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INDUSTRY IN ASSAM
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3.0 INTRODUCTION

In this chapter, dealing with the history of tea, we trace the origin of

tea; from its early discovery as a mysterious and exotic drink coveted as

gifts by Kings and Nobles, to the efforts put in by Sir C.A. Bruce and

Maniram Dewan to bring it to its present status as the 'common man’s

champagne’. We trace its evolution from the early stages of its being a

priceless item to the present stage of its becoming a commercially

produced and lucrative commodity readily available all over the world. We

study the impact of tea as a commodity earning through regular exports

high foreign exchange for India and at the same time being a big source of

income for the state of Assam.

3.1 A CHRONOLOGY OF TEA

Chinese legend credits the legendary Emperor Shen Nung with the

discovery of tea at about the time of the Biblical Adam in 2737 B.C., while

another Chinese legend says that Gan Lu, a Buddhist monk, brought the

first tea plants to China from India during the latter part of the Han dynasty
\
at around 25 - 221 A.D. According to a fable written during the rule of the

Ming dynasty, tea was discovered during the period that followed the Han

dynasty, sometime around 221 - 265 A.D.

Kuo Po in 350 A.D. first published the earliest reliable description of

the tea plant and the manner by which the beverage was made. In the later

Wei dynasty, 386 - 535 A.D., people residing in the border districts made

tea leaves into cakes which they ground into powder after baking. This

powder was then infused. During 500 A.D. tea was used more as a
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medicine than a beverage in China. It was in 589 A.D. that tea was first

used as a beverage at the beginning of the Sul dynasty.

With the introduction of Chinese culture and Buddhism in Japan in

593 A.D., tea was introduced there. In 725 A.D., tea was given a distinct

ideograph - Ch’a, for the first time. In 720 A.D., the first book on tea, ‘Ch’a

Ching' was published by Lu Yu and in 805 A.D.; the Buddhist Saint Dengyo

Daishi brought tea seeds to Japan from China, in 815 A.D., the Japanese

Emperor Saga began the cultivation of tea in five provinces near his capital.

The first report of tea published outside China was in Arabic and

written by Soliman in 850 A.D. and during 907 - 923 A.D., the use of tea

spread to the lower classes in China, in 1191 A.D., tea was reintroduced in

Japan by the Buddhist Abbot Yeisai and during the Ming dynasty, 1361 -

1628 A.D.; the process of green tea manufacture was invented in China.

In 1559, Giambatita Ramusia of Venice published the first notice of

tea and in 1567; Ivan Petroff and Boornash Yalysheff brought the first news

of the plant to Russia. In 1606-07, the Dutch first transported tea from

Macao in China to Java and in 1610 Dutch merchants began the import of

tea into Europe.

In 1611, the English East India Company established its agent in the

island of Hirado off the coast of Japan after the Dutch East India Company

was granted the privilege of trading there. By 1637 A.D. tea came into use

by the people of Holland and in 1640 tea became the fashionable beverage

of society at The Hague. In 1650 in England, tea was occasionally used

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and in 1651 the Dutch East India Company brought in 30 pounds of

Japanese tea to Holland.

In 1655 at a banquet at the Dutch Embassy at Canton, Johann

Nieuhoff recorded the use of milk in tea.

Tea was first publicly sold at Garway’s Coffee House in London in

1657 and the first advertisement of tea appeared in a newspaper in London

on September 30th 1658, announcing that tea was sold at the Sultaness

Head Coffee House.

The English East India Company first imported 143.5 lbs. of tea from

Java in 1669 and in 1680 Madame De La Sabllere introduced the custom

of adding milk to tea. In 1681 Dr. Andrew Cleyer brought tea plants to Java

from Japan and in 1689 the first import of tea from Amoy in China arrived in

England. In 1715, the first green tea was used in England and in 1717 the

first exclusive tea shop, ‘Golden Lyon’ was opened there by Thomas

Twining.

In 1735, Empress Elizabeth of Russia inaugurated the overland tea

trade from China and in 1738 Soichiro Nagatani invented the process of

Japanese green tea manufacture. In 1750, Japanese green tea was

exported from Nagasaki, while black tea gradually superseded green tea

and replaced coffee in Holland. In 1763, tea plants from Europe were

brought to Linnaeous at Upsal in Sweden and in 1774, the first patent for a

tea-making device was granted to John Wadham.

It was in 1780 only that Warren Hastings, Governor-General of

British India sent some seeds brought form China to Colonel Robert Kyd in
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Calcutta who grew some ornamental bushes, but it was in 1788 that Sir

Joseph Banks called the attention to the prospects of tea cultivation in

British India. In 1793, scientists at Lord McCartney’s embassy in China

sent some tea to Calcutta.

It was only in 1815 that Colonel Latter called attention to a wild tea

variety grown by the tribals of Upper Assam and Dr. Govan recommended

the cultivation of tea in the North Eastern part of Bengal (now Assam). In

1823, Major Robert Bruce discovered indigenous tea in Assam. In 1835 -

36, the Scientific Commission in India recommended the use of Chinese

tea plants in Assam and C.A. Bruce was appointed as the Superintendent

of tea culture in Assam. Along with the experimental planting of Chinese

tea, C.A. Bruce began a nursery of indigenous tea in Sadiya.

In 1838, the first export shipment of 8 chests of Assam tea was sent

to London and in 1839, Assam tea was first sold in India House in London

through public auction. In 1840, The Assam Company took over two- thirds

of the Government’s tea garden in North-east India. In 1842, tea cultivation

was started in Dehradun.

In 1843 - 44, Maniram Dewan was the first Assamese to establish a

tea garden. This was in Cinnamara in Assam while in 1851 Colonel

Hannay opened the first privately owned tea garden. In 1856, planting of

tea was started in Darjeeling and in Cachar in Assam and the Calcutta Tea

Auction was opened on 27th December in 1861.

In 1872, the pioneer inventor of tea machinery, William Jackson, set

up the first mechanical Tea Roller in Jorhat. In 1884, he invented the first
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mechanical Tea Drier and the Roll Breaker in 1887. In 1874 - 75, Lt. Col.

Edward Money invented the Tea Drier. In 1930, W. McKercher invented the

CTC machine in Assam.

In 1881, the Indian Tea Association of Calcutta was formed and the

Indian Tea District Association of London, formed in 1879, merged with it in

1894. The name of this body was changed to the Indian Tea Association.

The Association opened the Tocklai Experimental Station in Jorhat in 1900

for tea research and development purposes. In 1933, A.C. Tunstall of

Tocklai developed the methods of vegetative propagation of tea and in

1954, Two and a Bud’; a quarterly journal from Tocklai was published for

the first time. In 1961, N.G. Gokhale was appointed as the first Indian

Director to Tocklai. In 1965, the Tea Research Association was formed

and took over the management of Tocklai. In 1968, a separate Department

of Tea Husbandry and Technology was opened in the Assam Agricultural

University.

In 1970, the Guwahati Tea Auction Centre and in 1976 the Siliguri

Tea Auction Centre were established. It was in 1972 that the first batch of

students graduated with specialisation in Tea Husbandry and Technology

from the Assam Agricultural University, This batch included a student from

Uganda.

On the 28th of June 1998, the historic London Tea Auction Centre

was shut down due to the rapid commercialisation of tea as a high earning

commodity fetching huge cash returns for tea producing countries and with

traders now trading in the product directly with the producers for larger
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profit margins. (Millennium Tea Directory, Tea Digest, Eden, T. Harlalka, S

S, Kurmi, S „ Griffith S P.)

3.2 THE TEA INDUSTRY IN ASSAM

In Assam, the British first grew tea in Upper Assam. It is believed

that tea was first discovered when King Beesagaum, Chief of the Singphow

presented a Britisher, Biriphin, with a tea seed and seedling. The Khasis

murdered Biriphin and it was Robert Bruce who discovered the plant at

Sadiya in 1823 after Biriphin’s death and it was C.A.Bruce, brother of

Robert Bruce who planted tea on a large scale for commercial purposes.

While going though the history of the discovery of the tea plant in

Assam, it was claimed that even though C.A. Bruce was the first person to

venture into the dense tea forests of Assam and came to be known as the

father of Indian tea, it was Maniram Dewan who introduced him to King

Beesagaum. It was felt that Maniram Dewan had prior knowledge of these

deep tea forests and the European Planters, fearing competition from

talented local enterprise, branded him as a traitor and had him hanged in

1858. This incident also served as a warning to native entrepreneurs who

wished to make their fortunes in tea. (Singh, 2001)

It is said that the tea plant grew wild in Assam, and that Robert

Bruce discovered it with the help of Beesagaum, the Singphow King.

Baruah, P K (1977), Sharmah (1983), Phukan, M (1984), Phukan Khound,

S (1994) and Gangadhar Banerjee (1996), as also many others who had

studied the origin of tea in Assam agree that in 1823 tea was discovered by

Robert Bruce with King Beesagaum’s help.

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Tea cultivation in Assam began on a commercial scale in 1886 with

the advent of the East India Company into Assam.

In the beginning the planters faced many problems but the abundant

availability of land and the suitable climatic conditions prodded the pioneers

to grow tea in Assam. However, due to this same reason and the sparse

local population, labour was scarce. To set up such a profitable labour

intensive industry, labour was first brought in from China, but this proved to

be quite costly, as they demanded facilities that told on the profitability of

the industry. The British then brought in needy labourers from different

parts of the country where population was dense and labour cheap.

