permanent
and casual workers has also decreased. In tea plantations of Harrison Malayalam the workload
has been increased by about 20 percent. Moreover, working days have been reduced as well,
from 6 days a week to 5 days a week. It was reported that it would be further reduced to 4 days
a week.
The Condition of the Women Workers
Many cases of sexual harassment of women were reported by the trade unions. Exploitation of
the women workers by the field officers, supervisors and some times even by the management
regularly takes place. One of the cases of sexual harassment was reported from Nadumallai
Division of Periakara Malai tea estates. The field officer was regularly harassing a woman worker.
Due to this kind of perpetual harassment, the woman committed suicide. The problem of com-
plaining against management usually leads to harsher work schedules for them. They would be
given work in the jungle or in difficult terrains. So, many women decide against complaining.
Workers health
The estate hospitals are not adequately equipped with medicines. Due to the present crisis many
hospitals have closed down or are functioning without essential medicines. As a result many
workers have to buy medicines from the Valparai private hospitals. Many workers are suffering
from malnutrition, acute anaemia, frequent colds and even cardiovascular diseases. It was re-
ported that the government sponsored nutritional program in the Valparai tea plantations only
benefits the cook and their favoured staff.
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Occupational safety and hazards
There are many cases of workers meeting with accidents while on duty. There are incidents of
attacks by wild animals and also snakebites. However, it is very difficult for the workers to get
compensation as the tea management cites the present crisis as the rationale behind their inabil-
ity to compensate the workers. The workers involved in hazardous jobs like spraying pesticides
and insecticides are not provided with any protective clothing. They spray dangerous pesticides
without any protection. This has led to many cases of diseases.
RAJU, 40 (Sholyar Estate, Valparai)
Raju sprays insecticides in Sholyar TE from eight in the morning to two in the after-
noon spraying around 25 acres each day. He was not given any protective clothing
and the dangerous chemicals have affected his eyesight. He asked for compensa-
tion from the management who summarily rejected it. He continued to work despite
his damaged eyesight and one day, while working, fell down from a height and broke
his shoulders, but he was not given any compensation. The doctors have advised
him not to carry heavy weights but the manager has forced him to continue his spray-
ing job that involves lifting the heavy spraying machine on his shoulders.
64
crisis in indian tea industry
Observation of the Fact Finding Team on the Con-
dition of Small Tea Growers
The majority of the tea plantations in the Nilgiris are owned by small holders having a total area of
less than 5 hectares. There are around 60, 000 small tea grower families owning between 5 to 10
acres of land and wholly dependent on tea production and overall there are around 3 lakh people
who are directly or indirectly involved or dependent on tea cultivation.
The majority of these small growers are indigenous people called Badagas. These people were
engaged in potato and vegetable cultivation, but slowly they took up tea planting as tea growing
became profitable. Now the fortune of the entire region depends on the price of tea. Since, the fall
of tea auction prices, these small holders are facing severe hardship.
Moreover, there is a significant number of casual workers in these smallholdings, who are essen-
tially Sri Lankan repatriates. These Sri Lankan repatriates came to India under the October 1964
accord between Prime Ministers Lal Bahadur Shastri and Sirimavo Bandaranaike. They were
settled in the Nilgiri region by the government. The condition of this community is the worst, as
most of them dont own any land. With the consistent fall in tea prices, these workers in the
smallholdings are receiving practically nothing. All of them are under the burden of heavy debt
and their children, unable to bear the expense of education, have dropped out of schools. These
small growers are not protected by the Plantation Labour Act, which asks the employer to provide
basic minimum facilities for the workers. This is because the smallholdings below 8 hectares do
not come under the ambit of the Plantation Labour Act. These small holders are completely
dependent on the tea auctions, as they dont have access to any other method of selling tea.
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Retail Market
@ Rs. 140/ Kg
Bulk Buyers (Big Companies)
Value addition
Blending and packaging
Auctions
@ 50/ Kg
Brokers
BLFs
@ Rs. 32/ Kg
Retail Market
@ Rs. 140/ Kg
Bulk Buyers (Big Companies)
Value addition
Blending and packaging
Auctions
@ 50/ Kg
Brokers
Government Sales
Cooperative Factory
Retail Market
@ Rs. 140/ Kg
Bulk Buyers (Big Companies)
Value addition
Blending and packaging
Auctions
@ 50/Kg
Brokers
Ex-Factory Sales
Packet Tea
Big Plantation's Factory
Small Tea Holding
Sells @ Rs. 4.50/ Kg
Figure 1: The movement of tea: Smallholdings to the retail market
66
crisis in indian tea industry
A Meeting with the Small Growers, Coonoor
The Fact Finding Team members attended a meeting with the small growers at Coonoor on 22
January 2003. The meeting was organised by Parmasivam, from NDEW Union (INTUC). The
small growers were mainly from the Badaga community
3
, where as the workers in the small
plantations were essentially Sri Lankan repatriates. The small growers reported that they are
going through an unprecedented crisis and hardship for the past two years, because of the fall in
tea auction prices. The situation is such that even the school fees for children has not been paid
for months together, putting both the children and schools to great difficulty. The Chief Minister of
Tamil Nadu had promised an increase in procurement prices for green leaf from the small grow-
ers but that promise has not been fulfilled till date.
The small growers stressed that they can produce quality tea if they are given subsidies for
pruning the tea fields. They also suggested that the government should fix a minimum support
price of Rs. 55 per kg of tea, so that the small growers can get a price of Rs. 10 per kg of green
leaf. The small growers feel that the crisis is essentially because of the cheap import of tea and
its re-export as Indian tea, which affects the image of quality Indian tea.
The condition of Sri Lankan repatriates who work in these tea plantations is even worse. These
workers work in plantations as well as agricultural lands for Rs. 50 per day. However, since the
prices have come down they are not getting any work in the tea plantations. These workers
reported to the Fact Finding Team that they are facing a situation of starvation. Their children
have stopped going to schools and they survive by selling off household items.
