Chai time: sustainable livelihood for small tea growers through CSR

Sustainable Livelihood for Small Tea Growers through CSR



Chai Time


CHAI TIME


Shatadru Chattopadhayay

Senior Programme Manager, Partners in Change, New Delhi

Saji M. Kadavil, Research Consultant and Author

Edition, first: 2007

ISBN: 81-903505-6-0

Published by

Partners in Change

C-75 South Extension Part II

New Delhi 110 049

Tel: +11-41642348–51

www.picindia.org

The authors assert moral and legal right to be identified as authors of this work.

All rights reserved with the Publisher.

Copying and use in any form without the express permission of the publisher is prohibited.

Cover design: Argee/Wordmakers

Printed and bound in India at the National Printing Press, Bangalore


Chai TimeSustainable Livelihood for

Small Tea Growers through CSR

Partners in Change


Abbreviations 6

Glossary 7

Preface – Liesbeth Unger 11

Foreword – Viraf Mehta 13

Introduction

The problems of small tea growers 15

PiC and small tea growers 17

Objectives and Methodology 18

Methodology 18

Overview of Chapters 19

Indian Tea Industry - Pattern and Growth

Overview of the Tea Industry in India 24

Trend of Production 25

Export of Tea - Variations and Growth 26

Domestic Consumption 28

Indian Tea Industry and the ‘Crisis’ 31

India’s Small Tea Sector

Small Tea Growers in India 33

Productivity of Small Tea Gardens 34

Economics of Small Tea Growers in India

Small Tea Growers in Coonoor, TN 38

Small Growers in Idukki, Kerala 44

Small Growers in West Bengal 52

Small Growers in Assam 60

Value Chain and Small Tea Growers

Value Chain and Tea Sector 66

Competitiveness of New Model in Tea Sector

Cost of Production of Green Leaf for

Small Growers 73

Bought Leaf Factories 74

Floor Prices at Gardens 78

Price Mechanism at Auctions 78

Adulteration and Formation of Quality

in Various Stages of the Value Chain 81

Supply/Demand of Tea at Different

Localities 83

Corporate Social Responsibility

and Small Tea Sector

CSR and Tea Sector 87

CSR and Small Tea Growers 89

Workers Rights - Focus area of CSR 90

The Business Case for Integrating CSR

Practices in the Small Tea Holdings 91

Ethical Trade Initiative and Fair Trade 94

Fair Trade Practices 94

Consumer Preference and

Participation in CSR 96

CSR and Trade Initiatives 99

Initiatives from Small Tea

Growers in India 101

Policy Recommendations and Feasible

Intervention Points

Notes 111

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Chai TimeSustainable Livelihood for

Small Tea Growers through CSR

Table of Contents

List of tables

production of tea in the World 25

International tea markets 27

Destination-wise Indian Tea Exports 28

Demand and Supply of Tea 32

Registered Tea Gardens in India 33

Share of Small and Estate Gardens 34

Share of Small Growers in Indian States 35

Yield of Tea Cultivation 36

Tea Cultivation in Tamil Nadu 39

Tea Cultivation in Kerala 47

Tea Cultivation in West Bengal 5

NOC Petition of Tea Growers in W. Bengal 56

Price Realization for Green Leaf in W. Bengal 57

Tea Cultivation in Assam 61

Production Cost for Green Leaves in India 74

Growth of BLFs in India 75

Price Realization of Various Factories 76

Beneficiaries of Subsidy from Tea Board 84

Impact of Quality Upgradation Programme

on Small Tea Growers 85

CSR standards, Codes and Practices 88

The TBOD for CSR in Small Holdings 89

CSR and Welfare Matrix 91

Process of CSR in Small Tea Sector 92

Perspectives of Stakeholders on CSR

and Tea Industry 93

List of figures

Tea Industry in India 24

Trends of Tea Production in India 26

Tea Exports from India 27

Domestic Consumption of Tea 29

Domestic Market for Tea 30

Per capita Tea Consumption in

Various Vountries 31

Growth of Tea Gardens in Tamil Nadu 39

Growth of Tea Gardens in Kerala 46

Growth of Tea Gardens in W. Bengal 54

Growth of Tea Gardens in Assam 60

Value Chain Small Tea Growers in India 68

Price Differences at Auction in Coonoor 76

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Abbreviations

BLF Bought leaf factory

CAGR Compound annual growth rate

CoC Code of conduct

CSO Central Statistical Organisation

CSR Corporate Social Responsibility

CTC Cut, torn and curl

CTTA Calcutta Tea Traders Association

ETI Ethical Trade Initiative

HLL Hindustan Lever Limited

KVK Krshi Vigyan Kendra

ITA Indian Tea Association

ITC International Tea Committee

MNCs Multinational companies

NAS National Accounts Statistics

NOC No objection certificate

OECD Organization for Economic Co-operation and

Development

PDS Peerumadu Development Society

SHG Self-help Group

TMCO Tea Marketing Control Order

TPI Tea Promoters of India

UPASI United Tea Planters Associations of South India

USTPA United Small Tea Producers Association

VCA Value Chain Analysis

6


Glossary

Assessment: A study to determine whether, and to what extent, labour practices comply