Contractors were employed who recruited cheap labour from states such

as Bengal, Bihar, Uttar Pradesh, Orissa, Madhya Pradesh, Madras and

Maharashtra by luring them with false incentives and hopes of a better life.

The uneducated and poor from these states, dreaming of a better life in

Assam, came and began working in the tea plantations. At first only men

were brought into the state and returned to their homes after the season

was over. It was later on that due to the renewal of the contracts every

season, a few stayed back in Assam and they brought their families to the

state. Being tribal people, they had no bar on their women and children

working. This suited the British who employed entire families at cheap

wages. Hence, we find different tribes and castes and different languages

among the workers of this industry.

In Assam, there are 40900 tea gardens (including small tea growers)

today. The plantations span across an area of 275000 hectares of land and
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employing 605000 resident workers, i.e., almost 50 percent of the total

workers employed in the Indian tea industry. 86percent of the total
industrial workers during 1928 were employed by the tea industry alone.
(Das; 1931). In 1989, the number of people directly employed in the tea
industry was 953024 and 1183196 persons were dependent upon the
industry. During that year the Assam tea industry employed 145223 people
while 152786 people were dependent on the industry. (Tea Statistics, Tea
Board, 1987 - 88, 88 - 89, 89 - 90). Tea is a high foreign exchange earner
and contributes a sizeable amount to the State’s exchequer.
Table 3.1 shows the total number of tea gardens and the area under
tea plantations in Assam and India and also the total production of tea in
Assam, India and the world.
Table 3.1 - Comparison of < gardens^ area under tea cultivation and
production in Assam, India and the world
Year Number of tea gardens Area under tea (Ha) Production (MT)
India Assam % of India Assam % of India Assam World % of % of
Assam Assam Assam Assam
over over over over
India India India World
1951 6214 785 12.63 316840 155600 49.11 285399 150370 651980 52.69 23.06

1961- 9499 744 7.83 331229 102300 30.88 354397 182319 858730 51.44 21.23
1971 12015 750 6.24 356516 182300 51.13 435468 223665 1119530 51.36 19.98
1981 13410 777 5.79 383629 203000 52.92 560427 305130 1889500 54.45 16.15

1991 13873 848 6.11 420740 233200 55.43 754192 412898 2635487 54.75 15.67

1992 13918 851 6.11 420289 233600 55.58 723322 412010 2508754 56.96 16.42

1993 13936 850 6.10 418363 231900 55.43 760926 420430 2613436 55.25 16.09

1994 35116 1012 2.88 425966 227100 53.31 752895 400732 2573158 53.23 15.57

1995 37319 1196 3.20 427065 226200 52.97 756016 402617 2584422 53.26 15.58
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1996 38705 2472 6.39 431204 228200 52.92 780140 423965 2702047 54 34 15.69

1997 38707 2472 6.39 434294 229500 52.84 810031 425115 2790402 52.48 15 23

1998 88115 25708 29.18 474627 230900 48.65 874108 476046 2921759 54.46 16 29

1999 98889 30940 31.29 490747 257700 52.51 824408 432925 2955274 52.51 14.65

2000 112010 39151 34.95 504366 266500 52.84 846922 449219 2991827 53.04 15.01

2001 115264 40795 35.39 509770 269000 52.77 853913 453936 3091179 53.16 14.68

2002 115350 40800 35.37 509800 271000 53.16 853990 454000 3099298 53.16 14.65

2003 115400 40900 35.44 509800 275000 53.94 855000 NA 3400000

Source: i) Tea Statistics, Tea Board o f India, 1991 - 92, 2001 - 2002

ii) Tea Digest, Tea Board o f India, 1998-99, 1999 - 2000

From the table it is seen that Assam produces the largest quantity of

tea in the country and at the same time the land area under tea cultivation

is also one of the largest. Assam alone produced more than half of the

country’s total production of tea all through 1951 to 2002. Not only that,

Assam leads all other Indian states in tea plantations and production and

stands as the second largest tea producing state in the world, contributing

about one-sixth of the world's tea production. Assam ranks next to China,

which produces about 22.6 percent of the world’s total tea.

3.3 EC O N O M IC IM POR TAN CE O F T H E T E A IN D U S TR Y

Tea has always been a very profitable and important trade

commodity. After its re-christening as 'the common man’s champagne’ from

an exotic drink for Kings and Noblemen, tea was promoted by the East

India Company as a cheap and healthy natural drink for people from all

occupations. The market for the commodity thus grew, thereby leading to

more and more areas of land being put under tea cultivation.
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India is the world’s largest producer and the fourth largest exporter

of tea, exporting 24 percent of its annual production. Assam exports 15

percent of its production while Sri Lanka exports 95 percent of its

production and ranks as the largest exporter of tea. (Tea Statistics, Tea

Board, 2 0 0 0 -2 0 0 1 )

Among the different plantation crops, tea is considered to be the

most important crop in India. It is the second largest foreign exchange

earner and is exported to about 80 countries. (Banerjee G. 1996 and

Hussain 1998)

3.3.1 TEA INDUSTRY AS A SOURCE OF EMPLOYMENT

The tea industry employs a huge workforce, both directly and

indirectly through its ancillary and downstream industries. From the history

of the tea garden workers we see that these workers originally hailed from

Central India. They were brought to work in the plantations by the British

who faced a shortage of local labour. They came and settled in the Assam

plantations, as they were poor and dreamt of a better life in Assam. As

mentioned earlier in this study, most workers in the agricultural sector

consist of women from the lower strata of society. In the tea industry also,

almost 50-55 percent of the workforce consists of female workers. These

workers work alongside men doing equal amount of work and until 1976,

they were not paid equal wages as men. However, legislation such as the

Plantation Labour Act 1951 has been passed land put into effect for

uplifting the social, educational, economical and work status of the tea
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garden workers. Table 3.2 shows the average daily number of labourers

employed in India, North India, and Assam.

Table 3.2 - Average daily number of labourers employed in India,

North India and Assam during 1991 to 2002

% - N! to % - Assam % - Assam
Year All India North India Assam
All India to All India to N I
1991 996735 821311 554536 82.40 55.64 67.52
1992 991704 818467 560675 82.53 56.54 68.50
1993 991019 816265 555128 82.37 56.02 68.01
1994 1028694 834770 559801 81.15 54.42 67.06
1995 1028787 841769 567398 81.82 55.15 67.41

1996 1029651 840788 572311 81.66 55.58 68.07

1997 1032267 840756 579803 81.45 56.17 68.96
1998 1045405 853341 588714 81.63 56.31 68.99
1999 1188471 968600 596943 81.50 50.23 61.63
2000 1209723 984713 603787 81.40 49.91 61.32
2001 1209920 983605 604970 81.30 50.00 61.51
2002 1210060 983670 605000 81.29 50.00 61.50

Source: i) Tea Statistics, Tea Board of India, 1991 - 92, 2001 - 2002

ii) Tea Digest, Tea Board of India, 1998 - 99, 1999 - 2000

The tea industry is the single largest employer in Assam. Table 3.2

reveals that Assam employs an average of almost 54 percent of the

workers engaged in the Indian tea industry and an average of over 65

percent of those engaged in the tea industry in North India.

Apart from employing a large number of direct labour in the industry

itself, there are a large number of people working in the ancillary and

downstream industries, who make a living indirectly from the tea industry.

These are the contract workers employed by contractors. Plantations also

require products of other industries such as the plywood, iron, building

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materials, transport and related spheres, fertiliser, insecticides and

pesticides as also machinery and machinery spares industries. This has

made possible the existence of Companies such as Steelsworth and

Aluminium Industries in Tinsukia, T & I, T & I Global and Vikram India in

Tezpur, C M Ho in Makum, Sardar Karnail Singh and Sons and Assam Iron

in Dibrugarh, and Standard Engineering and Manjit Engineering in Doom

Dooma, all employing workers. These Companies have started exporting

machinery related to the tea industry to foreign countries. Nowadays tea

chests made of ply-board are no longer in use, and in place jute bags are

now used. This has given rise to the mushrooming of jute bag

manufacturing units at a number of locations. Similarly, nylon bag

industries have also come up. Moreover, there are possibilities of

developing a few downstream industries using the products / by-products of

tea. This has already been started in the Bongaigaon Petrochemicals

Complex. (Sharma, M: 2002). The decaffeinated tea waste is unique

manure that is used in tea soil. M/s Anisha Chemicals Pvt. Ltd. In Nalbari

has already started production of this organic manure from tea waste.

Another prospect of downstream industry is the making of decorative

furniture from uprooted tea bushes, which is seen at Dikom in Dibrugarh

district.

The tea industry provides direct employment to about 8 percent of

the state’s population and another 1 2 - 1 5 percent of the state’s population

is dependent on it for their livelihood.

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3.3.2 TEA INDUSTRY AS A REVENUE AND FOREIGN EXCHANGE
EARNER
Tea being a commodity subject to direct taxation by way of excise,

export duty, and cess under the Tea Act, this industry makes a substantial

contribution to Central revenues. The industry is also subject to Central

Income and Corporation tax and in most of the tea growing states, to

Agricultural Income tax.

Tea can be placed under both agriculture and industry. It is an

industry in the sense that tea is a processed and manufactured commodity

subject to excise duties and cess. It is also an agricultural crop as it is

grown on land and attracts Agricultural Income tax.