Tea Prices
The small growers are in great distress because of the continuous fall in tea prices. They used to
get around Rs. 18 for each kilogram of green leaf in 1998 but are now being offered Rs. 4 for the
same quantity. Due to the hardship faced by them the small growers have organised massive
strikes. These strikes sometimes become violent as well. Though the ruling party during elec-
tions promised that the small growers would be given a price of around Rs. 15 per kg, nothing has
materialised till date. However, the government has announced a reduction of sales tax from 4
percent to 2 percent. This helped the small growers to get an additional 50 paise per kg.
Bought Leaf Factories ( BLFs )
There are about 20 BLFs in the Gudulur area and about 65 in the Kotagiri area of Nilgiris. There
are some BLFs in the Kundah area as well. These BLFs buy tea from the small tea growers. In
total there are around 150 BLFs in the Nilgiri region producing 81million kgs. of tea. These BLFs
employ leaf agents to procure leaves from the growers.
3
Badagas are the indigenous people of Nilgiri district of Tamil Nadu.
67
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However, the BLFs have no control over the maintenance of green leaf standards in respect of
their procurement from small growers. This is one of the reasons for the poor quality of tea
manufactured by BLFs. Moreover, the output is often not in conformity with the PFA
4
standards
and is being dumped at low prices; therefore, adversely affecting the tea market as a whole. The
BLFs sourcing of green leaf is currently not accounted for by any agency leading to serious
quality issues involving the final output. Tea Waste generation by BLFs, as incidental to manufac-
ture, is not appropriately accounted for by way of statutory declaration under the Tea Waste
(Control) Order. It is important to examine in great detail the role of these bought leaf factories.
However, the most interesting aspect of the tea processing factories is that they sell the tea to
brokers for auction purposes. This tea is essentially bought by big tea companies in the auctions
and hence it again benefits big companies. Similarly, the small growers also sell the tea leaf to the
big plantation factories. Thus it is a vicious cycle where the big tea companies always benefit
from the cheaper tea.
The small growers of Tamil Nadu feel that some of the BLFs are benefiting from the crisis at their
cost. Earlier this has led to major agitations in the Kotagiri area. The state government has
appointed a high-level committee to enquire in to the crisis and the role of the BLFs. However, the
committees report has not been made public as yet.
Cooperative Factories
A majority of the small farmers sell their tea to the Industrial Development Cooperative Society
(Indcoserve), the premier cooperative of the tea growers in the region. About 21,000 small grow-
ers, growing tea on 34,000 acres are members of Indcoserve. Its members supply green leaf to
the 16 Indcoserve factories in the Nilgiris. The Indcoserve factories produce about 14 million kg.
of black tea per annum. The small growers supply their leaf through leaf collection centres on a
regular basis and receive payment on a weekly basis. The growers are paid on the basis of the
sale realisation of the factories. The small growers have alleged that they dont have access to
the profit and loss statement of the cooperative factories as Indcoserve follows a non-transparent
method. The growers feel they should not be penalised for the inefficiency of the Incoserve
factories.
Quality of Tea
The leaf produced by the small growers is of poor quality because large numbers of small grower
fields have not been pruned for the last 8 -10 years, where as the recommended time is once in
4-5 years. Pruning expenses, costs of burial of pruning and loss of crop for a period of three
months have been the main reasons discouraging the small growers from undertaking this im-
portant agricultural practice. Moreover, due to a steady fall in prices and accumulating losses, the
small growers are not in a position to plough back any money in the upkeep of the tea gardens.
68
crisis in indian tea industry
CHAPTER VII
The Crisis in the Tea Industry: Analysis of Vari-
ous Factors
After the assessment of the situation in the tea plantations of Kerala and Tamil Nadu we came to
the conclusion that the Indian tea industry is in crisis. It is manifested in the region specific
closure and abandonment of tea plantations, non-payment of wages and statutory dues to the
workers and starvation induced deaths in affected tea plantations. We will briefly examine the
factors that led to the crisis, whether the crisis is global in its sweep, considering the fact that tea
is a commodity traded in the global market. If it is an Indian phenomenon, the specificities of
Indian tea need to be looked into that make it vulnerable. However, it can be said that the most
important reason for the present crisis is the consistent and unprecedented fall in tea auction
prices to the extent that it is below the cost of production.
The average auction prices fetched by the tea producers of South India fell from Rs. 68.79 per
kg. in 1998 to Rs. 57.10 per kg in 1999, and further nose-dived to Rs. 44.64 in 2000. In 2001, the
price level hovered around Rs. 46.02 per kg. There are no clear signs of improvement in the
prices for the year 2002/3 as well. In the first three sales for the current year, the auction price
slipped by 20 percent to Rs. 40.29 per kg.
1
The northern tea gardens have not remained immune
to this trend of fall in tea prices. From Rs. 80.22 per kg in 1998 it drastically came down to Rs.
69.80/ kg in the year 2001. In the year 2002, the average tea prices have further come down to
Rs. 57.25/ kg (See Table). The decline in tea prices has led to a decline in farmers incomes and
labourers working conditions.
Table 20 Average Auction Prices in South and North India 1998-2002 (In Rs. )

Auction
Centres
2002 2001 2000 1999 1998
Difference
+/- (2002-2001)
Kolkata 61.22 76.36 81.09 88.60 87.83 -15.14
Guwahati 55.09 68.68 68.80 80.54 78.76 -13.59
Siliguri 54.13 63.41 61.16 72.56 74.66 - 9.28
North India 57.25 69.80 70.34 80.58 80.22 - 12.55
Cochin 48.13 52.21 51.33 62.03 73.31 - 4.08
Coonoor 36.85 41.47 38.98 53.34 65.06 - 4.62
Coimbatore 41.2 44.98 43.35 57.26 68.74 - 3.78
South India 42.13 46.02 44.64 57.10 68.79 - 3.89
All India 51.6 61.66 61.71 72.80 76.43 - 10.06
Source : Indian Tea Association. "Indian Tea Scenario 2002: A Status Paper." Kolkata: ITA,2002, p.13.
1
L. N. Revathy, Dipping prices worry Southern tea trade, Business Line, 30 January 2002.
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1. Is it a Global Crisis?
Tea is a global commodity. Though it is produced in a few countries it is traded and consumed all
over the world. To understand whether the present crisis is global in its sweep, let us look at (a)
global supply of tea and (b) global tea prices
1.1 Global Supply of Tea
When there is a shortage of tea in the international market, the price tends to go up and when
there is excess tea the prices come down. An examination of global tea production and exports
reveals that almost all the tea producing countries production and exports are directly related.