with the provisions of a code of labour practice. The term can refer to the study of a

workplace but can also apply to more general studies such as to an industry within a

country. A ‘study’ means a systematic investigation that covers all points of the relevant

code. Where this concerns a workplace it means a study involving the gathering of

robust verbal, documentary, visual and physical evidence. Preliminary studies meant for

detecting the likelihood that code provisions are not being observed are referred to as

risk assessments and are understood to be less robust. Where such assessments do not

involve the actual inspection of the workplace they are referred to as desk-based risk

assessments

Auction: Sale of tea in an auction room on a stipulated date, and at a specific time. Tea

auctions are held in India, Sri Lanka, Indonesia, Kenya and Malawi. These auctions

only sell teas from their particular areas. The London Tea Auction held every Monday

morning (barring public or bank holidays) in the city of London, is the only true

international tea auction, where teas from all over the world are sold.

Black tea: Fresh-picked green tea leaves are withered, spread out on racks to dry, and

then crushed by rollers to release the juices from them (fermented or oxidised). The

leaves turn brown and are then fired (or dried) by hot air and sorted into grades.

Blend: a mixture of teas from several different origins to achieve a certain flavour

profile. Most branded teas in the United States use 20 or more origins to achieve their

desired taste.

Blender: Tea taster who decides on the proportions of each different tea required to

produce the flavour of a given blend.

Broker: The person who negotiates the buying and selling of tea from producers, or for

packers and dealers, for a brokerage fee from the party on whose behalf he acts.

BOP: Broken Orange Pekoe - Full-bodied black tea comprising broken segments of

somewhat coarse leaves without tips. The smallest among leaf grades, it gives good colour

in the cup and is used for several blends.

BP: Broken Pekoe - Full-bodied black tea comprising broken segments of coarse leaves

without tips.

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Brick tea: Chinese and Japanese teas mixed and moulded into bricks under high pressure.

Once used as a form of currency.

Child labour: Child labour refers to work done by a child younger than 15 years, unless

local Legislation has set a higher age.

Code of practice/conduct: In the context of ethical trading, a code of practice (or code

of conduct) is a set of standards concerning labour practices adopted by a company

and meant to apply internationally, and in particular, to the labour practices of its

suppliers and subcontractors.

Collective bargaining: The right to collective bargaining refers to the right that workers’

organizations have to negotiate with employers or their organizations on behalf of their

members to determine working conditions and terms of employment

Corporate Social Responsibility (CSR): A concept of business ethics based on the idea

that companies have stakeholders who are broadly defined as individuals or groups

affected by the activities of the company. The idea of CSR is that a company should be

accountable to its stakeholders. For this reason the subjects of CSR focus on how

companies should identify and ‘engage’ stakeholders and how they should determine,

measure and report the impact of their activities on others. (The terms social auditing

and social reporting have emerged in this context.)

CTC: Cut, Tear and Curl, a machine process which cuts the withered leaves into uniform

particles to facilitate complete oxidation. Typical of most black tea grown in India and

other lowland producing countries, and used in teabags to create a stronger tea of

deeper colour.

Darjeeling: Province in northern India that produces black tea famous for its exquisite

bouquet.

Dark: A dark or dull colour which usually indicates poorer leaf

Dimbulla: A district in Sri Lanka (Ceylon) that produces full-bodied black tea.

Dust: The smallest broken leaves left over after all manufacturing processes are finished.

ETI Base Code: The code of labour practice based on key conventions of the ILO that

ETI requires its members to uphold. Its content was negotiated and agreed to by the

founding trade union, NGO and corporate members of ETI. It is accompanied by a set

of general principles governing its implementation.

Externality: A side-effect or consequence (of an industrial or commercial activity) which

affects other parties without this being reflected in the cost of the goods or services

involved; a social cost or benefit.