The present Central and different states set up of excise duties, cess

and various taxes levied on tea is given in Annexure 3.1. From Table 3.1 it

is clear that almost 50 percent of tea in India is produced in Assam which

also produces 14 percent of the world’s tea production Table 3.3 shows the

revenue collected by The Government of Assam between 1998 to 2004.

Table 3.3 : Revenue collected from tea by The Government of Assam -

1998 to 2004
Year Agricultural Assam Taxation Sale tax Total
Income Tax on specified land
1998-1999 10326.36 6025.88 2395.09 18747.33
1999-2000 7584.95 6293.58 2549.00 16427.53
2000 - 2001 4070.01 5594.00 3011.03 12675.04
2001 - 2002 1549.37 6093.33 2521.00 10163.70
2002 - 2003 435.00 5293.00 2305.00 8033.00
2003 -2004 408.00 5617.69 2464.00 8489.69
(Source: i. Office of the Commissioner of Taxes, Guwahati, Assam,
i . "Tax at aglance", Office of the Commissioner of Taxes, Guwahati, Assam)
 108

Revenue earned by way of exports and excise duties and cesses

accounted for 1.6 percent of total revenue in 1958-59. This came down to

0.2 percent in 1992-93. Though the total revenue has increased, in actual

fact the total revenue earned from tea increased from Rs.1624 lakhs in

1958-59 to Rs.7084 lakhs in 1992-93, an increase of almost 10 percent per

annum.

Diagrams 3.1 and 3.2 show the export of tea from India in million kgs

and foreign exchange earnings in Rs. Crores.

Diagram 3.1 - Export of t e a f r o m India (million kgs.)

EXPORT OF TEA FROM INDIA

■iMiiwuiira1
Million kgs

YEAR

Source: i) Tea Statistics, Tea Board of India, 1991 - 92, 2001 - 2002

ii) Tea Digest, Tea Board of India, 1998 - 99, 1999 - 2000
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D ia g ra m 3.2 - F o re ig n e x c h a n g e e a rn e d by In d ia fro m tea e x p o rts

(R s. cro res )

FOREIGN EXCHANGE EARNINGS FROM EXPORT OF TEA FROM INDIA

YEAR

Source: i) Tea Statistics, Tea Board o f India, 1991 - 92, 2001 - 2002

ii) Tea Digest, Tea Board of India, 1998 - 99, 1999 - 2000

From the two graphical diagrams (Diagram 3.1 and 3.2), it is clearly

seen that tea is an important export commodity for India. It has shown an

increase in foreign exchange earned in consecutive years. India earned Rs.

96.01 crores in 1951, Rs. 1135.55 crores in 1991 and Rs. 1898.61 crores in

2000 from tea. From 1999 there was a downtrend in quantum exports as

well as foreign exchange earned. This can be attributed to the changes in

the economies of the Russian countries and the turmoil it created in the

international markets. Also, 1998 was a year of record production volumes.

This led to a carry over of 1998 tea stocks into 1999, as there were no

corresponding increase in the volumes of export of tea during the stated

period.
 110

Even though tea is a lucrative source of foreign exchange earnings

for India, the world market for Indian tea is still at a very low level. India was

the largest exporter of tea in the world till 1987. Today, Indian tea accounts

for 20.83 percent of world tea export. However India’s share in world tea

exports has declined from 40.62 percent in 1958 to 14.05 percent during

2002. While India’s share in world tea exports has significantly decreased

after 1987, Sri Lanka’s share has increased and it has occupied India’s

position today. With the opening up of the Indian economy to the global

markets, and with proper Government help, tea has the potential to more

than double its foreign exchange earnings.

The following diagram shows the production of tea in India and the

export of tea from India during 1958 to 2003.

Diagram 3.3 - Production in India and the export of tea from India -
1958 to 2003 (in million kgs)

Production Export Production Export Production Export ProciEtion Export Production Export ProAction Export
1968 1988 1998 1996 1999 20C2
 111
Diagram 3.4 - Percentage of total production of tea exported from
India -1958 to 2003

Percentage exports of total Production

□ 1958 B 1968 D 19 7 8 Q 1 98 8 * 1 9 9 1 □ 1992 ■ 1993 □ 1994 * 1 9 9 5 Q 1996 D 1997 □ 1998 * 1 9 9 9 B 2 0 0 0 * 2 0 0 1 * 2 0 0 2 B 2 0 0 3

The Tea Board of India, during the period 2000 to 2003 had taken

up ambitious schemes to promote Indian tea in the world market. It has

identified some of the following problems of marketing Indian tea abroad:

a) It is seen that spurious and cheap teas are being sold in the world

market under the banner of ‘Darjeeling Tea’. This is adversely

affecting the exports of teas from this region.

b) Indian tea, especially Assam tea, is costlier than teas from Kenya,

Sri Lanka and China because of which demand in markets abroad

has dwindled. The cost of Assam teas is higher than that of other

countries mainly due to the fact that the statutory social costs in

Assam, such as workers’ welfare costs, is very high. Almost 65

percent of the cost of production of Assam teas comprises workers’

wages and welfare costs. As these statutory costs cannot be

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ignored, to offset this, higher worker productivity is being stressed

on.

c) Tea is facing stiff competition from soft drink products. The Tea

Board of India, along with a few Companies are now advertising and

promoting tea as a natural health drink. Infact, new products such as

cold tea, iced tea and flavoured teas packed like soft drinks, is being

introduced in the market to promote sales.

With the steps taken by the Tea Board, The Indian Tea Association

and other tea manufacturing and marketing companies, it remains to be

seen whether tea exports from Assam will pick up in the coming years.

3.4 PRESENT POSITION OF THE TEA INDSUTRY

1996 was the year of fluctuating fortunes for the Indian tea industry.

Production reached an all-time record level of 780 million kgs, surpassing

the previous 761 million kgs achieved in 1993. The average price of tea in

the Indian Tea Auctions registered a marginal gain in 1996 over 1995, but

exports registered a decline over 1995.

1997 ended with good fortunes and became a landmark year with

multiple achievements for the tea industry. For the first time Indian tea

production crossed the 800 million kg mark to reach 810.03 million kgs; the

annual average price of tea in the India Tea Auctions registered a

substantial increase of 37 percent to touch Rs.66.89 per kg. Exports

registered a substantial increase of 41.32 million kgs. during 1997.

The Indian tea industry, at the start of the new millennium, is in

many ways at crossroads and faced with a number of critical problems

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such as low price realizations and high costs of production. The sharp fall

in tea prices and depressed market conditions during 2000 adversely

affected the industry particularly the producers of Dooars, Terai, Cachar

and entire South India. Indian tea production, after attaining all time records

in 1998 has shown a modest rise in 2000 to the level of 846.5 million kgs

as against 825.9 million kgs in 1998. The increase in production was mainly

attributed to the increase in crop in North Indian tea growing areas. At the

end of 2000, Indian tea exports reached a level of 206.82 million kgs as

against 191.72 million kgs in 1999, registering an increase in quantum of

15.10 million kgs over 1999. However, the export earnings declined by as

much as Rs.67.26 crores in 2000 over those in 1999. The annual average

prices of tea at Indian Auctions also registered a decline of Rs. 11.08 per

kg, or 15.23 percent over 1999 rates. The unit export price during 2000

stood at Rs. 91.80 per kg as compared to Rs. 102.54 per kg in 1999.

Export of tea from India in 1997 showed an increase due to higher

intake by CIS countries, particularly the Russian Federation. Export to Iraq

after a gap of several years under the UN sponsored “Food for Oil”

programme helped boost Indian tea exports both in quantum and export

earnings. Considerable increase in exports to Pakistan was also a reason

for the increase in exports. However, during 2000 the export of tea from

India to CIS countries declined to 7.74 million kgs except Kazakhstan and

Ukraine.

• Mentionable here is that India has around 57200 hectares of land

under tea cultivation, and produces almost 20 percent of the world’s tea,
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besides providing direct employment to about 1 million workers including a

sizeable number of women, and indirect employment to another 2 million in

the ancillary industries.

Today, India is faced with strong competition from low cost

producers like Indonesia, China, Vietnam and Kenya. The factors

intensifying the global crisis on tea since the recession of 1999 are;

i the widening gulf between oversupply and low demand

leading to a slump in prices,

ii the rise in social liability and responsibility which the

managements fails to meet, thereby leading to labour unrest,

iii the vast gap between the quality of living of the grassroot

workers and the luxurious lifestyles of the management

personnel, and

iv the sharp rise in manufacturing costs.

Against this ominous backdrop, a majority of the tea gardens in

Assam have expressed their inability to provide even the basic statutory

bonus of 8.33 percent to their workers.

The presence of cheaper varieties of imported teas and an over

abundance of the cheaper local produce that lack export demands has

eaten into the market share of Indian teas in the domestic market. Some

gardens of the Assam Tea Corporation along with a few others in the state

are even unable to make labour payment on time. A few gardens have

stopped providing subsidized ration to the workers, while there are others

who have defaulted in paying PF to the contributors. This has caused a lot
 115

of tension between the workers and the management, sometimes leading

to violence. In Assam, the scenario is better than in North Bengal, while in

the Dooars and Terai regions the situation is much worse. In Dooars, 14

out of 153 gardens have already stopped operations and many more are

on the brink of closure. The slump in the market prices during the last four

years has taken a heavy toll and today the State Bank of India has frozen

the accounts of six gardens run by Duncan Industries Limited in the region

as the leading Company has nearly Rs. 5 crores due towards PF payment

to its workers. The situation has risen due to the fact that in Dooars the cost

of production is Rs. 75.00 per kg whereas the selling price is Rs. 51.00.