Although, the production is increasing in all the tea producing countries, whenever, there has
been excess production, the exports have also gone up to balance the excess production. How-
ever, in the case of India, between 1997 to 1998, the production went up by 60 million kgs. but the
exports went up by only 7 million kgs.
Table 21 World production and export of tea (in million. )
Country 1995 1996 1997 1998 1999 2000 2001
Pr Exp Pr Exp Pr Exp Pr Exp Pr Exp Pr Exp Pr Exp
India 756 164 780 162 810 203 870 210 805 192 823 207 854 180
Banglades-
h
48 25 53 26 51 25 56 22 47 15 54 18 57 13
Sri Lanka 246 235 259 234 277 257 281 265 284 263 306 280 295 289
Indonesia 144 79 166 102 154 67 167 67 165 98 169 106 169 100
China 588 167 593 170 613 202 665 217 676 200 680 228 695 250
Taiwan 21 3 23 3 24 3 23 2 22 3 20 3 20 2
Iran 55 2 58 2 60 3 60 3 60 4 50 4 50 4
Japan 85 1 89 1 91 1 83 1 88 1 90 1 90 1
Turkey 104 2 115 4 140 19 178 18 171 5 170 6 138 5
Vietnam 40 14 42 15 45 27 47 33 49 36 59 56 80 68
Kenya 244 237 257 244 221 199 294 263 249 242 236 217 295 258
Malawi 34 33 38 37 44 49 40 41 39 43 42 39 37 41
Tanzania 24 21 20 18 22 19 24 22 23 21 24 22 25 22
Uganda 13 11 17 15 21 18 26 23 25 22 29 26 33 30
Argentina 42 41 43 41 55 56 50 59 50 52 47 50 55 52
Others 87 41 90 40 90 55 98 57 99 64 104 70 115 74
Total 2531 1076 2643 1114 2718 1203 2962 1303 2852 1261 2903 1333 3008 1389
Source: Compiled from various issues of Indian Tea Association. "Indian Tea Scenario" Kolkata ITA. Pr: Productivity; Exp: Exports
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crisis in indian tea industry
1.2 Global Tea Prices
The price indices based on the auction prices in US Dollars with the year 1995 taken as the base,
show that the fall in tea prices is essentially restricted to India and Bangladesh. The position of
South Indian tea prices is the lowest among all regions. Sri Lanka, Kenya, Uganda, Malawi and
Tazania in particular have shown appreciable increase in price indices in 2001compared to that
of 1995.
Table 22 Global tea price indices (Based on auction prices in US $ terms)

Countries 1995 1996 1997 1998 1999 2000 2001
North India 100 93 124 124 119 98 94
South India 100 92 128 132 105 78 77
India 100 93 124 125 114 91 89
Sri Lanka 100 133 143 148 116 126 110
Kenya 100 108 152 147 139 158 114
Indonesia 100 109 155 159 99 113 92
Bangladesh 100 95 140 127 103 93 90
Malawi 100 103 162 155 122 152 113
Uganda 100 145 225 170 161 199 140
Tanzania 100 119 175 126 122 163 126
Source: The Survey of Indian Industry (The Hindu, 2003), p. 381.
It is beyond the scope of the present fact finding exercise to look at how in a global
commoditlike tea, the fall in tea prices has not spilled over to the rest of the world. However,
we will be examining the possible factors that led to the fall in tea auction prices in the Indian
market.
2. Over Supply Situation
Most of the planters and trade unions have cited the over supply situation as the main reason
behind the fall in tea prices. Since a large number of countries are into tea production and there
is no clear monopolistic leader, it allows for fierce competition. The plantation management in
both Kerala and Tamil Nadu has contended that the over supply situation exists because of
71
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falling exports, growing imports, falling tea consumption in India and rising labour costs.
2.1 Exports
1997-98, the tea import saw a four times increase that has continued since then. There was a
major fall in tea exports in the year 1999 (shortfall of 18 million kgs.) and again in the year 2001
(shortfall of 25 million kgs.). As a result every year there has been an accumulation of tea
stockswhich could not be sold. Between 1995- 2001 the accumulated net tea stock has been
calculated to be around 165.09 kgs. The availability of this surplus tea in the Indian market may
have affected the auction prices in a major way.
Table 23 Production and Import of Tea (in millions of kg)
Year 1995 1996 1997 1998 1999 2000 2001
Production 754 780 810 874 824 846 854
Import 1 1.25 2.61 8.93 9.99 13.43 16.58
Total Supply 755 781.25 812.61 882.93 833.99 859.43 870.58
Domestic
Consumption
562 580 597 615 633 653 673
Export 163.7 160 203 210 192 207 182
Total Demand 725.7 740 800 825 825 860 855
Accumulated Net Tea
Stock
29.3 70.55 83.16 141.09 150.08 149.51 165.09
Source: Calculated from Indian Tea Association. "Indian Tea Scenario" Kolkata: ITA, various issues.
While all the major tea-producing countries have witnessed an increase in exports, the Indian tea
industry has continued to be left far behind them. One interesting aspect to be observed from the
graph below is that the rapid growth of Chinese tea exports from 168.5 million kgs. in 1995 to 250
million kgs.. China is slowly emerging as the biggest player in the international tea export market.
It is crucial to examine the markets in which Chinese green tea is rapidly becoming popular and
which tea-producing countries are losing out in that market.
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crisis in indian tea industry
Figure 1: The volume of tea exports by major tea producing countries in the world ( In
Million Kgs. )
Source: Compiled from Statistical Bulletin, Sri Lankan Tea Board, Colombo, 2000 and Indian Tea Associa-
tion. Indian Tea Scenario Kolkata: ITA, 2002.
2.2 Basic factors behind fall in tea exports
In a large number of estates of South India, there is very little importance given to the quality of
the tea produced. The tea from Kerala and Tamil Nadu had a ready market in Soviet Union till
1991 and it continued even after the fall of the Soviet Union as the Government of India entered
into a rupee-rouble agreement. For example, in many tea estates of Kerala normal plucking,
which is for 10 days, is being extended to 15 to 22 days. As a result, the green leaf becomes
0
50
100
150
200
250
300
350
India SL China Kenya
India 163.7 160 203 210 192 207 180
SL
235.8 233.6 257 265 263 280 289
China
168.5 166.5 202 217 200 228 250
Kenya
237.5 244.2 199 263 242 217 258
1995 1996 1997 1998 1999 2000 2001



73
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coarse and unsuitable for quality tea manufacture.