Fair trade: Fair Trade is an alternative approach to conventional international trade. It

is a trading partnership which aims at sustainable development for excluded and

disadvantaged producers. It seeks to do this by providing better trading conditions, by

awareness raising and by campaigning. Fair trade differs from ethical trading in that its

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primary focus is on improving trading relationships rather than labour practices. It

engages primarily with marginal producers, and aims to establish an alternative trading

model rather than working within the confines of conventional international trading

relationships.

Flush: Young tea-leaf shoots. The term also refers to the various harvests. ‘First flush’ is

the early spring plucking and the ‘second flush’ is harvested in late spring and early

summer. A second flush has a stronger flavour than the first flush.

Freedom of association: The right of all workers to join or form a trade union of their

own choosing and carry out trade union activities without interference from their

employer or from public authorities.

Garden: The name of a specific plantation used to identify fine harvests produced solely

from that garden.

Green tea: Unfermented tea that is immediately heated (or steamed) to kill the

fermentation enzymes. It is then rolled and dried. Naturally low in caffeine, the brew is

very light in colour. Green teas range from a light, fragrant taste to a very bold vegetal

flavour.

Import Quota: A form of protectionism used to restrict the import of goods by limiting

the legal quantity of imports.

Oolong tea: Semi-oxidised tea from China or Formosa; a diplomatic tea in that

Oolong is a compromise between black tea and green tea. It is more delicate than black

tea and stronger than green tea. The floral Ti Kuan Yin produces a clear mellow brew

and is famous for its light fragrance.

OP: Orange Pekoe: Of higher quality than Pekoe leaves, it is not a variety of tea but a

term which describes the size of the leaf. It is a black tea comprising leaves of 8-15 mm.

It has fewer tips than FOP, because it is plucked later in the season and generally refers

to tea from Sri Lanka (Ceylon). Leaves are long, thin and rolled length wise.

Orthodox tea: Tea was processed this way for centuries, by hand, with great care. Some

of today’s great teas are still produced in this manner.

Pan-fired: A kind of Japan tea that is steamed then rolled in iron pans over charcoal fires.

Pekoe Souchong: Black tea, produced by a coarse plucking of the third leaf on the

bush. Each leaf is rolled into a ball.

Pekoe: A grade of black tea produced by a medium plucking of the second leaf on the

bush.

Ploughman’s lunch: A meal featuring hearty meat and cheese sandwiches, pickled

vegetables, sweets and served with tea as the main beverage.

Pouchong: A kind of scented China tea, so called from the Cantonese method of

packing in small paper packets, each of which was supposed to be the produce of one

choice tea plant.

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Rooibus: Bush tea from Africa. Caffeine-free, it may be purchased as a variety or

blended with herbs and flavourings.

Scented tea: Green, semi-fermented or black tea that has been flavoured by the addition

of flowers, fruit or essential oils. Earl Grey is one of the most famous of scented black

teas. Madame Butterfly is a green tea scented by the addition of flowers and flavouring.

Stakeholder: As developed for the concept of Corporate Social Responsibility the term

refers to any individual, community or organization that affects or is affected by the

operation of a company. Stakeholders may be internal (e.g. employees) or external (e.g.

persons performing work who are not employees, and maybe also customers, suppliers,

shareholders, financiers or the community). For instance, in the context of ethical

trade, the workers whose working conditions are the subject of codes of labour practice

are recognized as having the greatest ‘stake’ in ethical trading.

Tariff: A Government-imposed tax on imports.

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Preface

Are we romanticizing the small farmers by wanting them to survive and

have a better position in the value chain? Or are they not sustainable in the

long run and are big companies right in preferring tea from large estates,

from whom the quality is much better to control?

This study of small growers in the tea sector in India is showing us how

important it is to include small growers in the value chain, not only from

developmental perspective, but also from the perspective of a supply of

varied, good quality tea for an affordable price.

When the recommendations of this study are implemented, the most

important benefits are for: the migrant, seasonal workers dependent on

work in small gardens who will be better protected, the small growers and

their families who will be supported more when they have land titles,

registration and knowledge on markets and prices, and consumers in India

who will have better access to a wider variety of tea with higher quality.

Already several associations between small growers in the tea sector exist,

one of which the USTPA in Nilgiris, in association with Partners in Change,

supported by Oxfam Novib. These associations will be crucial for the new

model of production in the tea sector, where small growers have more

power to negotiate.

The international market and the domestic market in India are

dominated by a few big players , who have a lot of influence on prices via

the auction, or via direct sales, on quality and on the demand of consumers.