(Debashis Bhattacharyya - 'Two leaves and Blood', The Telegraph, 16th

November 2003, p. 11)

Tea and coffee are important export commodities of India, with tea

holding a leading position in exports during certain years. The average

annual exports of tea were Rs. 106 crores during the First Plan period. Tea

exports further picked up to touch Rs.195 crores in 1960 - 61 (3rd Plan),

but later on the quantum fell. Tea exports earned Rs.1132 crores during

1991 - 92, and their contribution rose to Rs.1785 crore in 1999 - 2000, but

again fell to Rs.1720 crore in 2001 - 2002. During 2001 - 02, coffee

exports touched a record of Rs.1095 crore. The following table shows the

exports of tea, coffee and rubber since 1960.

 116

T a b le 3.4 -A n n u a l e x p o rts o f tea, c o ffe e a n d ru b b e r (in C ro re Rs.)

1960- 1970- 1980 - 1985- 1990- 2001 -

Item
1961 1971 1981 1986 1991 2002

Tea 195 148 426 626 1070 1720

C o ffe e 2 25 214 265 252 1095

R ubber N.A 9.69 31.36 N.A 263.05 1779.10

(Source: i) India's balance of payment, 1948 49 to 1961 -62,

-

ii) RBI, Handbook of Statistics on Indian Economy-2001,

Hi) Economic Survey 2002 - 2003, Rubber Board)
India has an agriculture-based econom y, and agricultural products

are an im portant part of its exports. However, due to increasing dom estic

consum ption arising out o f the rapidly increasing population growth, the

exports of agricultural products is falling. In the case o f tea, the expected

export volum es have not m aterialized, and dom estic consum ption is

insufficient to consum e the increasing production. This has led to a surplus

stock in the dom estic market, leading to a price slump.

The slum p in the prices o f tea has hit the tea industry in Assam quite

hard. The state has been able to garner ju st Rs.13 crore from the tea

industry, w hereas there w as a tim e when the collection had touched

Rs.113 crore. A ssam accounts fo r 50.07 percent o f Indian tea production

with 700 large tea gardens, 120 bought leaf factories and 941 registered

sm all tea growers. During the last decade, several m arginal farm ers in

Assam , B ihar and North Bengal sw itched o ve r to tea growing. Their

contribution at the end o f the 8th Plan period w as around 5 percent and it

shot up to 17 percent by the end o f the 9th Plan.

 The tea industry is presently reeling under a crisis due to higher

production and sharp decline in prices. The decline that started in the mid­

nineties continues unabated. The industry has been witnessing huge

losses due to depressed prices and spiralling costs. Domestic demand is

stagnating and India’s position in the world tea market is under severe

threat. Due to high and uncompetitive cost of production of Indian tea, it is

vulnerable to low cost competitors such as Indonesia, China, Vietnam and

Kenya. In December 1985, after the formation of the SAARC, India had

agreed to allow imports of tea from Bangladesh and Sri Lanka without tax.

Low cost tea from these countries has made Indian teas uncompetitive

even in its own domestic market. The high cost of production of Indian tea

can be attributed to high labour costs, high cost of the social and welfare

responsibilities of the industry, and increasing cost of inputs such as

chemicals, fertilizers, fuel and other items related to the industry. The

bought leaf factories that have come up recently produce teas at much

lower costs. They sell their produce at lower prices and make profits. As

they enjoy tax holidays and do not maintain any permanent workforce they

do not incur the related social and welfare costs, thereby keeping their

costs low. This is not the case with bigger and established gardens with

huge workforces and related commitments. Another cause for the price

slump is the fact that the low cost teas from countries like Kenya, China,

Vietnam and others has attracted buyers from across the globe who till very

recently bought teas from India, especially Assam teas.

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3.4.1 PR ESEN T S C EN A R IO OF THE TE A IN D U STR Y IN A S S A M

There w as a tim e when jobs in the tea industry w ere m uch sought

after with the cream of society vying fo r the sam e. The industry was

booming, m aking huge profits year after year. Leading buyers used to vie

with each other to buy particular brands o f gardens, producers had a

choice of custom ers, and prices soared high. M anagem ents and

proprietors earned huge profits. Shareholders w ere assured of huge

dividends, M anagers their bonus, and the w orkers - a 20 percent payout o f

bonus during the Puja period. The G overnm ent earned huge revenues and

was assured that the industry would carry the S tate’s econom y forward.

A part from the oil and coal industries owned by the G overnm ent, other

industries w ere neither developed nor encouraged. O ther agricultural crops

such as coffee and rubber were not encouraged. U ncultivated land was

handed over to private parties, unem ployed youth and anyone w ho wanted

to invest in the tea industry. The m otto was: ‘th e m ore the production, the

m ore the profits’. To sum m arise; tea was the goose tha t laid the golden egg

fo r the State o f Assam .

It is the sam e in Bengal. In North Bengal, tea is the only industry. No

other industry has developed there. The industry em ploys approxim ately

100000 perm anent w orkers and around tw ice the num ber o f seasonal

workers directly. Additionally, around 400000 people depend indirectly on

the industry today.

Darjeeling teas need no introduction. A t one tim e Darjeeling teas

were fam ous and sought after all over the w orld. Infact, the com m on man
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could not afford Darjeeling teas, as export dem ands w ere so high that

com ing across pure Darjeeling teas in the dom estic retail m arket was

considered a piece o f good luck.

T oady in North Bengal, 14 o f 153 gardens have shut down in the

Dooars district. W orkers do not get their w ages and rations on tim e, and

C om panies have defaulted in making statutory paym ents o f PF and the

8.33 percent m inim um bonus. This is not the case with ju s t the small or

proprietorship gardens, but even with such world leaders in the tea industry

such as Duncan Industries Limited and G oodricke. In Darjeeling, during the

non-productive period, which is 5 - 6 m onths in a year, the workers work

only 3 days a w eek and get their w ages for this period only. This is a cost

saving exercise agreed upon between the w orkers and the garden

m anagem ents. This is a significant achievem ent given the fa ct that the

Unions in this area are very strong and largely violent. The fact that such a

m ilitant Union has agreed to such drastic cuts in the w ages goes to show

the depth o f the problem . Survival is the w atchw ord today in Darjeeling and

the Dooars fo r both the m anagem ents and w orkers.

In m ost tea gardens in the Dooars district, w orkers do not get their

wages in tim e. Rations have not been given to them fo r alm ost a year now,

and yet the w orkers continue to work. Here also the CITU led Unions are

very tough and militant. V iolence against the m anagem ents is

com m onplace in the gardens of Dooars. This goes to show the desperate

state o f affairs in the plantations in this area o f North Bengal.

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The situation in Assam is slightly better off in the Brahmaputra

valley, but in the Cachar and Silchar districts the situation is tense. Quite a

few gardens have shut down. Work has come to a standstill. Ration, bonus,

and other related statutory requirements have not been paid in some

gardens while in others they are irregular. In the Brahmaputra valley, some

gardens have closed down while some are irregular in payment of wages

and disbursement of rations. Quite a few gardens have been declared as

sick units, the most prominent among them being the gardens belonging to

the Government owned Assam Tea Corporation Limited (A TC L ) and the

Tea Trading Corporation of India (T T C I). Today, most tea Companies are

running at a loss. During 2003, the bonus payment became a big issue,

with leading Companies like Hindustan Lever Limited, Tata Tea and other

leaders declaring their inability to pay 20 percent bonus to their workers.

Very tense moments passed during this period with violence erupting in

several gardens and around 4 gardens in the valley declared lockouts due

to violence against managements by the workers. Several people lost their

lives and in some places the Army and Paramilitary Forces had to be called

in to control the situation.

3.4.2 CAUSES FOR THE FALL IN PRICES IN THE TEA MARKET

The main causes for the fall in prices of Indian teas in the world

market is as follows:

i) Overproduction leading to excess supply over demand,

ii) Reduction in exports volumes,
iii) Competition from cheaper teas from other countries
and bought leaf factories,
 121

iv) Changing lifestyles of the Indian public,

v) High cost of production of Indian teas,
vi) The Tea Marketing Control Order
i) Overproduction leading to excess supply over demand

With the change in the economic policy of the country and the tax

sops given by the Government to States and investors to get the country on

to the road of industrialization and development, tax holidays were granted

to any new industry or factory that came up in Assam. This has led to

several tea factories being set up - the bought leaf factories. Usually tea

factories are set up in gardens where the raw material comes from the

plantations and is processed in the factory. The same person or Company

owns both the plantation and the factory. Bought leaf factories however do

not have their own source of raw material. They buy leaf from the small tea

growers who do not have their own factory for processing their leaf. The

bought leaf factories then process the leaf and sell the finished product

under their own brand name.

There are around 120 such units registered in Assam and new ones

are coming up every year. This has added to the country’s production, but

domestic consumption has not increased proportionately. Added to this is

the fact that teas from Sri Lanka and Kenya are selling at Guwahati at

Rs.60.00 per kg. (Jiba Prakash Kurmi, Dainik Janambhumi, dated

17/09/2002, p-6. 'Cha Silpar Nirapattar Prasna PrsangaV), while teas

produced in Assam itself sells at Rs.90.00 - 150.00 per kg. Exports have

also fallen due to competition from countries like Sri Lanka, China and
 122

Kenya, which produce tea at much lower costs. Thus the surplus in the

market has made it a buyers’ market thereby compelling prices to fall,

il) Reduction in exports volumes

Reduction in exports is one of the major causes for the price slump

of Indian teas in the world market. There are many reasons for this, the

prime one being the availability of cheaper quality teas from countries like

China, Vietnam, Sri Lanka and Kenya.