Table 24 Major importers of Indian tea
Destination 1995 1996 1997 1998 1999 2000 2001
United Kingdom 21.1 24.5 26 21.3 18 20.1 15.90
C.I.S 81.5 51 95.6 94.6 102.8 95.43 83.41
U.A.E 13.4 21.6 20.9 23 17.3 21.2 21.65
Source : Tea Statistics, 11 Sep. 2001 <www.teauction.com/statistics/expcountry.asp>
The CIS countries have increasingly become quality conscious and are demanding better quality
tea. There is also a major shift visible in Russian buying from CTC to Orthodox teas. Although
the tea exports to CIS were growing slowly during the period 1999-2000 but, in 2001 exports fell
to 83.41 million kgs. in 2001 from over 95.43 million kgs. in 2000. The Russian tea importers
have begun to buy tea from other tea producing countries like Sri Lanka. Sri Lankas major
export market has become the C.I.S and the countries in Middle East. Moreover, every year their
exports to these countries are growing) and it is felt that this growth is at the cost of Indian
exports.
Tables 25 Sri Lankan Direction of Exports (In million/ kg.)

Destination 1995 1996 1997 1998 1999 2000
United Kingdom 12.88 7.93 9.19 9.81 10.60 10.17
C.I.S. 40.37 38.22 50.47 41.09 47.74 56.64
Iran 5.89 10.02 6.18 5.48 9.67 12.48
Saudi Arabia 2.45 8.80 8.64 11.12 9.81 11.42
Middle East (other) 36.33 6.16 28.18 31.88 62.89 67.62
Source : Tea Statistics,11 Sep. 2001 <www.teauction.com/statistics/expcountry.asp>
estin
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2.3 Imports
The planters have regularly contended that the tea prices are going down because of cheaper
tea imports. The Coordinative Committee of Planters Associations (CCPA) sent a detailed memo-
randum to the Commerce Minister setting out its objections on the following considerations:
i. The tea at a cheaper price would be highly fibrous and stalky which was not being gen-
erated by the Indian industry.
ii. The Dooars, Cachar, South Indian tea were good blending materials and imports would
militate against the interests of those vulnerable segments.
iii. Imports would end up merely replacing the Indian tea component in exports conferring
no benefit by way of additional export volume.
iv. The proposal to dilute the value-addition norm would not be in Indias overall interest.
v. It was apprehended that the restriction on sales in Domestic Tariff Area (DTA) could be
diluted, in time, to allow dumping of low priced teas in the domestic market to the detri-
ment of the Indian tea industrys growth and development.
2
Table 26 Year-wise import of tea into India
Year M. kg Rs Crore Rs/ kg
1996-97 1.25 6.21 49.68
1997-98 2.61 17.79 68.16
1998-99 8.93 64.73 72.47
1999-00 10.36 61.97 59.80
2000-01 15.23 95.47 62.70
1999 (Jan-Dec) 9.99 57.40 57.49
2000 (Jan-Dec) 13.43 84.55 62.96
2001 (Jan-Dec) 16.58 92.48 55.78
Source: Indian Tea Association. "Indian Tea Scenario 2002: A Status
Paper." Kolkata: ITA, 2002, p.15.
It has to be noted that the sale of imported tea in the domestic tariff area by 100 percent EOU/
EPZ units is not allowed. In fact, in the year 2001, out of a total import of 16.58 million kgs.,
almost all (16.24 million kgs.) was re-exported (Table 8). However, the excess tea imported
(even if it is only for re-exporting purpose) along with rising tea production also means that much
more tea would be available in the market. This availability of excess tea again brings down the
2
Indian Tea Association, Annual Report (Kolkata, 1994) pp. 74-75.
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tea auction prices. The other interesting aspect is the price paid by the importers for the tea
bought from outside the country. From the year 1997 the price of imported tea has remained
much higher than the average auction prices. Hence, it is crucial to examine the nature of tea
imports in India, who are importing this tea and where is this tea going and at what price?
Table 27 Import through routes (million kg.)

Import by 2001 2000
EOU 12.69 10.05
EPZ/SEZ 2.02 0.64
Domestic units under Duty Exemption
Scheme
0.53 2.13
Total Import for re-exports 16.24 12.82
Import for domestic market 0.34 0.61
Total Import 16.58 13.43
Source: Indian Tea Association. "Indian Tea Scenario 2002: A Status Paper." Kolkata: ITA,
2002, p.16.
mport
The data shows that Indonesia and Vietnam have become the biggest tea exporters to India. Sri
Lanka has not been able to penetrate Indian markets in spite of a concessional import duty of 7.5
percent with a quantitative barrier of 15 million kg.
76
crisis in indian tea industry
Table 28 Country wise tea imports into India

Country 1998 1999 2000 2001
China 0.12 0.26 0.24 _
Indonesia 4.22 3.14 4.39 7.46
Kenya 0.44 1.25 1.33 2.21
Iran n.a. 0.48 0.93 0.06
Sri Lanka 0.31 2.77 2.09 0.8
UAE n.a. 0.09 0.42 _
Vietnam n.a. 0.36 2.72 5.29
Source: Compiled from Indian Tea Association. "Indian Tea Scenario 2002: A Status
Paper." Calcutta: ITA, 2002, p.16 and Indian Tea Association. "Indian Tea Scenario
2001: A Status Paper." Kolkata: ITA, 2001, p. 20.
2.4 Tea imports and domestic consumption
The excess tea argument however needs to be further examined in the context of growth in
production and domestic consumption. The domestic consumption of tea in India has been grow-
ing. When the global tea market is shrinking due to competition from other beverages, the Indian
annual tea consumption has been increasing by an average of 2.75 percent per annum during
1986-2000. However, during the same period, the average annual growth of Indian tea produc-
tion has been only 1.68 percent.