However, when we look at the initiatives that are currently taken to improve

the situation for people and environment in the production of tea, these

companies are not playing a leading role at all. As we are learning from this

study the problems are complicated, yet millions of people depend on the

tea sector for their livelihoods and many of them live in deplorable

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conditions. Therefore the problems cannot be ignored and need to be

dealt with the sooner the better. As the study rightly points out, all

stakeholders in the value chain, have to be involved, some at the national

level, some at international level and others at local level. You would expect

the most influential players to take responsibility, take a lead and invite

others to work with them. More direct relationships between buyers and

small growers will be beneficial for both of them.

For Oxfam Novib, the large tea buyers/packers, retailers have primary

responsibility to ensure that small producers are not excluded as a result of

increasing requirements in the areas of food safety, quality and volume. By

making improvements a shared effort and not solely the responsibility of

the small producer, these companies can play an important role in

facilitating development and poverty alleviation in India.

Liesbeth Unger

Oxfam Novib

12


Foreword

India is one of the the largest producers and consumers of tea in the

world. It produced over 900 million kilograms (kg.) of tea and consumed

771 million kgs. in 2006. India also exports about 180 million kg. of tea

every year. The tea industry is the second largest employer in India, with

more than 1.2 million workers on permanent rolls. Women constitute 50

per cent of the workforce. The number of workers employed goes up

significantly if the casual workers are also included.

The auction prices of tea consistently fell in an unprecedented manner

during 1998–2003 leading to a situation that they were even lower than

the cost of production. The decline in tea prices has led to downward

pressure on farmers’ incomes and labourers’ working conditions in many

Indian tea estates and small holdings with less than 10.12 hectares of land.

Such low prices may force the small tea growers to compromise on quality,

environmental aspects, and labour situation which in turn may lead to

their exclusion from many markets, high cost of production, and

environmental pollution. In the long run this may further bring down the

tea prices and could affect the sustainability of the entire tea industry. At

the same time the challenge is to make the tea market work for all, even

when tea prices start improving.

Increasingly Indian tea companies are integrating corporate social

responsibility into their core business practices and moving away from

philanthropic approach. It is widely acknowledged that improved social,

environmental and economic practices of the tea companies across the

supply chain can lead to remunerative prices for tea small growers and fair

wages to the workers in one hand and better access to markets, reputational

benefits, increased workers satisfaction and loyalty leading to increased

productivity, increased savings through better environmental management

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and reduction of cost of production on the other. Partners in Change

along with all its partners remained committed to this agenda.

The present study conducted by Partners in Change with support from

Oxfam-Novib is an in depth analysis of the drastic expansion of the small

growers, the issues around livelihood and competitiveness of small tea-

growers in all the four tea producing states of Assam, West Bengal, Tamil

Nadu and Kerala. It also attempts to understand how elements of improved

social, economic and environmental aspects in the small holding could

lead to additional competitiveness for the tea small holdings. At the same

time the study also analyses different barriers to integrate these components

of responsible tea production and trade. It also provides valuable

recommendations on how to overcome those barriers for sustainable tea

industry.

The study was made possible through the active participation of different

stakeholders including the small tea growers, auctioneers, representatives

from processing factories, trade unions, business leaders, several civil society

organizations as well as many academicians.

I am confident that this study can contribute significant inputs to small

tea growers, civil society organizations, policy-makers, business leaders as

well as academicians towards unleashing the immense potential of the Indian

tea industry.

Viraf Mehta

Chief Executive

Partners in Change

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Chapter 1

Introduction

India is the second largest producer of tea in the world, and produces

around 927.98 million kilograms of tea, accounting for 27.14 per cent of

tea produced worldwide. The tea industry accounts for employment of

more than 2 million people. It occupies an important role in the Indian

economy not only due to its capacity to earn foreign exchange but also

because it impacts the livelihoods of scores of people employed directly

and indirectly by the industry.

Tea production takes place in both large plantations and smaller gardens.

The size of big plantations varies from 500 acres to 1,200 acres. These

plantations focus solely on production of tea to benefit from the economies

of scale. They are often part of a chain of plantations owned by large

corporations. Technically, growers holding up to 10.12 hectares under tea

are considered small growers. This segment provides employment to around

230,000 families.1 However, they only account for 14.5 per cent of the

total area under tea and 11.1 per cent of total tea production.

The plantation model of the tea industry works with its own structure

and development mechanisms. Various Acts and Rules regulate and control

the structure and function of plantation sector in India. The plantation

sector works in a strong network of capital assets and has its own methods

of addressing issues such as the quality of green leaves, production of ‘made

tea’, and social, economic and social responsibilities at the field and market

levels.

