It’s been roughly two and a half years since I’ve moved back from Singapore to Assam. From one of the fastest moving countries to a state which still prides itself in getting things done in its own laid-back sweet time. From a global hub to a state which many Indians would still fail to locate in its map or name its capital. From a capital of multinationals to a state which is just opening itself to the rest of the country. From a job that entailed analyzing and presenting numbers to a job that entails managing the field, factory and administrative operations along with sales. From a job behind the laptop screen to a job involving the lives of over four thousand people, tractors, machines and a product without which its difficult to start the day. From the worlds premier concrete jungle to the vast open lands and actual jungles of Assam. All this for the love of the country side, for the love of manufacturing and for the love of tea.
I was born to a family which has its roots deeply planted in Assam and in tea since the 1930’s. While I was brought up in Calcutta and went to Singapore for my higher education and work experience, I am now back, based out of the tea estate which was planted by my great grand father in the 1930s. Living at the tea estate itself, managing people and work at the ground level has given me a firm foundation, exposed me to the ground realities and has provided me with a greater understanding of this industry’s current standing and what its future might look like.
The tea industry has long been associated with its British colonial past, a culture of aristocracy and an air of superiority – all of which I feel has changed over the last few years and will continue to do so even more dramatically in the next coming years. We are at an important juncture for the tea industry where if few important decisions are not made by both the government and the industry, it will mark the beginning of the end for this industry much like that of the Jute industry in India.
It’s a pretty dull and gloomy atmosphere in most of the tea estates in today’s scenario. The most prestigious of the tea estates in Assam have recently declared bankruptcy, many are on sale and most of the others are facing operating losses on an everyday basis. With an increase in production cost and a stagnant selling price, losses are but natural. The average cost of production continues to exceed the average auction selling price. To further put things in perspective, while the price of a staple product like rice has increased from Rs. 0.20 to Rs. 24/kg a 120 times jump from a period of 1954 to 2018, the average price per kg of tea has increased from Rs. 7 to Rs. 140/kg, reflecting only a 20 times jump for the same period. Continuous losses over the past couple of years have also meant that there has been a lack of developmental activity at the field, factory and social welfare level which has further dwindled yields, productivity, quality of tea and motivation amongst the workers, hence putting the entire system into a vicious cycle. To add to the current woes of the industry, the minimum wage for the workers is slated to increase by more than 40% for the current calendar year, thereby threatening to further widen the difference between production cost and selling price.
The obvious question now arises is that how can an industry be facing a higher production cost continuously in an open economy where natural forces of demand and supply are in play. While there are a few reasons for this, the main reason lies in the fact that there is an uneven playing field with the industry being divided into the unorganized and the organized sector. The unorganized sector comprises of the Small Tea Growers (STGs) who are not included in the ambit of the Plantation Labor Act, while the organized sector comprises of all the tea estates who fall under the purview of the Plantation Labor Act and have a binding obligation in terms of wages, benefits and statutory requirements towards the workers. Bought Leaf Factories (BLFs) purchase leaf from STGs which they manufacture and sell in the open market whereas most of the tea estates from the organized sector manufacture tea using leaf from within their plantations. While in 1999, the unorganized sector comprised of only 4% of the industry, it currently officially stands at 44%. This rampant growth of the unorganized sector means that it can no longer be ignored, as what used to be a negligible contributor to the industry is now comprising close to half of the total industry’s production.
In the current scenario, BLFs and STGs form bilateral agreements to fix prices of green leaf keeping the benchmark price of the green leaf set by the Tea Board as the base. The STGs are forced into selling their leaf at low prices as there is no formal structure or mechanism for the green leaf sale. The minimum benchmark price remains low and moreover cannot be formally enforced. The plucked green leaf being perishable has to be sold the same day as its plucked and cannot be stored. Selling of green leaf at low prices forces STGs to pay a much lowered wage and bonus amount to their workers as compared to the organized industry norms. The low green leaf price ensures that the BLFs have a much lower cost of production as compared to the organized sector thereby enabling them to sell the teas at a much lower price in the open market. As they comprise of a substantial 44% of the industry’s production, they are able to drive the prices of tea down in the open market where large MNCs and other companies procure teas for blending, packing and selling in retail, wholesale or export markets. With an advent of consumerism and rise in number of brands selling tea, there is major competition among tea brands to capture the market by competing on price and offering discounts. This forces them to reduce their purchasing price of tea. With the BLFs willing to sell cheap, the overall tea market gets pushed down and the average selling price remains suppressed. Thus, till there is an uneven playing field between the organized and the unorganized sector, there is little scope for increase in the average selling price of tea and there will continue to be a rise in growth of the unorganized sector and a subsequent fall of the organized sector.
