No cheer for tea planters from record crop

By V. Jayanth

CHENNAI, JULY 9. The tea plantations are heading for a bumper crop this year, creating more problems for the estates and a headache for the Government.

After a peak in 1998, there was a drop in tea production last year. But current indications point to another record crop this year. In South India, production touched 87.9 million kg till May, up from just 76 m kg during the first five months of 1999. The crop in North India was also higher, at 105.3 m kg for this period, compared to 92.4 m kg in the previous year.

While the bulk of the North Indian tea is consumed domestically, about half of the tea grown in the South Indian plantations is normally exported.

Unfortunately for the south, things are not looking rosy at the moment, despite the prospects of a bumper crop. Not only is the export market shrinking, but the southern tea does not seem to find very much favour in the domestic market.

What has really upset the planters in the south - Tamil Nadu, Kerala and Karnataka alike - is the increasing import of tea from Sri Lanka, Kenya and even Indonesia.

According to Mr. E.K. Joseph, Vice President, United Planters' Association of Southern India (UPASI), about 60,000 kg of Sri Lankan tea has arrived in the Indian market this year, after the bilateral, free trade agreement and the substantial reduction of duty to just 7.5 per cent.

``India has agreed to a ceiling of 11.5 m kg of Sri Lankan tea this year and a 15 m kg import annually under the free trade agreement. The Sri Lankan tea is a direct competitor to the south Indian tea and because of the lower cost of production there, it may be cheaper at this concessional tariff'', he explains.

UPASI has also noted that a substantial quantity of tea from Kenya is being imported by the Export Oriented Units (EOUs) in India for value addition and re-export. But it cannot put a figure to that import. On top of it all, it has information that cheap Indonesian tea is being re-exported as Indian tea by some agencies. These have together impacted on the south Indian tea's market at home and in the global market.

What Mr. Joseph and his colleagues in UPASI are now asking is ``When the Government of India wants us to prepare for global competition and opens up the import channel to competitors, why is the Centre not undertaking key reforms on the administrative side for the plantation sector?''

They argue that under the Tea Marketing Control order of 1984, the plantations are bound to offer 75 per cent of their production at the auctions. The prices this year have touched the rock bottom. Small growers have taken to the streets of Coimbatore as their green leaves are bought at Rs. 4.50 to Rs. 5 per kg by multinationals and leading tea companies here. The floor price for orthodox tea in the auctions down south was averaging about Rs. 35 per kg now - much lower than the cost of production.

If the estates could enter into agreements with private sector companies, they hope to get a better price if they offer at least 50 per cent of the produce outside the auctions. The Centre refuses to move on such reforms, though all it may require is a modified Government order, not any amendment to legislation.

Mr. C. Sankaranarayanan, Adviser to the Planters Association of Tamil Nadu (PAT) says ``Our input costs are always rising and the Government has added to our woes by clamping a Rs. 2 per kg excise duty last year. Though this was removed for package tea this year, we are still hurt by this levy. Neither the Finance nor the Commerce Minister is sympathetic to our cause, but want us to face competition without a level playing field''.

He explains that the estates in the south have been crippled this year on account of increase in wages, rise in the cost of fertilisers, fuel, pesticide and power.

On top of it was the negative impact of imports under the liberalisation process. ``Unfortunately, the reforms do not spill over to the administrative, labour or control systems''.

According to PAT's figures, wages for estate workers are over Rs. 70 per day and work out to Rs. 135 per day on an average, with all benefits in the southern plantations. But in West Bengal or Assam, the total costs were only half of that.

Traditionally, the South exported 50 per cent of its production to Russia and West Asia, whereas the North exported only around 15 per cent of its much higher production. While tea production hovered around 200 m kg in the South, it was above 650 m kg in the north.

With exports to Russia badly affected because of the economic crisis there, exports to Moscow have fallen drastically for a year now. The south Indian plantations are normally focussed on lower grade tea to cater to these markets, whereas the northern estates concentrated on higher grade, costlier varieties for the domestic market and special exports. Even in the auctions, northern tea fetched a much higher price.

It was on account of these factors that UPASI took up with the Centre, the plight of the tea sector this year, without getting much of a response. While the Commerce Ministry immediately increased the duty on other tea imports, it could not alter the agreement with Sri Lanka.

The planters asked for two specific concessions - immediate abolition of the excise duty and suspension of imports by the EOUs for at least six months (so that they could buy local tea). Further, UPASI suggested that in addition to the Rs. 3000 crores annual repayment to Russia, the Centre could provide another Rs. 200 crores to Rs. 300 crores credit for purchase of tea under the rupee-rouble agreement. But there has been no positive response from New Delhi on these demands.

Finding the Centre so committed to reforms, the planters now want to know why this is not being extended to the plantation sector. ``They want us to prepare for competition, without giving us a level playing field. Look at the tax levels here. The Centre collects 35 per cent tax on 40 per cent of our income and the Tamil Nadu levies a hefty 65 per cent agricultural income tax on the remaining 60 per cent. Why should the estates alone be subject to agricultural income tax when all the rich farmers around the country go scot free and even get free power supply. This is unreasonable and unethical'', they fume.

One problem they face on the labour front seems to be hurting them. Some of the unions are opposing mechanisation in the estates and the State Governments are more sympathetic to their cause. ``We believe this will be the last generation of estate workers who remain with us. Their children will not take up this work. If we do not introduce machines for pruning and picking now, what will happen to us in the future?'' asks Mr. Diwakaran Moorkath, Head of the Personnel wing of the Bombay Burmah Trading Corporation (BBTC), which runs a few estates.

PAT members complain that every level of Government wants to fleece the estates, without offering any help or assistance. Even small panchayats have been upgraded as town panchayats merely to enhance taxes because they cover the estates. Without providing any service inside they estate, they pocket a huge tax annually. This has added to the financial burden.

Their other grouse is that the growers have not benefited from the reforms and the consumers of tea have not gained from the rock-bottom prices ruling the market now. It is the big companies and the middlemen who are cornering the profits with a big margin in between. Tea prices in the retail market have not fallen as the price of tea at the auctions have.

The only way out for the southern planters may be to go in for modernisation, cost cutting and a change over to higher grade tea. That will mean replantation and substantial investments. Sooner than later, they must prepare for that shift, instead of looking to the Government for concessions and incentives.

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