The problems of small tea growers

Small tea growers in India are economically and socially vulnerable as

they are mostly marginal farmers, Dalits or from tribal communities. Many

of them do not possess rights over the land they cultivate. Though the

quantity of tea produced by small tea growers has increased over time, the

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profit accruing to them is very marginal. The reasons for this are several,

chief among them being:

� Low price-realization owing to poor quality and inefficient and

incompetent production structures in garden.

� Domination of the corporate sector over the market.

� Inability of small tea growers to access international markets directly

� Smallholders merely grow the tea as against the corporate sector,

which converts the green leaf into a ready-to-consume beverage and thereafter

dominates the market.

� The fairly large quantities of ordinary tea leafs produced by small

growers are sent to bought-leaf factories for processing and result in

low returns to the grower, as well as impact prices in the market.

The constant fall in tea auction prices from 1998 onwards has however

challenged the plantation system of production. During 2002-2006 more

than 36 plantations were closed down or abandoned and directly affected

thousands of workers and the economy of regions where the plantations

are located.. During this period, most of the discussions started highlighting

the small grower model of tea production which was increasing when the

prices were high as a sustainable system for future as the cost of production

of small growers is low compared to big estates. However, the small growers

unlike the popular perception were equally or some time worst effected by

the constant fall in tea prices.

This study tries to understand the drastic expansion, livelihood potential

and competitiveness of small tea-growers as a new model of tea production

in India. It also attempts to understand how elements of improved social,

economic and environmental aspects in the small holding could lead to

additional competitiveness for the tea small holdings. At the same time

the study also analyses different barriers to integrate these components of

responsible tea production and trade across the value chain.

The small tea growers sector works in a vicious circle of low price

realization and deprivation. It begins with the workers (who are given less

wages and other facilities than the estate workers), growers (who could

not match the quality of leaves produced by the estates), Bought Leaf

Factories (BLFs) (who often produce inferior ‘made tea’), and finally results

in low price realization at auctions.

BLFs pay low prices for green leaves as they receive low prices for their

‘made tea’, a situation that results in workers being underpaid. Underpaid

16


workers who work in such conditions are less productive. It is therefore

important to examine how the small tea sector can develop mechanisms

through which it can break this vicious cycle, strengthen its capacity and

become empowered. Empowerment in this context means a process

through which people, especially the poor, are enabled to take greater

control over their own lives, and secure better livelihoods combined with

ownership of productive assets as a key element.2 The study also looks into

the opportunities for developing linkages between small tea growers and

other stakeholders, especially corporate companies in the tea industry.

Partners in Change and Small Tea Growers

In the tea sector Partners in Change strives to make businesses

accountable to all its stakeholders through out the supply chain

commensurating to their influence in those chains, laws of the land and

also ensure that they don’t lobby to change laws and like to examine their

responses to their own stated policies and sectoral codes of conduct. The

aim is not merely to make the companies more profitable but to make

them more responsible.

In the case where such instruments does not exist as in the case of tea

small holdings PiC engages in multi-stakeholder dialogues aimed towards

developing relevant social and environmental standards, ensuring

remunerative prices and living wages through better access to market and

equitable sharing of profits, and through addressing the issue of food

security.

We believe that while the low tea prices as it has been prevailing for

quite some time now may force the tea growers to compromise on quality,

environmental aspects, and labour situation, such practices leads to denial

of access to many markets, high cost of production in the form of less

productivity and environmental pollution. This may lead to the prices of

tea further going down in the long run and could affect the sustainability

of the tea industry.

Hence, PiC has been active for last three years to create an enabling

environment for sustainable and equitable economic growth of the small

tea growers. This PiC seeks to do by building partnerships of small tea

growers with the big tea companies under CSR framework. Such

partnerships would help in improving the quality of tea produced by small

tea growers by using the technical knows how available with the big

companies leading to small growers getting a better price.

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It is also crucial to develop a mechanism of serious stakeholder

engagement with social and environmental issues. Hence, It will involve a

programme to develop a social and environmental guideline for the small

tea growers in association with other actors in the supply chain so that it

opens up new markets for them. The present research is an effort towards

that direction and aims to capture the key social, economic and

environmental issues around small tea growers and workers in the tea supply

chain.

Objectives of the study

� Trace the history and the present status of small growers and workers

attached to them in the small tea gardens of India.

� Critically examine the legislative and policy framework (including

implementation and execution of laws) in the tea small holdings.