Issues at the tea estates however, are not just limited to an uneven playing field between the organized and the unorganized sectors. Much of the issues faced by the tea estates today are also due to its archaic management style, climatic changes and a rapid population growth within the tea estates. The tea estates have largely followed a bureaucratic and hierarchical form of management where there are many layers between the worker and the top management. Historically, it has been a top-down approach where instructions are passed from the top management through its subsequent layers to the end worker. This has lead to an inefficient and non-transparent system in an agricultural practice which is labor intensive resulting in opportunities for corruption and mismanagement. Recent changes in the climatic conditions has also affected the industry in terms of water logging, breeding of new pests and un-familiar plant diseases which have caused drop in yields, productivity and quality of tea produced. One of the other main issues faced by the tea industry, which often gets ignored and not talked about, is that of a fast growing aspirational young population within the tea estates. In todays time, with relatively easier access to television, internet and education, the younger generation at the tea estates are seeking better and more lucrative opportunities than that of a daily rated worker. They are either migrating out of the estates to towns and cities or are remaining unemployed or under-employed within the tea estates. The tea estates are under pressure to provide proper housing, schooling and medical facilities along with adequate job opportunities to this growing population. It has also meant that the tea estates are now getting devoid of skilled field or factory workers who were earlier learning on the job from an early age under the guidance and tutelage of their elders.
While there are issues that persist within the industry pertaining to both internal and external factors, it cannot be ignored that this industry is a vital part of India’s economy. It is India’s second largest employer after the Indian Railways amongst the organized industries and more than 50% of the employed are women. The organized tea sector houses all its permanent workers, provides them with free primary schooling and medical facilities along with ration and other fringe benefits like firewood, dry tea and protective materials. This is over and above the statutory requirements such as provident funds, gratuity and an annual 20% bonus. The industry unfortunately is now on a downward spiral and will soon cease to exist in the current form as we know it unless remedial measures are taken to revive it.
The way forward for the industry will have to involve a participation from all its stakeholders, that is, the producers, the trade unions representing the workers, the government and the bulk buyers. The industry and the government first must recognize and accept the fact that the STGs are here to stay and are an integral part of the industry. They must be represented and involved in all negotiations and discussions pertaining to the industry. A conscious effort needs to be made to ensure that there is a level playing field between the unorganized and the organized sectors within the tea industry. Cultivating tea is an agricultural practice and like other agricultural produce and cash crops, green leaf should have a minimum selling price enforceable by law. The minimum selling price would be higher than the current minimum benchmark price and would enable the STGs to pay the right wages and other statutory obligations such as the contribution to the provident fund, gratuity and bonus. The government will have to ensure the enforcement of the minimum selling price on the green leaf while both the government and the trade union will have to ensure that the rightful wages and its components are paid to the workers belonging to both the organized as well as the unorganized sector. This will effectively raise the production cost for the BLFs thereby raising the average selling price of tea as a whole. It will also mean that the end worker be it from the unorganized or the organized sector will receive an equal wage and statutory dues, helping in leveling the playing field between the organized and the unorganized tea sector. The buyers’ responsibility will be in paying a premium for quality tea which will incentivize producers to follow the right practices and ensure that the tea estates remain sustainable for the times to come.
With the change in times, the future of the industry will also depend a lot on how the producers adapt and re-invent themselves. The bureaucratic and hierarchical form of management will have to give way to a flatter structure of organization which will enable greater transparency, efficiency and a sense of entitlement amongst the employees. There will have to be a conscious effort in bringing new technology and machinery to this industry and in vertically integrating processes, that is, by adding value to the bulk tea be it in terms of packaging, blending, flavoring or any other form of enhancing the value of made tea. This will not only open new avenues of revenue generation but will also provide the local educated youth from within the tea estates job opportunities adequate to their qualifications. New technologies and machinery will reduce the dependence on the already dwindling availability of trained manual labor and increase productivity thereby decreasing overheads and the cost of production. Support to and collaboration with the Tea Research Association and Tocklai scientists will have to be established to counter the ill effects of climate change in order to amend the long standing agricultural practices to stay relevant with the current conditions. There is also an opportunity to utilize the winter months in Assam, which is non cropping for tea, with the help of a government ruling. Alternate cropping in fallow lands during the winter months will enable the tea estates to generate alternate sources of income and provide productive employment to its resident workers during the non tea cropping winter months in Assam.