These countries produce the same quality teas at cheaper rates

because they do not have high social and welfare costs. In these countries,

the labour costs are low, as they do not maintain large workforces as in

Indian gardens. The plantation labourers in these countries are not

resident, and gardens are not responsible for their welfare. Hence, the

wage related cost of welfare measures is not borne by the gardens. In

Assam, these expenses account for almost 60 to 70 percent of the cost of

production.

In addition, when Assam tea was riding high and there were buyers

for almost all quality of teas, the producers sacrificed quality and went in for

high volumes of production. The teas from competing countries hence

overtook the demand for Assam teas. Valuable customers were lost.

Also, Russia was a huge market. After the breakdown of the

Russian Union, the economies of the small countries that emerged were

not strong and hence their economies suffered. The quantum of teas

bought by these countries reduced, reducing demand and increasing the

availability of Assam teas in the international market, leading to a fall in its

 123

demand and prices. So also, the war in Iraq has devastated its economy.

This has led to a reduction in the Iraqis’ buying of Assam teas. These

factors cascaded into a chain reaction with teas from India and especially

Assam being readily available in the markets with fewer buyers. This has

led to a drastic reduction in export sales, increasing the availability of teas

in the domestic markets and bringing prices down.

iii) Competition from cheaper teas from other countries and

bought leaf factories

As mentioned above, teas from Sri Lanka and Vietnam are selling in

India at Rs.40.00 to Rs. 60.00 per kg. while the average cost of production

of Assam teas is 63.00 rupees. The customers’ choice therefore is the

cheaper teas with the same quality. Teas from the African continent sell in

India at Rs.35.00 to 65.00 per kg.

The mushrooming of bought leaf factories in all tea-growing areas

has added to the production. The fact that these factories do not employ

permanent workforces means that they do not incur labour related welfare

costs. Additionally, these factories enjoy the benefits of the changes in

India’s Economic Policies and avail tax holidays. These factors reduce their

costs and enabling them to sell their teas at lower rates and make profits.

iv) Changing lifestyles of the Indian public

There was a time when if a family ventured out for an outing, they

always had a cup of tea at a teashop. Today, the same persons do not

drink tea, but enjoy soft drinks. This has led to a decline in the domestic

consumption of tea as compared to the increasing population of the

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country. The reduction in consumption and increase in production has led

to a build up of stocks in the markets and a dip in the prices.

Today, under the leadership of the Tea Board of India, tea is being

advertised as a 100 percent natural health drink, and is exploring new

countries for exports of tea.

Such steps, if successful, will improve the prices of teas that are sold

in the auctions.

v) High cost of production of Indian teas

As mentioned earlier, Indian teas are costlier than teas from other

countries. The reason for this is the workers’ wages and the wage related

benefits. This adds to the price of the produce. As mentioned earlier, teas

from Sri Lanka, Vietnam and Kenya sell at lower prices in the Indian market

and still make profits. Indian teas are costlier at an average price of

Rs.63.00 per kg. Consumers logically opt for the imported teas causing a

fall in the tea prices.

It was recommended by the Parliamentary Standing Committee that

the Central and State Governments and the Industry share the social cost

that is presently borne by the tea industry alone. The Committee had

pegged the social costs of labour at Rs. 592 crores. The social cost in the

North Indian tea industry was estimated at Rs. 459.97 crores, which is

about Rs. 7.17 per kg. of tea, and in the South this was estimated to be Rs.

132 crores, or Rs. 3.96 per kg. of tea. These social costs include medical

benefits, housing, education, fuel, drinking water, childcare and creches,

sanitation, roads and highly subsidised rations for workers.

 125

The Committee had suggested that 40 percent of the social costs be

borne by the Central Government, 10 percent by the State Governments

and 50 percent by the industry. However, it has been mentioned in the

Business section of The Telegraph dated 22 December 2003 that the

Finance Minister, Sri Jaswant Singh has rejected the tea industry’s

proposal for the provision of Rs. 150 crores by the Central Government to

take care of the social costs. This is a major setback for the domestic tea

industry.

vi) The Tea marketing Control Order (TMCO)

During the early and mid seventies, the Indian tea industries faced a

severe recession for a period of around 7 years. Even though production

was high, prices were very low. The Government, in an attempt to control

the prices of tea enacted the Tea Marketing Control Order (TMCO) in 1984.

This was modified in January 2003 to arrest any further decline of prices in

the auctions and to assure that the prices in the auctions get reflected in

the retail prices in the market.

In the auctions, manufacturers do not auction their produce directly.

Brokers do this on behalf of the manufacturers. Teas are sent from the

factories to warehouses and Brokers representing the manufacturers take

samples of these teas from the warehouses, value them as per their quality

and current market trend and then put them up for auction based on the

value and demand. Representatives of the manufacturers do take a part in

the auctions in the sense that they may be present there and can decide

whether or not they wish to actually sell the teas at the rates at which they
 126

are valued or bid for. Until the TMCO was amended, the Broker could hold

up the auction of any lot of teas and keep them for sale through private

buyers or to put them up for sale at a later date. This meant that a poor

quality tea could be held back and put up for sale at a time when the

auctions prices were higher, thus fetching better prices. This also meant

that with brokers holding teas for sale later, the offering in the auctions

were smaller. Thus with lesser teas on sale, prices obviously went up. The

amendment of the TMCO was that once the brokers received teas at the

warehouses, they were bound to put them up for sale at the auctions within

a period of three weeks. This meant that during peak periods there was an

excess of teas in the auctions. The demand being lower than the quantity

on sale meant that prices dipped. In addition, a lot of teas went unsold

meaning that these came back on offer after three weeks at the latest

thereby further increasing the quantum on sale, further bringing the prices

down. In such a situation it is the buyer who gains the most, as retail prices

do not reflect the dip in the auction prices.

3.4.3 EFFECTS OF TEA PRICE FALL

I) Effects of the fall in prices on the tea industry

Tea is one of the top industries of Assam and the State’s economy is

heavily dependent on it. During the 1970s, when the tea industry was

facing a financial problem, the Government took over 12 sick gardens, and

The Assam Tea Corporation came into being, a fully Government owned

Company. Today, these gardens are bankrupt and the workers do not

receive even their regular wages and rations. Some of the gardens have
 127

stopped production. The workers pluck and sell the leaves to outside

buyers and make a living. In some Gardens, the management has even

given up their right to manage and 14 Gardens in Dooars have stopped

operations due to financial crisis. If the crisis during the 2003 bonus period

is taken as an indication, it is quite evident that over 90 percent of the

gardens in the state are faced with financial insecurity with some even

unable to pay the minimum rate of bonus at 8.33 percent. Even financially

sound tea companies such as Hindustan Lever Limited, Tata Tea, Warren

Tea Limited, Assam Company, Eveready Industries, McLeod Russell and

the Dhunseri Group, the top tea producing Companies who have always

registered huge profits, have been unable to pay 8.33 percent bonus and

12.67 percent ex-gratia, i.e.: a total of 20 percent bonus, to their workers for

the financial year 2002 - 2003. This shows a reduction in earnings by these

Companies. In some cases huge losses have been incurred.

The reduced earnings or losses incurred by the gardens have a

deep impact on the entire industry and the State as revenue earnings fall.

An example of the loss in taxes collected by the Assam Government is

given below:

Table 3.5 - Agricultural income tax earned by the Assam Government

from the tea industry for the period 1998 to 2003

Fiscal Year 1998- 1999- 2000- 2001 - 2002-

1999 2000 2001 2002 2003
Agricultural
income tax
103.26 75.84 40.70 15.49 4.26

(Source: Guwahati Tea Auction Centre. (All figures in Rs. Crores)

 128

Since the State’s earnings reduce, to make up the budget deficits,

the Government levies taxes on other items thereby causing price increase

of other goods in the market.

As per the Assam Plantation Labour Act, the garden management is

responsible for the welfare of the workers and their dependents that reside

on the gardens. Reduced profitability leads to drastic cuts in the welfare

measures that need to be done. This can lead to disgruntlement among the

workers, increasing the chances of a breakdown in industrial relations and

increasing violence against the managements. This is a matter of grave

concern since the population of tea tribes in the State is so large that any

mass scale violence will be very difficult to control. Continued downslide in

earnings will lead to further cuts in welfare measures and in some cases

even the inability of meeting statutory requirements such as wages, rations,

housing and such like. This could lead to law and order problems not just

for the industry but also for the entire State.

The tea industry is the largest employer in the state employing more

than 4,00,000 workers in addition to almost an equal number of seasonal

workers. Reduced earnings and continued losses will lead to laying off of

workers resulting in mass unemployment. This will lead to increased crime

rates both on the gardens as also in neighbouring rural and urban areas.

Unemployment will increase in the clerical cadre also. The educated youth

of the gardens and nearby areas who usually work as mohurers and clerks

on the gardens will have this avenue of employment closed to them This
 129

may lead to some of them joining with extremist organizations further

aggravating the already burgeoning problem of extremism in the State.