� Undertake a mapping of the tea value-chain and assess the supply chain

models to identify various intervention points for mainstreaming

responsible practices with a focus on marginalised and vulnerable small

growers and workers

� Evaluate the role of the key players and institutions involved in small

grower system of tea production and trade.

� Examine the land-use pattern and socio-economic background of tea

small growers.

� Identify ways to initiate and maintain at least minimum economic,

social and environmental standards in the small growers sector which

would enable them to compete with national and international players.

Methodology

The research focuses on small growers of four regions in India. The

study mainly relies on primary survey including informal discussions,

focused group discussions and questionnaire survey methods. A mix of

qualitative and quantitative methods have been utilised during analysis of

the research in an attempt to understand the situation of small growers in

the tea industry and to suggest policy initiatives.

The primary survey for the study covered all the stakeholders in the

process of the tea value chain. It covered workers and small growers at one

end and the consumers from the other. Attempts were made through the

questionnaires to capture different perspectives from the various

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stakeholders. The study in all four regions specifically covered:

� Small growers

� Workers in small tea plantations

� Leaf agents

� Bought Leaf Factory owners

� Brokers

� Buyers, including those who bought directly from gardens

� Auction Secretary

� Up-country buyers

� Wholesalers, retailers and consumers

� Trade Union members

Apart from the direct stakeholders, the survey also covered other key

agents like resource persons from the Tea Board from its Kolkata and

Regional Offices and other centres, UPASI, Coonoor; association members

in different regions and trade union leaders.

Consumers were queried to assess their awareness of the quality of tea,

the prices they paid for good quality tea or CSR issues attached to the tea

industry. The key questions of the discussions are included in the Appendix

of this report.

The formal questionnaire method, also applied during the survey,

focused mainly on small tea growers and workers in small tea gardens.

Questions were also framed to capture details of production, workers and

social and environmental benefits of the workers.

Though the terms marginal farmers and ‘small growers’ vary, the present

study recognizes small tea growers as per the formal definition of the Tea

Board. The difference between the ‘small’ smallholder and the ‘larger’

smallholder is also significant. For instance, one of the ‘smallholders’

interviewed had 45 acres of tea and was able to employ a farm manager.

In the production scenario, the survey tried to capture the details of

production of green leaf, cost and benefit of production, leaf prices, and

marketing problems and so on. Workers and their wages were also addressed

in the survey.

Overview of chapters

The introductory chapter maps out the manner in which discussions

develop into arguments that address the competitiveness of the small tea

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sector and livelihoods of the small tea growers and workers in the Indian

tea industry.

The second chapter describes the structural foundation of the Indian

tea industry. It begins with the profile of production, growth patterns in

international markets and the nature of domestic consumption in India.

The situation of closed/abandoned tea estates across India, mainly in

West Bengal and Kerala, created a crisis in the tea industry and left workers

jobless causing intensive deprivation and even hunger deaths among them.

The crisis in the Indian tea industry and low production in estates, has

however led to expansion among small tea growers, as well as created a new

and competitive model in the industry.

In 2005, tea production in India touched 927.98 million kilograms.

Of this, North India accounted for 74.5 per cent with 700.9 million

kilograms, while South India had a share of 24.5 per cent with 227.88

million kilograms. India holds fifth position in the world tea market and

accounts for 12 percent of the world market. Kenya still dominates the

international market, while China and Sri Lanka have increased their shares

in 2005 as compared to the previous year.

From being a predominant consumer of loose tea, the Indian tea market

has slowly transformed into a brand-dominated packet tea market. In

India, packet tea is processed by multinational and other big Indian

companies. The third chapter discusses the small tea sector in India in the

context of the changing scenario of production, international and domestic

consumption.

Chapter three addresses issues of development of small tea sectors and

how it copes with financial stability and productivity in order to compete

with plantation economy. Small growers in India were initially confined

to Nilgiris district of Tamil Nadu and to a small extent, Kerala and Himachal

Pradesh. Small tea gardens came up in Assam, West Bengal and Bihar

during the 90’s. Currently the number of small holdings (as per the

membership of various small growers’ associations in different states), stands

at 1, 26,256 though only 56.8 per cent (71676) of these small growers have

so far registered with the Tea Board. Around 53.9 per cent of small growers

are concentrated in South India and 46.1 per cent is in North India.