The consumption rates are going up regularly and this has been substantiated by a study con-
ducted by IIM-Calcutta in1999, on behalf of the Tea Board of India. The IIM -C study, using the
state level data of National Sample Survey Organisation (NSSO) for the year 1987-88 and 1993-
94 revealed that tea consumption is growing by 3.1 percent per year. The study also revealed
that packaged tea constitutes about 40 percent of the total tea market and is estimated to grow
at a cumulative annualised growth rate of 5 percent.
However, there is another study by ORG-MARG conducted on behalf of CCPA, which estimates
that the domestic consumption growth is only 1.8 percent annually. There is lot of confusion
about the exact consumption rates and has hampered the formulation of any meaningful long-
3
Please refer to Chapter 4 pp 33- 34.
4
Please refer to the complete break-up of labour wages in Chapter 4 p. 37
77
crisis in the tea industry
crisis in indian tea industry
term action plan on production, consumption and exports of tea. It is strongly felt by all the
stakeholders that extensive mapping of production and consumption levels needs to be done as
soon as possible.
3. High Labour Costs
The employers have cited increasing labour costs in the face of falling tea auction prices as one
of the major reasons for high production costs and the subsequent closure of many tea estates.
The Chairman of the Central Travancore Planters Association (CTPA)
3
in a letter provided to the
Fact Finding Team mentioned that wages and other benefits constitute 50 to 60 percent of the
cost of production. Particularly in the case of Kerala it has been mentioned that the tea plantation
wages are the highest in the world. The wages and other fringe benefits given to a worker in
Kerala is Rs. 137.83 per day and in Tamil Nadu it is Rs. 120.9 (From 1 January, 2002).
However, during the Fact Finding Teams visit to Kerala and Tamil Nadu, it was observed that
many benefits, which are cited as part of the wages on paper,
4
are not provided to the workers.
For example, in Kerala, none of the estate hospitals are functional and in Tamil Nadu very few
estate hospitals have the requisite medicines. In Kerala, there are many instances of the non-
remittance of provident fund for years. In most of the tea estates of Tamil Nadu and Kerala there
is hardly any amount spent on statutory benefits like sanitation and conservancy, education and
crches. The workers doing the job of spraying pesticides and insecticides are not provided any
sort of protective clothing. Hence, there are lot of discrepancies between the employers calcula-
tion of wages and what is actually given to the workers.
3.1 Cost of Production
A look at the cost of producing a kilogram of tea in South India shows that the cost of production
has gone up only marginally. Moreover, the manufacturing costs have actually come down. Only
the plucking costs have gone up marginally.
5
For an detailed analysis on employers perspective on wage and productivity linkage in the context of Kerala please
refer to Chapter 5 pp.33-35.
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crisis in indian tea industry
Table 29 Cost of Production of tea (per kg) in South India in 2000-01

Details of COP Cost of Production (Rs/ kg)
1998-99 1999-00 2000-01
Cultivation 7.72 7.76 6.97
Plucking 10.64 12.17 13.92
Manufacturing 7.04 7.06 6.96
Packing 3.79 3.8 2.75
Upkeep 3.23 2.97 3.08
Selling/distribution 0.86 1.35 1.41
Welfare 7.47 8.41 9.28
Bonus 3.15 3.41 3.66
Head Office 4.85 4.35 4.19
Interest 1.71 1.9 2.46
Depreciation 1.96 1.96 2.28
Others 6.31 5.82 6.1
Source: Data collected from UPASI during CEC Organised Fact Finding visit to
southern tea plantations, January 2003.
Details
The Chairman of CTPA has mentioned that while the tea plantation wages in Kerala are the
highest in the world, these tea plantations have the lowest tea productivity. Moreover, most of
the employers both in Tamil Nadu and Kerala argue for a productivity linked wage hike. The
employers contend that the Minimum Wage Report of 1952 has taken an annual plucking
average based on the crop from the years 1950-51. The yield levels have since increased
manifold but were not reflected in the standard output.
5
6
Indian Tea Association Status Paper, Kolkata, 1997.
79
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0%
20%
40%
60%
80%
100%
Assam West Bengal Tamil Nadu Kerala India
Over 50 yrs Yield/ Hectare (000 Kg)


4. Productivity of Tea Bushes
Increased labour efficiency is not the only factor that may lead to increase in productivity. Factors
like age distribution of tea bushes, improper usage of fertilizers, shear plucking etc. are also
equally important. The productivity of tea plants deteriorates after 50 years. Hence, it is essential
that at least 2 percent of the bushes need to be re-planted every year.
6
Given below is the age of
tea bushes in the various tea-producing states of India.
Figure 2 Age and yield ratio in 1997
Source: Tea Board of India, Tea Statistics, Kolkata, 2000, pp. 26-27.
80
crisis in indian tea industry
Table 30 Age of tea bushes (in percent) 1997
State
State
Below 10
Yrs
11 to 30
yrs
31 to 40
yrs
Over 50
yrs
Assam 18 29 22 31
West Bengal 15 19 20 46
Tamil Nadu 29 18 16 37
Kerala 12 04 13 71
India 19 23 20 38
Source: Tea Board of India, Tea Statistics, Kolkata, 2000, pp. 26-27.
Kerala and West Bengal have the largest percentage of old tea bushes and hence it is not
surprising that the productivity has come down significantly. The trade unions and workers in
Kerala told the Fact Finding Team that the management in the closed or abandoned tea planta-
tions have not nurtured the plants for a long time. No effort has been made to replant bushes
over 50 years.
If we try to compare the age of tea bushes and the productivity linkages (Figure 2), it will be seen
that Kerala and West Bengal have the largest numbers of old tea bushes and the productivity is
also one of the lowest. At the same time, Tamil Nadu has the largest number of young tea plants
and hence the productivity is also the highest in the country. Therefore, it would be wrong to
attribute the present crisis only to increasing labour wages.
5. High Agricultural Income Tax
Sixty percent of the profits from growth, manufacture, and sale of tea are counted as agricultural
income and taxed by the states. The rest of the forty percent is considered as non-agricultural
income and is taxed by the union government. The planters have pointed out that to increase the
volume of exports, production needs to be augmented. The pace of production growth has to be
sustained by a consistent and adequate level of resource generation. However, resource gen-
eration has been very difficult under the prevailing agricultural taxation structure.