The tea industry has given birth to ancillary industries. These in turn

employ thousands of people. These industries also suffer as the

purchasing power of the gardens is reduced. They in turn lay off employees

leading to further unemployment and disgruntiement.

From the above we see that the fall in tea prices has led to reduced

profits and even losses in the industry. This is leading to dissatisfaction

amongst the workers in the gardens, their neighbours and finally the state.

. Another effect of falling prices leading to either dwindling profits or

spiralling losses is that reputed business houses will exit the business. The

gardens will be taken over by unscrupulous moneyed businessmen who

may exploit both the workers and the industry’s resources. This may lead to

further reduction of revenue earnings for the State, illegal outflow of money

from the State, reduction in investments by business houses in the State,

poor maintenance of the Gardens, increased labour unrest, apart from

increased unemployment of local youth, and closing down of ancillary

industries.

ii) Effects of price fail on the workers

W e have mentioned time and again that the tea is a very labour

intensive industry and that the workers are the main assets of any garden.

There are tea factories that are very much modernized and automated and

they employ a bare minimum number of workers. However, there are very

few mechanical devices that take care of the activities in the field such as
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plucking, hoeing, cheeling and pruning. The tea plantation worker is thus

indispensable.

Like all industries, the fortunes of the garden workers depend on the

fortunes of the industry. The slump in tea prices in the auctions that has led

to the present financial crisis in the industry has affected the workers the

most. They have been the first to bear the brunt of all pressures on the

gardens to increase profitability.

Wage and wage related benefits constitute approximately 60 - 70

percent of the cost of production. It is hence expected that during any crisis

such as the present financial crisis this is reduced as far as possible.

Employment of workers has been cut down so as to reduce the

wage bills. This has led to unemployment. Families dependent on these

laid off workers suffer untold misery.

in some gardens, such as Chandmari Tea Garden near Tinsukia,

the management has shut down operations due to the huge losses. This

has led to workers being laid off and having to go without pay for months

on end. Subsidised rations, firewood compensation, bonus and other perks

and benefits have been stopped. The workers of such gardens, deprived of

their basic dues, suffer even for want of their daily food.

In other gardens even though unemployment has risen, workers

continue to receive their basic dues as per Law. In some cases, Banks

have stopped financing gardens as the credit of these gardens have run

into crores of rupees with the gardens unable to pay back their loans. The
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Board o f Financial Rehabilitation (B IF R ) has declared so m e ga rd e n s as

sick units.

T h e re are ca se s of irregular paym ent of w a g e s and disbursem ent of

rations and bo n u s. E m p lo ye rs have not m ade P ro vid e n t Fun d deposits in

som e ca se s. G ra tu ity and pension paym ents are pe nding. From the field

s u rve y d o n e fo r this stu d y it is se e n that v e ry fe w w o rk e rs maintain Bank

accounts. T h e y keep all their sa vin gs in their hom es, in po st offices, with

the ration sh o p s and m oneylenders. T h e ir sa vin g s are v e ry little. W e also

found that the w o rk e rs are v e ry m uch d e p e n d e n t on the ir su bsidised

rations. Infact, m any h o use holds depend on this ration fo r their food during

the w eek. D e la ys in paym ent of w a g e s and d isb urse m en t o f rations thus

com pel the w o rkers to either to go w ithout their full m eals or to take loans

from un scru p u lo u s m o neylenders and further get into debt.

H e n ce w e s e e that the present crisis in the in d u stry has hit the

w o rker the m ost. It has led to increased unem ploym ent am ong the w orkers,

reduction in w a g e s b y w a y of reduced overtim e and ‘ticca ’ ea rn in gs and

reduction in fam ily earnings due to th e se re a so n s. Irregular paym ent of

w a g e s has led to increasing debts and in som e ca se s reduction in food

intake b y fam ilies.

A s the m anagem ents do not do ca rry out repairs to the labourers'

h o u se s and co lon ies due to paucity of funds, problem s o f drinking w ater

and sanitation facilities have com e up leading to incre ased illn esses and

dise ase s. T h e healths of w o rkers also suffer as the w orkload o f those

em ployed is increased due to layoffs to in cre a se productivity and

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profitability. A ls o , as the earnings of ga rd e n s are poor, costlier m edicines

have been replaced b y ch e a p e r substitutes leading to deteriorating health

care facilities. R o a d s and drains are not repaired leading to increased

problem s of com m unication to their w orksites, hospitals and cre ch es.

A ll th e se h a ve created industrial relations problem s and in som e

ca se s law and o rd e r problem s as well. T e m p e rs are frayed and indiscipline

am ong the w o rkers is on the rise,

iii) E ffe c t o f p ric e fa ll o n w o m e n w o rk e rs

W o m en w o rkers are the backbone o f the tea industry. T h e y

constitute alm ost 50 percent of the w o rkforce contributing e q ually to the

household as m en. Infact, in som e ho use h o ld s th e y are the main

breadw inners. A p a rt from working in the plantations alongside m en, they do

the ho usehold ch o re s also.

T h e tea garde n w o rk er com m unity is a patriarchal so cie ty. It is also a

male dom inated so cie ty w herein wife beating and v io le n ce on w om en is not

uncom m on. A lco h o l a b u se am ong men is ram pant and the w om en o f the

fam ily b e a r the brunt o f the m ale m em bers’ anger.

E v e n though the m anagem ent prefer w om en to m en, there are

certain jo b s that cannot be do ne b y w om en and in su ch ca s e s m en are

given pre fe rence. H e n ce the num ber of w om en e m ployed has also been

reduced. T h e w om en that have been laid off have to b e ar the brunt of their

m ale fam ily m em bers’ a n g e r and frustrations. E v e n th o se w h o gain

em ploym ent are not alw ays spared.

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In cases where the male member of the household is unemployed,

the woman bears the brunt of his frustrations. The scenario is worse if the

woman is also unemployed.

There are cases where women have been killed or hospitalised due

to domestic violence. Divorce is also on the rise. In some Gardens nearer

the towns the women go to the towns to work as domestic servants. Their

lack of education does not enable them to get any better jobs. Also, their

lack of skill or knowledge of any other work hinders them in getting better

jobs.

In some cases, women have even taken to prostitution, thus

exposing themselves and the tea community to the evils and hazards of the

world outside the sheltered Gardens, apart from increasing domestic

dissatisfaction at home.

It can thus be concluded that it is the women who are the worst

sufferers due to today’s crisis in the tea industry.

3.4.4 REMEDIAL MEASURES TO BE TAKEN

All have recognized the importance of the tea industry as an industry

of importance to the nation. The present crisis faced by the industry is a

matter of concern for all and the Government has also come forward to bail

out the industry. The Government has given some sops to the industry. In

the 2003 - 2004 budget the Government has changed the Basic Excise

Duty of Re. 1.00 payable per kg. tea to Additional Excise Duty. However,

the cess of Rs. 0.30 payable per kg. to the State Government remains. The
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revenue collection from this Additional Excise Duty goes not to the Central

Government, but for the development of the industry. (Budget 2003 - 2004)

The Parliamentary Standing Committee attached to the Union

Commerce Ministry in its 64th report on ‘Export of Tea’ has supported the

small tea growers demand for interest holiday on their Bank loans, making

it compulsory for the Tea Board to accept the list of members provided by

the All Assam Small Tea Growers' Association (AASTGA), disburse loans

to them, fix price subsidy and a minimum support price. This will help the

small growers better their profitability.

Tea producers sell teas through the auctions and also directly to

buyers. It is the auctions that play a major role, selling approximately 85

percent of the teas produced in India. However, in 2002 - 2003, only 29

percent of the teas produced in Assam were auctioned through the GTAC.

Of the rest, 20 percent was auctioned at Kolkata, 15 percent went out as

exports and packet teas, and the remaining 36 percent went out of the

State as Stock transfer. (Dr. Jayanta Madhab)

The amendment of the TMCO that was done in January 2003

regarding the sale of teas in the auctions so as to avoid flooding the market

with teas thereby bringing prices down should be re-looked into. The

Brokers, who had been regulating the flow of teas into the market so as to

gain the maximum possible value for their clients may be consulted for this

and the wealth of experience available with them may be utilized so as to

improve the average auction prices.

 135

In the auctions, teas are sold to registered bulk buyers. These large

bulk buyers sell these teas to smaller wholesalers who in turn release the

teas in the retail market. Some buyers have their own brands. After

purchasing teas from the auctions they blend different quality teas and after

packeting, release teas to the retailers. Since producers are receiving low

prices and consumers pay high prices, it is clearly seen that it is the

middlemen who are the gainers. The Government should enact Laws

against such practices and fix a minimum procurement price as in the case

of some commodities such as rice, wheat and sugar.

One of the reasons for the present crisis is the oversupply of tea in

the market. Th e production of tea should be regularized by regularizing the

rapidly growing small tea grower community as it is a very unorganised

section of producers, and there is no accurate record of the actual quantum

of land that is under these smallholdings. This will enable to regularize tea

production as per market demand.

The Parliamentary Standing Committee has recommended that the

Tea Board should persuade Government bodies to purchase teas through

public auction as well as the Public Distribution System. This will help fix a

minimum price for the commodity.

The Parliamentary Standing Committee has also recommended that

tax concessions be given to the industry for the next three years. It has

recommended that the sales tax rate should be brought down to 4 percent.