In the face of drastic expansion, small tea growers face constraints such

as possession of title deeds, particularly in the north east region where

small growers do not possess rights over the land and are therefore yet to

20


register with the Tea Board. In the small tea sector, West Bengal with 3390

kilograms records high productivity. The performance of the small tea sector

in Kenya with 1651 kilograms is lower than that of Indian small tea sector

with 1680 kilograms. .

Chapter four discusses the expansion of small tea cultivation in four

regions, namely Tamil Nadu, Kerala, West Bengal and Assam. The chapter

also examines the way workers engage with small tea gardens and outlines

their vulnerability in terms of their deprived working conditions and

inadequate welfare schemes. Though the spread of small tea cultivation

began in the post 80s, rapid expansion began only in the late 90s. Among

these small growers (below 10.2 Ha) there are large numbers of marginal

growers in all tea growing regions. They face major constraints such as low

price realization for green leaves, low quality of green leaves, and large

numbers of unregistered growers, problems obtaining N.O.C and rights

over the land, insufficient funding for proper maintenance, lack of

associations/net works with multi stakeholders etc. The increase in the

numbers of unregistered small growers is also a major problem since they

fail to avail of subsidies and financial assistance under various schemes

from the Tea Board and other financial institutions. All regions face similar

problems, though the intensity varies from region to region.

Migrant workers constitute a majority in the small tea sector work force.

They include migrants from neighbouring countries as well as from within

India. It is however learnt that a large number of labourers are returning to

their villages to find alternate jobs such as stone crushing, construction

labour and other unorganized sectors. Workers in small tea gardens enjoy

no benefits or welfare schemes other than their daily wages.

Since small tea growers are scattered in different regions, workers engaged

with them do not form unions or associations. Workers of small tea gardens

do not have any common platform to negotiate their basic rights such as

minimum wages, working conditions and health care facilities.

Chapter five locates the position of small tea growers in the value chain

of the Indian tea industry. The concept of the value chain is used as an

organised system of exchange from production to consumption with the

purpose of increasing value, and transforming inputs and competitiveness.

The concept of global value chain is one among the several approaches to

study inter-firm relations. It draws on the simple idea that the design,

production and marketing of products involve a chain of activities divided

21


between different enterprises, often located in different places.

The value chain of the tea industry involves various stakeholders and

their conflicts of interests and convergence in the process of operationalising

at various levels. The ‘structured and pre-determined’ role of stakeholders

in the tea industry and the interaction among them maintain the price

mechanisms and value-additions in the tea industry. Big companies play a

major role in the value chain of the Indian tea industry and they dominate

pricing as well as domestic and international markets.

This chapter goes on to state that small growers often fail to negotiate

with other dominant stakeholders in the value chain in this process. It is

also about identifying strategic interventions that the small tea sector can

make to strengthen local business competitiveness in infrastructure and re-

position regulations. This could help them look at competition as an

advantage, rather than as a hindrance. The production and market segments

of small tea growers emerge as a new alternative to plantation model

economy. Emergence of this new model with its own dynamism influences

production, domestic market and labour market as well.

Chapter six outlines the development of the present mechanism of the

sector that defines the competitive edge that the new model of small tea

growers has. This chapter discusses various factors involved in the model

such as the expansion of BLFs, price and quality determining mechanisms

and determinants of supply and demand of tea in different localities. There

has been a steady growth in the numbers of private tea manufacturing

factories in India in the post 90’s. In Assam, BLFs have increased to 162 in

2004 from 119 in 2001. Similarly, in West Bengal the number of BLFs is

79 in 2004 from 44 in 2001.

The increase in the production of ‘made tea’ at BLF due to various

adulteration practices will create changes in supply within a short period

in the market. In the context of marginal growth of domestic consumption

and stagnant local demand, an increase in supply in the local markets will

lead to a fall in prices and low quality tea. This chapter also discusses how

important it is to maintain supply of quality green leaves and quality of

‘made tea’ to domestic and international markets. The chapter also outlines

initiatives of the Tea Board such as awareness programmes for improving

quality, usage of chemical and fertilizers in the gardens etc. The programmes

also focused on improved quality at the field-level and in factories to achieve

high productivity and income.

22


Chapter seven addresses CSR in the tea sector and the constraints in its

implementation at various stages. The chapter also outlines social,

economic and environmental responsibilities in the small tea sector as well

as rights of workers and consumer awareness in India. CSR means the

commitment to contribute to sustainable economic development - working

with employees, their families, the local community and society at large to

improve quality of life in ways that are good both for business and for

development. Though studies point out that a majority of consumers say

that they are influenced in their purchasing by knowledge of a company’s

responsibility, their attitudes are not reflected in their actions. The actual

purchasing behaviour of consumers does not match what they say. Lack of

promotional schems of these products, purchasing power, choice etc are

some of the reasons for the gap between purchasing preferences and

behaviour. The chapter concludes with the major initiatives and constraints

of small tea growers in India.