7
The planters,
7
Indian Tea Association, Annual Report, Kolkata, 1992. pp. 167-68.
81
crisis in the tea industry
crisis in indian tea industry
particularly in Tamil Nadu, have blamed the state governments of tea producing states for ruining
the tea industry by imposing unrealistic agricultural taxes. They have pointed out that planning
and policy making at the state level rarely displayed any concern towards a realistic taxation
policy.
Table 31 Tax Incidence on the Tea Industry of India in 2001
Tax Headings Assam
West
Bengal
Kerala
Tamil
Nadu
Income 100 100 100 100
Deduction u/s 33 AB
8
20 20 20 20
Taxable Income 80 80 80 80
Central Corporate Tax @ 35
percent on 40 percent)
11 11 11 11
State Agricultural Taxes @ * on
60 percent (48)
21.6 24 28.8 31.2
Total Tax Incidence 32.6 35 39.8 42.2
*Note: Maximum State AIT rates in: Assam (1997)- 45 percent; West Bengal- 50 percent;
Tamil Nadu- 65 percent; Kerala- 60 percent
Tax
The planters in Tamil Nadu have particularly stressed that they are paying the highest over all tax
(42.2 percent) in the tea industry and this high rate is seriously affecting the capacity of internal
resource generation by the plantations. This needs to be ratified immediately by the government.
It is felt that the assessment of income tax payable by a planter should be brought under the
purview of the central income tax act and then subsequent allocations can be made to the states.
5.1 High Excise Duties
Excise is an indirect tax levied on goods manufactured or produced in India. Central Excise
duties are the single largest source of revenue for the Central Government of India. The excise
duty was prevalent in India from the time of the British rule. In 1944, 11 different excise related
acts were combined into one act and this was then named as The Central Excise and Salt Act,
1944. Initially, when the Central Excise Act was passed in 1944, the rates of duties for different
8
Under Section 33AB, assesses carrying on the business of growing and manufacture of tea became eligible for
deduction up to 20 percent of income. This deducted amount has to be deposited with National Bank for Agricultural
and Rural Development (NABARD) and utilised for specified purposes, which are extension planting, replanting of old
tea bushes, infilling, rejuvenation pruning, modernisation and up-gradation of manufacturing facilities and labour wel-
fare schemes, such as, housing and sanitation.
82
crisis in indian tea industry
goods were given in that Act itself. However, with the increase in the types of goods being manu-
factured in India, the need for a separate Act for classifying the goods and prescribing the rate of
excise duty for each was felt. Therefore, in 1985, the Central Excise Tariff Act was passed
classifying goods under 96 chapters. They were further divided, into groups and sub-groups with
the rate of duty prescribed for each sub-group. In 1996, it was renamed as The Central Excise
Act, 1944.
The government has often given excise concessions on one category of tea, only to compensate
it by raising the excise duty on some other category. Ashok Alampally, President of AKPA re-
ported to the Fact Finding Team that the Government of India imposed an export duty of Rs. 5
per kg but it was removed in 1979. However, the Finance Ministry re-imposed 8 percent excise
duty on packaged tea in the 1998 union budget. This led to wide scale protests from the planters
and the tea traders. In 1999, the government removed the excise duty on packaged tea but
introduced an excise duty of Rs 2 per kg. on bulk tea in February ,1999. However, the planters
contended that levy on bulk tea is a direct charge on a product which remains the cheapest mass
consumption beverage for the entire population. On the basis of various representations from
the planters the Finance Minister reduced the excise duty on bulk tea from Rs. 2 per kg. to Rs.
1 per kg. in February, 2002. The planters told the Fact Finding Team that since the production
costs have gone up and the prices are declining the excise duty is eroding the estates profitabil-
ity. They also contended that tea is an essential commodity as it is an item of mass consumption
- hence it should be freed from excise duty.
6. Small Growers and the Bought Leaf Factories
In the last 10 years there has been phenomenal growth in the small growing sector as compared
to the traditional organised tea sector in terms of area (from 25,108 hectares in 1991 to 1,01,000
hectares in 2001) and production (from 52 milion kgs. in 1991 to 12.6 million kgs. in 2001). At
present there are around 2,30,000 small growers engaged in tea production. The increase in
small growers has also led to an increase in the number of privately owned Bought Leaf Facto-
ries (BLFs), processing tea bought from the small growers. However, the BLFs still account for
less that 20 percent of the total tea production. India is perhaps the only producer of black tea in
the world, which is still dominated by the estate sector. Much of the success in both Kenya and
Sri Lanka is linked to the growth of the small grower- BLF sector over the past few decades.
At present there are more than 135 tea factories in Assam producing 50 million. Kg. of tea, 42
tea factories in West Bengal producing 30 million kg. of tea, 173 factories in Tamil Nadu produc-
ing 81 million kg. of tea and 13 tea factories in Kerala producing 2 million kg. of tea. However,
unlike Kenya and Sri Lanka where small growers - BLF are regulated by a strong supporting
institutional framework, there is no supporting institutional framework for Indian small growers -
BLFs. In Sri Lanka all the tea growers are organised into a government run cooperative called
83
crisis in the tea industry
crisis in indian tea industry
Tea Small Holders Development Authority (TSHDA) in which all the small growers are sharehold-
ers. The TSHDA also has 12 BLF factories, under the name Tea Shakti and are also planning to
package tea produced from these factories. Additionally, the green tea prices paid to small grow-
ers in Sri Lanka is based on a formula under which 32 percent of the average monthly sales
proceeds are given to the factory owners and 68 percent of the average monthly sales price was
given to the green leaf suppliers.
9
For example, if the monthly sales proceed is Rs. 100 then Rs.
32 goes to the factory owners. Whereas, the green leaf suppliers received Rs. 75 divided by 4.5
of the sales proceed.
10
This formula was based on the relative estimated average costs of the
production of green leaf and made tea. Similarly in Kenya, the small growers are organised by the
state controlled Kenya Tea Development Authority (KTDA) which also has a large number of
BLFs processing tea.