This will help the industry, but then it will also mean that the State’s

revenue earnings will also suffers due to the lower tax collections.
 136

The tea industry hosts a large number of resident populations whose

welfare is the responsibility of the management. The Parliamentary

Standing Committee has recommended that the Government take on some

of the cost burden of these social responsibilities. The cost of labour

welfare, which is the wage related benefits that counts for almost 60 to 70

percent of the cost per kg, will help reduce the cost of production. In this

regard, the Finance Minister’s rejection of the proposal of the Standing

Committee’s proposal for provision of Rs. 150 crores to take care of 40

percent of the social costs may be reconsidered so as to provide a respite

to the industry during the present crisis.

Tea plantations have huge resident population that is increasing day

by day. Since literacy levels are low, they do not get any gainful

employment outside the garden. They thus depend on the garden for jobs

and even if not employed, make full use of the gardens’ housing and other

infrastructure facilities. Moves to have them vacate Company owned

property have proved futile in the past and in some cases have even led to

violence against the management by the tea workers. In most cases the

Government and local administrations have always stood by as mute

spectators. Vacating such illegal occupation will help reduce expenses and

hence costs.

The subsidised rations that are issued to the workers are a direct

loss to the Companies. The price of subsidised rations when bought by the

Companies and added to it the milling and transportation costs add up to

an average of Rs.9.26 per kilogram of rice and Rs.8.23 per kilogram of

 137

flour. Companies in turn sell this to their workers at Rs,0.54 per kg. The

loss on this is huge as a daily rated worker is entitled to 6.52 kgs. of rice

and flour each per month along with a related amount for their dependents

as is shown in previous chapters.

Such cost cutting measures will reduce the cost of production and

make Assam teas more price competitive to compete with the cheaper teas

from China, Indonesia, Vietnam, Sri Lanka and Kenya. Under such

circumstances the industry will stand a better chance to fight off

competition.

Cost cutting will not help if there is no market for teas. The tea

market will have to be developed for more demand. The tea market is

being eroded by coffee and soft drinks. Tea will have to compete with these

two commodities. To do this the Tea Board has taken up the task of

creating a market for tea in a big way in 2003. It has engaged top publicity

and advertising Companies worldwide to. publicize tea as a natural health

drink. The yet untapped American and East European markets are being

explored and the existing markets in the Middle East and Gulf countries are

being further explored. The expected demand for Indian teas will help bring

the industry back onto the path of profits.

For better market demand the quality of teas must improve. During

recent times, quality has taken a major battering especially due to the high

volumes and the need to cater to the existing low cost - low quality market

within the country.

 138

The European Union, Britain, America and other developed

countries have strict quality control norms on the pesticide and other

residue levels in agricultural products. Most companies are compliant with

this requirement, but it is the small tea growers and the bought leaf

factories that flout these norms. Some bought leaf factories produce poor

quality teas at low costs and market the same the in the low cost market.

Some small tea growers use chemicals and fertilizers that leave behind

high residue levels. These teas get rejected in the foreign markets thereby

tarnishing the image of the entire industry. This in turn brings down the

demand for Indian teas. To detect such cases the Government along with

the Tea Board will have to take the initiative and take strict action after

enactment of suitable Laws.

To overcome the adverse effect of chemical residues in tea and

hence face rejection by foreign buyers, the production of organic teas

should be encouraged.

The above are some remedial measures that can be taken to revive

the tea industry. Both the Central and State Governments will have to play

vital roles in this process of revival and a minimum time frame needs to be

fixed to ensure early implementation. Millions of people depend on the tea

industry and it is of utmost importance to ensure that the industry survives

these turbulent times and does not die out like the jute industry.

3.4.5 THE GUWAHATI TEA AUCTION CENTRE. (GTAC)

At one time the GTAC was the leading tea auction centre in the

world. As per the 1984 Tea Marketing Control Order, (TMCO), all gardens
 139

had to sell a minimum of 75 percent of their produce through the auctions.

However, when the TMCO was lifted in 2001 tea producers reduced their

offerings in the auction and preferred to sell their produce through private

buyers. The total volume of sales through the GTAC hence reduced,

reducing its earnings. This led to the centre to lose its position in the world

market. The expanding market for pilfered teas has added to the problems

of the GTAC. The Centre is alarmed at the arrival of lesser volumes of teas

from major tea manufacturers like Warren Tea, Assam Company, Assam

Frontier Group, Dhunseri Tea Industries and the Williamson Magor Group.

It was found that in spite of higher prices fetched at the GTAC during April

to July 2003, the period when quality tea varieties are sold, these

companies deliberately sent their best quality teas to Kolkata Tea Auction

while second grade teas were sent to the GTAC. The teas offered at the

GTAC is supported by the biggest buyer of the auctions, and this may be a

deliberate attempt to keep prices low at Guwahati against Kolkata the

auction. The best effort of the present Government to redress the

grievances of the industry will come to naught if these Companies do not

change their attitudes and strategies.

In Assam, the total production is approximately 450 m kg. of this,

only about 36 percent is sold through the GTAC. Table 3.6 shows the

quantities of tea sold through the GTAC.

Table 3.6 - Quantities o f tea sold through the GTAC, 199 9 - 2003
YEAR 1999-2000 2000 - 2001 2001 - 2002 2002-2003
Quantity sold
(Million kgs) 159 141 140 125
Average price
(Rs /kg)
88.54 68.80 68.68 61.31
(Source : The Guwahati Tea Auction Centre)
 140

The reduction in sales through the GTAC has also caused a loss to

the warehouses to the tune of almost Rs.70 crores. Additionally, this has

also left around a 1000 people unemployed. In South India, there are three

auction centres in Coimbatore, Coonoor and Cochin. Here approximately

200 m kgs of teas are sold. In West Bengal (Kolkata and Siliguri), 120 m

kgs are sold. In Sri Lanka, 86 percent of the teas produced are sold

through the auctions, 88 percent in Kenya and 98 percent in Bangladesh.

The Government charges Rs. 0.32 per kg of green leaf. During

1998-1999, the Assam Government collected Rs. 103.26 crores from

Agricultural Income tax. A lion’s share of this came from the tea industry.

During 1999 - 2000, the figure stood at Rs. 75.84 crores, 2000 - 2001 Rs.

40.70 crores, 2001 - 2002 Rs. 15.49 crores, and during 2002 - 2003, 4.26

crores.

At present, the AGST is 6.6 percent per kg of tea. Moreover, another

2 percent is charged per kg of tea traded through the GTAC as surcharge.

However, in the other tea Auction Centres in the country, this surcharge is

4 percent. This means that the GTAC should have had an edge over other

Auction Centres, with lesser surcharge (less by 2 percent), higher price

realization for the producers and equally good Information Technology (IT)

facilities. The preference of other Centres over the GTAC could be because

of less convenient communication (rail, road and air transportation), hotel,

banking, entertainment and relaxation facilities, as also the unfavourable

law and order situation with regular ‘bandhs’ and work disruption. Table 3.7
 141

shows the quantity and average prices of teas sold from the GTAC for

exports.

Table 3.7 - Q uantity o f tea through the GTAC and

prices realised from 1998 to 2004
Price
Season Q uantity (kgs)
(Rs/ kg)
1998 -1999 14869555.50 76.39
1999-2000 12188048.80 79.89
2000 - 2001 14768905.40 79.10
2001 - 2002 13276906.30 78.64
2002 - 2003 14169126.30 72.05
2003 - 2004 9566066.50 65.87
2004 - 2005 9378962.80 74.36
(Source: GTAC)

The figures in Table 3.7 support the above argument. We see from

the table that from 2003, there was a sharp decline in the quantum

exported, and the prices realised were also poor. This could be due to the

fact that high production volumes reduced the demand at the auctions.

Also, during 2002 - 2003, tea was imported to India for blending and re­

exports.

3.5 GROWTH OF SMALL TEA PLANTATIONS IN ASSAM

The concept of small tea growers began during the late seventies

when then Janata Party leader Sri G Borbora became the Chief Minister of

Assam and Sri Sonewsar Bora was Cabinet Minister of Agriculture and Co­

operatives. Sri Bora who took the initiative and encouraged the local youth

and marginal farmers to take up tea growing in small scales so as to

overcome the problem of unemployment and to utilize the large tracts of

 142

uncultivated land in the State. The Government of Assam supported the

view by removing constraints of loan availability thus improving the

Growers’ cash flow situation. Farmers of Golaghat, Jorhat, Sibsagar and

Dibrugarh Districts started cultivating tea in holdings ranging from 0.13

hectares to 3 hectares.

According to The Tea Board, a small tea grower (STG) is a person

whose land under cultivation does not exceed 75 bighas (10 hectares). The

Small Tea Growers Advisory Programme (STGAP), The Assam Agriculture

University and the NABARD have accepted this criterion. According to the

Government of Assam, a person can be considered a small tea grower only

if the area under cultivation does not exceed 30 bighas. However, the All

Assam Small Tea Growers Association (AASTGA) submitted a

memorandum to the Government of Assam in 1993 to increase the

cultivable land from 30 bighas to 250 bighas. This is yet to be approved.

When the AASTGA was formed under the active participation of Sri

Gangadhar Saikia, the present president of AASTGA in 1978, there were

only 21 of such holdings. In 1997, the number of registered small growers

grew by 38776, cultivating an area of 382805 bighas (out of a total

occupation of 543535 bighas) and engaging about 1.50 lakh workers and

5303 employees.