Tea is definitely more than just a beverage in India. From helping start each day to making every guest feel welcome at home. From connecting families, friends and colleagues to being the perfect companion for a silent evening spent in solitude. From being an excuse to take a break from work to providing that mental energy to continue working. From making rains more enjoyable to being the drink that brings the country together. Tea is and always will be the national drink of India, whether officially declared or not. The backbone of this rich tea culture – the tea gardens, however currently need some stability for survival. I believe that with the combined effort from all the stakeholders involved, not only will this industry revive, but will leap frog into the future by creating greater opportunities, adding enhanced values and fostering social growth.
~ Mrityunjay Jalan
It’s a pretty dull and gloomy atmosphere in most of the tea estates in today’s scenario. The most prestigious of the tea estates in Assam have recently declared bankruptcy, many are on sale and most of the others are facing operating losses on an everyday basis. With an increase in production cost and a stagnant selling price, losses are but natural. The average cost of production continues to exceed the average auction selling price. To further put things in perspective, while the price of a staple product like rice has increased from Rs. 0.20 to Rs. 24/kg a 120 times jump from a period of 1954 to 2018, the average price per kg of tea has increased from Rs. 7 to Rs. 140/kg, reflecting only a 20 times jump for the same period. Continuous losses over the past couple of years have also meant that there has been a lack of developmental activity at the field, factory and social welfare level which has further dwindled yields, productivity, quality of tea and motivation amongst the workers, hence putting the entire system into a vicious cycle. To add to the current woes of the industry, the minimum wage for the workers is slated to increase by more than 40% for the current calendar year, thereby threatening to further widen the difference between production cost and selling price.
The obvious question now arises is that how can an industry be facing a higher production cost continuously in an open economy where natural forces of demand and supply are in play. While there are a few reasons for this, the main reason lies in the fact that there is an uneven playing field with the industry being divided into the unorganized and the organized sector. The unorganized sector comprises of the Small Tea Growers (STGs) who are not included in the ambit of the Plantation Labor Act, while the organized sector comprises of all the tea estates who fall under the purview of the Plantation Labor Act and have a binding obligation in terms of wages, benefits and statutory requirements towards the workers. Bought Leaf Factories (BLFs) purchase leaf from STGs which they manufacture and sell in the open market whereas most of the tea estates from the organized sector manufacture tea using leaf from within their plantations. While in 1999, the unorganized sector comprised of only 4% of the industry, it currently officially stands at 44%. This rampant growth of the unorganized sector means that it can no longer be ignored, as what used to be a negligible contributor to the industry is now comprising close to half of the total industry’s production.
In the current scenario, BLFs and STGs form bilateral agreements to fix prices of green leaf keeping the benchmark price of the green leaf set by the Tea Board as the base. The STGs are forced into selling their leaf at low prices as there is no formal structure or mechanism for the green leaf sale. The minimum benchmark price remains low and moreover cannot be formally enforced. The plucked green leaf being perishable has to be sold the same day as its plucked and cannot be stored. Selling of green leaf at low prices forces STGs to pay a much lowered wage and bonus amount to their workers as compared to the organized industry norms. The low green leaf price ensures that the BLFs have a much lower cost of production as compared to the organized sector thereby enabling them to sell the teas at a much lower price in the open market. As they comprise of a substantial 44% of the industry’s production, they are able to drive the prices of tea down in the open market where large MNCs and other companies procure teas for blending, packing and selling in retail, wholesale or export markets. With an advent of consumerism and rise in number of brands selling tea, there is major competition among tea brands to capture the market by competing on price and offering discounts. This forces them to reduce their purchasing price of tea. With the BLFs willing to sell cheap, the overall tea market gets pushed down and the average selling price remains suppressed. Thus, till there is an uneven playing field between the organized and the unorganized sector, there is little scope for increase in the average selling price of tea and there will continue to be a rise in growth of the unorganized sector and a subsequent fall of the organized sector.