In India, with the exception of Industrial Cooperative Factories Federation Ltd (Incoserve) in
Tamil Nadu, the small growers are highly fragmented. The price paid by the BLFs to the small
growers is based on the auction price of some representative factories in the area. However,
there is no formal list of these representative factories and there are no disclosures made on
how the green tea price for the period was arrived at.
The small growers do not have any control over the green leaf prices and the price fluctuation in
the auctions directly and immediately affect the price realised by the small growers. Since the
small growers have not been able to control the green leaf prices, they tend to compromise on
quality and emphasise on increasing the volume of tea.
The BLFs also have no control over the maintenance of green leaf standards in respect of their
procurement from small growers. The payment to the small growers is residual in nature so most
of the BLFs recover their margin and have no major interest in procuring quality tea leaves from
the small growers. This is one of the reasons for the poor quality of tea manufactured by BLFs.
Moreover, the output is often not in conformity with the PFA
11
standards and is being dumped at
low prices, adversely affecting the tea market as a whole. The BLFs sourcing of green leaf is
currently not accounted for, leading to serious quality issues involving the final output. Tea waste
generation by BLFs, as incidental to manufacture, is not appropriately accounted for by way of
statutory declaration under the Tea Waste (Control) Order. The small growers and the BLFs are
9
Sri Lanka. Report of the Presidential Commission on the Tea industry and Trade.
Colombo: 1995, p. 92.
10
One kg of manufactured tea is equivalent to 4.5 kg of green leaf.
11
Prevention of Food Adulteration Act, 1954.
84
crisis in indian tea industry
increasing at a very rapid pace hence, this sector needs further research in great detail.
Source: Compiled from Tea Market: A background Study (Oxfam, U.K. 2002)
7. The Tea Auctions
The auction system has been the primary marketing mechanism for tea from the time of the first
auction in 1891. The auction system received strong regulatory support in 1984 when the Tea
Marketing Control Order (TMCO) came into existence. The TMCO stipulated that 75 percent of
producers tea, except the packaged tea, has to be sold through auctions. However, in India not
more than 60 percent of tea was sold through auctions as most of the big companies preferred
selling packaged tea. The auctions are costlier for the producers as compared to private sales
because of the transaction costs. However, the payment is assured in auctions and there are
hardly any defaults.
7.1 Problems with the Tea Auction Rules
The report by international management consultant, A.F. Ferguson & Co about tea auctions
prepared on behalf of the Tea Board of India in 2002, severely criticised the existing rules. The
report mentions two major problems with the tea auction system, i.e. Divisibility of lots and Proxy
bidding.
7.1.1 Divisibility of lots
From the fundamental auction principles point of view, all buyers in any auction system must put
12
Fair Trade Organisations, Report of Dutch India Working Group on Tea Industry, 1994
< www.transfair.ca/fairtrade/fair667.html> 6 Oct 2001.
13
Fair Trade Organisations, Report of Dutch India Working Group on Tea Industry, 1994
< www.transfair.ca/fairtrade/fair667.html> 6 Oct 2001.
Figure 3: Dominance of big companies in Guwahati Auctions in 1999

33%
13%
18%
6%
3%
27%
Hindustan
Lever
Tata Tea
Western
India
Other
packteers
Bazar
Exporters
85
crisis in the tea industry
crisis in indian tea industry
the winning bid to buy tea. However, the divisibility rule permits a buyer to buy his entire tea
requirement without ever placing the final bid, through sharing with the winning bidder. Thus, the
divisibility rule contradicts the basic principle of auctions as it permits some buyers to buy tea
without bidding. The divisibility rule exists in order to help the small buyers participate in the
bidding, but in effect it is utilised by the numerous agents buying tea on behalf of big companies
7.1.2 Proxy Buying
Again the fundamental principle of auction mentions that the original bidders should be present in
the auction room to buy tea but, in practice one buyer is allowed to bid for other buyers as well.
This system again goes against the spirit of competition that an auction centre should witness.
7.2 Role of the Tea Brokers
During the Fact Finding Teams visits many trade unions complained that the bigger players,
operating on behalf of the corporate entities, keep away smaller brokers from the auction floors in
order to reduce competition. It was pointed out that the big brokers not only do the valuation of tea
but also fix the tea prices even before the auctions because of the existence of the divisibility rule.
For example five brokers decide a price beforehand and then bid and get the tea at a mutually
agreed price, and share it among themselves. There is also a system of proxy buying, by which
the brokers can buy tea on behalf of the bidders not physically present in the auctions. By these
methods, the brokers have been able to keep the prices low and then sell at higher prices to the
foreign buyers.
J. Thomas & Co. Pvt. Ltd., the largest tea broker in the world, handles over 155 million kg. of tea
a year, i.e., one-third of all tea auctioned in India. Carritt Moran and Co. Ltd., the worlds second
largest tea broker, handles 24 percent of auctioned teas in India. Carritt Moran, has also been
doing the blending and packaging operations on behalf of Hindustan Levers. The dominance of
big corporations in Indian auctions is visible from the figure below.
There are regular complaints from the small growers about cartels operating on the auction
floors. It is alleged that the bigger players, operating on behalf of the corporate entities, keep
away smaller brokers from the auction floors in order to reduce competition. That is one of the
reasons that the tea price in the retail market is around Rs. 160 per kg. while in the auctions it is
less than Rs. 50 per kg.
14
Financial Express, 21 June 2001.
86
crisis in indian tea industry
8. The Big Tea Corporates are Still Making Profits
According to a report by the World Bank (1997), the processing and distribution of tea in 1990
was controlled by four major UK corporations all of which have vertically integrated to a great
degree; Unilever/Brooke Bond, Cadbury Schweppes, Allied-Lyons (now Tata Tea, an Indian com-
pany) and Associated British Foods/Twining. Together these controlled 80 percent of the tea
market in many countries.
12
The present crisis has remained confined to the small and medium tea plantations. The big tea
corporations remain mostly unaffected by the present crisis and have shown consistent profits.
These big tea companies are showing profits because of their high degree of flexibility, their
buffer stocks, and their speculative transactions.
13
For example, Tata Teas profit has declined only 3 percent from Rs 128.75 crore in 1998-1999 to
Rs 124.63 crore in 2000. Sales from operations increased by 5.4 percent from Rs 874.23 crore to
Rs 922.12 crore in 1999-2000. The main reason behind the profits shown by Tata Tea is because
it is one of the largest integrated tea manufacturers in the world. Integrated in the sense that it is
involved in all phases of the value-chain.