This small plantation sector provided self-employment to about 4000

educated youth and additional employment avenues to about 40000

agricultural workers and jobs to 1664 employees in 1992-93. Thus, these

small plantations provide income opportunities directly to about 1.80 lakh

 143

families in Assam. The total output of tea produced by the small plantation

sector by the turn of the 20th century stood at 45 million kgs which is

roughly about 10 percent of the total tea produced of the State.

Table 3.8 - Small Tea Growers of Assam registered with the Tea

Board of India, and registered areas up to 31st August 2002

Number of small Registered Area

District
tea growers (Ha)

Golaghat 266 800.68

Sibsagar 86 252.09
Dibrugarh 112 359.38
Tinsukia 99 367.53
Jorhat 90 186.08
Lakhimpur 13 58.73
Sonitpur 113 259.54
Dhemaji 1 8.95
Darrang 19 82.22
Kamrup 7 26.95
Cachar 20 94.50
Karbi Anglong 92 827.56
Nagaon 25 85.06
Morigaon 7 7.35
Kokrajhar 6 35.67
Nalbari 4 19.40
Barpeta 1 1.51
North Cachar Hills 1 4.68
Dhubri 1 1.04
Hailakandi 3 6.25
Goalpara 1 6.25
Karimganj 3 12.20
Bongagaon 3 19.86
Total 973 3523.5
(Source: Tea Board of India, regional Office, Guwahati)

3.5.1 IMPACT OF BOOM AND DEPRESSION IN THE SMALL TEA

PLANTATION SECTOR

Every industry goes through cycles of ups and downs. The tea

industry too faced its periods of booms and depressions. The overall
 144

impact of this is difficult to assess mainly due to the lack of adequate

reliable data. However, by comparing the total cost of production incurred

and the total revenue received by the small growers before and after the

tea boom / depression, the impact can be analysed indirectly. (G ogoi J K)

The price of green leaf during pre-boom period, that is prior to 1997

stood at about Rs. 7.00 per kg. If a small tea grower could produce 1800 kg

of green leaf per bigha, his total revenue stood at Rs. 12600.00 (i.e., 1800

kg per bigha @ Rs.7.00 per kg of green leaf). The total cost of production

per bigha of small tea cultivations is about 40 percent of the total revenue,

which means that the cost of production stood at Rs. 5040.00 per bigha.

Therefore the net profit per bigha stood at Rs 7560.00 (i.e., TR-TC =

Rs.12600 - Rs. 5040 = Rs. 7560.00) during the pre-boom period.

During the boom period of 1997-98, the price of green leaf increased

with every small tea grower receiving an average of Rs.12.00 per kg of

green leaf. Therefore, by following the same process of calculation and

assuming the price of green leaf to be Rs 12.00 per kg it is found that the

total revenue stood at Rs.21600.00 during 1997-98. Thus, the rate of

increase in profit per bigha of land from Rs.21600 during the boom period

shows an increase of 71 percent within two years.

The second important impact of the tea boom is the growth of small

tea factories in Upper Assam. These developments resulted in competition

among the new small factory owners and large-scale factory owners who

offer attractive prices for the green leaf produced by the small tea growers.

The third, impact of tea boom is also reflected in the mushroom growth of
 145

tea nurseries due to the high demand for tea seedlings. An investment of

Rs.1 lakh in a tea nursery covering an area of 3 bighas of land yielded an

average profit of Rs. 135500 approximately during the boom period.

3.5.2 PROBLEMS OF SMALL TEA GROWERS

i) Land
In Assam almost 60 percent of the land belongs to the Government.

Hence there is no ‘patta’ land as this land is the ceiling surplus land. On the

other hand, most of the small tea growers are either unemployed youth or

from the rural areas. They have taken this land and started cultivation of

tea. However, as this land is in the name of the Government and not the

grower, banks and other lending institutions such as NABARD and Tea

Board do no disburse any loans to such growers. Hence such growers

either take private loans at high interest rates in addition to making large

investments from their own resources, which, in most cases, means selling

off of the family jewellery. The same is with the growers who utilize their

family property. As the land cultivated by them is usually registered in the

name of their family members or are joint holdings, loans from Government

sources at lower interest rates cannot be availed by them.

According to Sri H K Gohain, General Secretary, AASTGA, the State

Government, in the 1998 Land Policy had agreed to look into distributing

the ceiling surplus land to these growers, making it possible to register the

land in their own names. However, the Government has taken no positive

steps in this direction till date. In Tinsukia district there are no small tea

growers who grow land on ‘miyadi’ land.

 146

ii) Technology
The small tea growers have limited resources at their disposal due

to the handicaps of high interest rates and low price realization. This has

limited the access of small tea growers to the latest in economic technology

for low cost and high yielding products. However, Companies such as Tata

Tea, HLL and Warrens extend their full support to the small tea growers

with whom they do business, by extending their technical resources to

them. Infact, in 2003, Warrens dedicated one of their middle level

executives to look after the plantations of the small tea growers from whom

they are buying leaf and offer technological and other advise to them. Tata

and HLL offer a similar service of having a dedicated executive for the

small tea growers. They have also dedicated executives to offer help and

advise to the bought leaf factories from which they buy teas.

Such help and support has helped the small tea growers and the

bought leaf factory owners to improve productivity and quality.

iii) Marketing

The cultivation and production of tea is a time bound operation. To

get good quality tea leaves, one has to pluck the leaves at strict plucking

intervals, known as ‘plucking round’. Leaves of any tree or bush are highly

perishable. So also are tea leaves. This means that once the tea leaves are

plucked, the small tea growers have to manufacture the leaves within a

maximum time limit of 12 - 16 hours, after which the leaves begin to rot.

Since the small tea growers do not have their own production facility, they

sell their produce to the nearest factory. This limits the producers’ choice of

markets, and the factories, belonging mainly to large Companies, take

 14 ?

advantage of this and dictate prices as per their wishes. Till date the

Government and Tea Board have not fixed the minimum rates for tea

leaves. This is one of the longstanding demands of the small tea growers.

However, it is very much doubtful if this demand will ever be met as in the

global economy that tea competes in with other countries, the Government

cannot fix a minimum selling price for the final product. Hence, the powerful

tea lobby in the Government circles will never agree to such a price

fixation. However, it is a fact that large Companies like Tata Tea, HLL, and

other major players in the Assam tea market fix the price of green leaf only

after considering market conditions.

Since 1999, the price of tea in the international and domestic

markets is gradually declining due to various reasons as discussed earlier

in this chapter. Hence the procurement price of the tea leaves is also

declining. This means that the small tea growers have to sell their produce

at cheaper rates. This, coupled with the ever-bludgeoning wage bills, high

cost of fertilizers and chemicals and other inputs, the small tea growers’

cost of production is also increasing. This has reduced the profitability of

the small tea plantations, which are generally less than 250 acres in size. In

Golaghat district where land yields are low the cost of production is

approximately Rs. 7.50 to Rs. 8.24, the selling price since August 2003 has

been Rs. 6.00. In Tinsukia and Dibrugarh districts, the average price of

green leaf is Rs.6.50 while the cost of production of the small tea growers

is around Rs.5.50, This is a hand to mouth existence. Sri H K Gohain,

General Secretary of the AASTGA, has said that this price decline is a ploy
 148

by the multinational HLL to marginalize the small tea growers by creating a

glut in the tea prices. He has said that the small tea growers are not

contributing to the decline in the quality of teas as this Company also

purchases tea from small bought leaf tea factories. He has even gone to

the extent of calling for a ban on all HLL products in the market.

To capitalize on the ready availability of raw materials, some

businessmen have started small factories, commonly called ‘bought leaf

factories’. These factories buy the leaves from the small tea growers and

sell the tea under their own brand name after manufacture. This has

increased the market scope of the small growers, but is yet to bring about

any change in the prices of tea leaves. This can be attributed to the glut in

the prices of tea in the markets as also the fact that private owners will

naturally be interested to make the maximum profits from their factories.

Some small tea growers have set up cooperative factories under the aegis

of the ‘Small Tea Growers Development Cooperative Society’ after June

1999 and are marketing the product in the open market under the brand

name of ‘Ladoi Tea’. Another factory is proposed to be set up soon in

Lahoal in Dibrugarh district.

It has to be agreed that with the mushrooming numbers of small tea

growers and around 120 bought leaf factories, the State’s, tea production

has increased. This production increase has contributed to the fall in the

prices of tea in the auction and open markets. This has been further

aggravated by the fact that most of the bought leaf factories sell their

produce in the open market and not through the auctions. This has had a
 149

negative contribution to the tea prices as quite a few factories sell their

produce at lower rates due to the need for money and / or quick profits,

th is has contributed to the lowering of prices of green leaf,

iv) Global Econom y Policies

Today India follows a new economy policy that has done away with

subsidies and Governmental interference in the market. This is in keeping

with the global economic policy. Under these guidelines, the Government

will not make any price fixation of teas. It follows that the minimum price of

tea leaves will not be fixed. The small tea growers will hence have to

compete in the open market. It takes 4.5 - 5 kgs. of green leaf to

manufacture 1 kg of tea. Thus the price of green leaf will always depend on

the price of the teas sold in the market. It is therefore quite safe to surmise

that Government help by way of doling out subsidies or fixing minimum

procurement prices will not materialize.

In addition, the Government has also approved direct foreign

investment in plantations. This means that big business houses from other

countries have an opportunity to acquire full ownership of the plantations,

leaving the small tea growers open to the threat of takeovers. They will be

at the mercy of these big players who may pose a threat to their existence.

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 150
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