Issues at the tea estates however, are not just limited to an uneven playing field between the organized and the unorganized sectors. Much of the issues faced by the tea estates today are also due to its archaic management style, climatic changes and a rapid population growth within the tea estates. The tea estates have largely followed a bureaucratic and hierarchical form of management where there are many layers between the worker and the top management. Historically, it has been a top-down approach where instructions are passed from the top management through its subsequent layers to the end worker. This has lead to an inefficient and non-transparent system in an agricultural practice which is labor intensive resulting in opportunities for corruption and mismanagement. Recent changes in the climatic conditions has also affected the industry in terms of water logging, breeding of new pests and un-familiar plant diseases which have caused drop in yields, productivity and quality of tea produced. One of the other main issues faced by the tea industry, which often gets ignored and not talked about, is that of a fast growing aspirational young population within the tea estates. In todays time, with relatively easier access to television, internet and education, the younger generation at the tea estates are seeking better and more lucrative opportunities than that of a daily rated worker. They are either migrating out of the estates to towns and cities or are remaining unemployed or under-employed within the tea estates. The tea estates are under pressure to provide proper housing, schooling and medical facilities along with adequate job opportunities to this growing population. It has also meant that the tea estates are now getting devoid of skilled field or factory workers who were earlier learning on the job from an early age under the guidance and tutelage of their elders.
While there are issues that persist within the industry pertaining to both internal and external factors, it cannot be ignored that this industry is a vital part of India’s economy. It is India’s second largest employer after the Indian Railways amongst the organized industries and more than 50% of the employed are women. The organized tea sector houses all its permanent workers, provides them with free primary schooling and medical facilities along with ration and other fringe benefits like firewood, dry tea and protective materials. This is over and above the statutory requirements such as provident funds, gratuity and an annual 20% bonus. The industry unfortunately is now on a downward spiral and will soon cease to exist in the current form as we know it unless remedial measures are taken to revive it.
The way forward for the industry will have to involve a participation from all its stakeholders, that is, the producers, the trade unions representing the workers, the government and the bulk buyers. The industry and the government first must recognize and accept the fact that the STGs are here to stay and are an integral part of the industry. They must be represented and involved in all negotiations and discussions pertaining to the industry. A conscious effort needs to be made to ensure that there is a level playing field between the unorganized and the organized sectors within the tea industry. Cultivating tea is an agricultural practice and like other agricultural produce and cash crops, green leaf should have a minimum selling price enforceable by law. The minimum selling price would be higher than the current minimum benchmark price and would enable the STGs to pay the right wages and other statutory obligations such as the contribution to the provident fund, gratuity and bonus. The government will have to ensure the enforcement of the minimum selling price on the green leaf while both the government and the trade union will have to ensure that the rightful wages and its components are paid to the workers belonging to both the organized as well as the unorganized sector. This will effectively raise the production cost for the BLFs thereby raising the average selling price of tea as a whole. It will also mean that the end worker be it from the unorganized or the organized sector will receive an equal wage and statutory dues, helping in leveling the playing field between the organized and the unorganized tea sector. The buyers’ responsibility will be in paying a premium for quality tea which will incentivize producers to follow the right practices and ensure that the tea estates remain sustainable for the times to come.
With the change in times, the future of the industry will also depend a lot on how the producers adapt and re-invent themselves. The bureaucratic and hierarchical form of management will have to give way to a flatter structure of organization which will enable greater transparency, efficiency and a sense of entitlement amongst the employees. There will have to be a conscious effort in bringing new technology and machinery to this industry and in vertically integrating processes, that is, by adding value to the bulk tea be it in terms of packaging, blending, flavoring or any other form of enhancing the value of made tea. This will not only open new avenues of revenue generation but will also provide the local educated youth from within the tea estates job opportunities adequate to their qualifications. New technologies and machinery will reduce the dependence on the already dwindling availability of trained manual labor and increase productivity thereby decreasing overheads and the cost of production. Support to and collaboration with the Tea Research Association and Tocklai scientists will have to be established to counter the ill effects of climate change in order to amend the long standing agricultural practices to stay relevant with the current conditions. There is also an opportunity to utilize the winter months in Assam, which is non cropping for tea, with the help of a government ruling. Alternate cropping in fallow lands during the winter months will enable the tea estates to generate alternate sources of income and provide productive employment to its resident workers during the non tea cropping winter months in Assam.
Tea is definitely more than just a beverage in India. From helping start each day to making every guest feel welcome at home. From connecting families, friends and colleagues to being the perfect companion for a silent evening spent in solitude. From being an excuse to take a break from work to providing that mental energy to continue working. From making rains more enjoyable to being the drink that brings the country together. Tea is and always will be the national drink of India, whether officially declared or not. The backbone of this rich tea culture – the tea gardens, however currently need some stability for survival. I believe that with the combined effort from all the stakeholders involved, not only will this industry revive, but will leap frog into the future by creating greater opportunities, adding enhanced values and fostering social growth.
~ Mrityunjay Jalan 