14
Since the company owns gardens, it has control over
both the quality and the quantity of the tea, without having to depend on the open market.
The falling auction prices have, in fact led to an increase in the operating margins as the com-
pany has left its retail prices unchanged. Therefore, its packaged tea division has acted as an
efficient buffer on profitability. Other big players like Hindustan Lever, which is the largest player
in the packaged tea segment, have also benefited from the fall in tea auction prices.
The fall in tea auction prices have also led to multinational companies entering the made tea
business in a major way. The soft drink giant Coca Cola has begun selling tea with the brand
name Georgia Tea. Similarly, the Godrej Group have entered the tea business in the year 2002,
under the name of Godrej Tea Ltd. It aims to have retail networks in 25 cities and is targeting the
premium varieties of tea. The smaller and medium tea plantations dont have access to the retail
market and are completely dependent on tea auctions for the sale of their tea. These tea planta-
tions are slowly closing down or being abandoned because of the fall in tea auction prices. This
has led to severe hardship for the workers, who are living in pathetic conditions. They are com-
pletely dependent on the plantation management for basic human amenities, including food,
water, electricity, education and health facilities. The workers are not even able to buy food, as
the wages have not been paid for years.
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CHAPTER VIII
RECOMMENDATIONS OF THE FACT
FINDING TEAM
A. Recommendations for Kerala
1. Relief
1.1 The crisis in the tea industry has lead to calamity in the tea gardens of Peermade Taluk of
Idukki district. The distress faced by the workers and their families cannot be mitigated by
the workers organisations. Therefore, immediate and continuous relief support should be
given to all the tea workers in distress till normalcy returns. The components of the relief
should be the following:
1.1.1 free ration of food grains
1.1.2 medical facilities including mobile hospitals
1.1.3 drinking water
1.1.4 assistance to the school going children
1.2 The Government of Kerala, the Planters Associations, and the Tea Board should assume
moral responsibility and initiate concrete relief measures to mitigate the suffering of the tea
garden workers.
2. Accountability and Liability of Planters
2.1. The criminal liability of the planters in not respecting the statutory provisions of pay-
ment of wages, Provident Fund and Gratuity should be established. Recovery proce-
dures should be initiated against the planters to ensure payment of these statutory
dues.
3. Mismanagement
3.1. Stringent action should be initiated against those planters who have mismanaged the
gardens by siphoning off funds and not carrying out essential agricultural tasks. Planta-
tions cannot be seen as private fiefdoms but entities accountable to the public.
4. Cost of Production and Productivity
4.1. Considering the fact, that diminishing productivity is due to the increasing age of bushes
in Kerala and careless agricultural practices, the Fact Finding Team proposes that the
Government of Kerala and the Tea Board should take immediate steps for the replant-
ing of tea bushes. The Tea Board should launch quality and productivity upgradation
schemes for tea plantations. The Fact Finding Team rejects the argument of the em-
ployers that increase in the labour cost is primarily responsible for the increase in the
cost of production.
5. Preventing Cartels in Auctions
5.1. Bring appropriate changes, including computerization, in the tea auction system to
make it transparent, competitive and accountable, with the objective of preventing for-
mation of cartels in tea auctions by big players that forestall natural price realization.
88
crisis in indian tea industry
6. Floor Price for Tea
6.1. Tea being a product of mass consumption under the Essential Commodities Act, the
government should fix a minimum floor price for tea and if the prices still fall, the gov-
ernment should support them.
7. Export of Tea
7.1. The government and the Tea Board should take immediate steps to increase the quan-
tum of exports of tea from India after value addition.
8. Workers Cooperatives
8.1. All the abandoned and closed plantations should be handed over to the workers coop-
eratives.
B. Recommendations for Tamil Nadu
1. The tea workers are living under very difficult conditions and hence any deduction in
their wages in Tamil Nadu on the pretext of the present crisis is unjustifiable. This kind of
wage reduction may lead to unrest, social instability and an enormous increase in ad-
ministrative expenditure to cope with it.
2. A minimum floor price for the tea from small growers should be fixed by the government
and if the price still falls it should be supported by the government.
3. Modern technology like mechanical harvesters and shears should not be introduced to
reduce the labour force.
4. The Tea Board should launch quality and productivity up gradation schemes for tea
plantations, in particular for the small growers.
5. The government should bring appropriate changes, including computerisation, in the tea
auction system to make it transparent, competitive and accountable.
6. Some of the tea plantations, which have been closed or partially closed in Tamil Nadu,
should immediately restart and in case they fail to do so, the tea plantations should be
handed over to the workers cooperatives.
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List of Abbreviations
AIAWU All India Agricultural Workers Union
AIT Agricultural Income Tax
AKPA All Kerala Planters Association
AITUC All India Trade Union Congress
BLF Bought Leaf Factories
BMS- Bhartiya Mazdoor Sangh
BPL Below Poverty Line
CEC Centre for Education and Communication
CCPA Consultative Committee of Plantation Associations
CITU Centre of Indian Trade Unions
CPI Consumer Price Index
CTC Curled, Turned, and Cut
CTPA Central Travancore Planters Association
CTTA Calcutta Tea Traders Association
EOU Export Oriented Units
EPZ Export Processing Zone
GDP Gross Domestic Product
HDI Human Development Index
HLL Hindustan Lever Limited
HMS Hind Mazdoor Sabha
HPI Human Poverty Index
HRELU High Range Estate Labour Union
Indcoserve Industrial Cooperative Factories Federation Limited
ITA Indian Tea Association
INTUC Indian National Trade Union Congress
IUF International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco
and Allied Workers Association
KTDA Kenya Tea Development Authority
LTC Leave Travel Concession
MMJP Michael Manarcadu Joseph Plantation
NABARD National Bank for Agricultural and Rural Development
PAT Planters Association of Tamil Nadu
PFA Prevention of Food Adulteration Act
PLA Plantation Labour Act
RBT Rai Bahadur Thakur
UPASI United Planters Association of Southern India
TMCO Tea Marketing Control Order
TSHDA Tea Small Holders Development Authority