The final chapter concludes with discussion and arguments on the study.

It brings in the nature of problems at various levels and with different

stakeholders and demonstrates how it influences the value chain of Indian

tea industry by summarizing each chapter. The chapter also makes an

attempt to find out feasible intervention points and make recommendations

for the upward mobility of small growers in the value chain of the tea

industry. More specifically, the arguments attempts to demonstrate that

the development mechanisms of small tea segments are more competitive

and play a major role in domestic and international markets and in the

long run can lead to sustainable growth of the Indian tea industry.

23


Indian Tea Industry –Pattern and Growth

Overview of the Tea Industry in India

Tea is grown in 16 Indian States, of which Assam, West Bengal, Tamil

Nadu and Kerala account for about 96 per cent of the total tea production.

While tea exports account for a significant amount of foreign exchange,

tea also contributes revenue to the national exchequer by way of cess, sales

tax, agricultural and corporate income tax, etc. More than two million

people derive their livelihood from ancillary activities associated with the

industry. The tea industry provides direct employment to more than a

million workers, of which a sizeable number are women.1

Chapter 2

Source: Tea Statistics (2005) J Thomas & Company Pvt. Ltd and www.indiateaportal.com

N. India –

Production

700.9 (74.5%)

Figure 2.1 Tea Industry in India (figures are in Million kilograms)

Export

94.9

(50.6%)

S. India –

Production

227.8 (24.5%)

Export

92.6

(49.4%)

Export

187.6

Domestic

Consumption

757

All-India Production

927.88

24


Despite the crisis in the tea industry having caused serious challenges of

livelihood and food security, hunger and poverty among the tea garden

workers, mainly in West Bengal and Kerala, the scenario is gradually changing

and there is an improvement in the prices. In 2004, 94 tea gardens were

reopened and only 24 remain closed at present. The table below provides

an overview of the tea industry in India.

Trend of Production

India was the market leader at the international level with regard to

production and consumption till recently. However, the latest data (2005)

demonstrates that China, with 27.34 per cent share of the total world tea

production has become the biggest producer India comes second with

27.14 per cent of the total production. China’s tea production has increased

from 835.23 Million kilograms in 2004 to 934.86 Million kilograms in

2006 whereas India’s production has decreased from 934.86 in 2004 to

927.98 in 2005.2

Table 2.1 Production of Tea in the World

Country 2004 Share 2005 Share

(in mn. kgs) (in %) (in mn. kgs) (in %)

India 892.96 27.0 927.98 27.14

China 835.23 25.2 934.86 27.34

Sri Lanka 308.09 9.3 317.2 9.28

Kenya 324.6 9.8 328 9.59

Bangladesh 55.63 1.7 58.62 1.71

Vietnam 97 2.9 109 3.19

Indonesia 164.82 5.0 165.85 4.85

Malawi 50.09 1.5 37.98 1.11

Tanzania 30.69 0.9 30.36 0.89

Others 551.23 16.7 509.15 14.89

Total 3310.35 100.0 3419.58 100.00

Source: Tea Statistics (2005), J Thomas & Company Pvt. Ltd and www.indiateaportal.com

Northern India holds a major share in tea production with 74.5 per

cent of total production in India, whereas Southern India leads in tea

25


exports with 50.6 per cent of the total production being exported. The

emerging demand from the Middle Eastern countries is one of the factors

for high exports growth from Southern India.

Besides production, India is also ranked high in the domestic

consumption of tea. Domestic consumption constitutes around 80 per

cent of total tea production in India. However, the per capita consumption

of India is very low compared to other countries.

Figure 2.2 Trend of Production of Tea in India

Export of Tea: Variations and growth

India’s has 12 percent of the market share and enjoys fifth place among

tea-exporting countries in the international market. While Kenya still

dominates the international market, China and Sri Lanka have increased

their market share in 2005 as compared to the previous year. India’s exports

on the other hand, have declined from 12.8 per cent in 2004 to 12.3 per

cent in 2005.3

The overall crisis in the tea industry has impacted the production and

export sector of the Indian tea industry. Conversely, one of the important

reasons for the ongoing crisis in the tea industry is India’s unpredictable

performance in the export market. Export trends fluctuate each year, and

Source: Tea Statistics (2003), Tea Board of India and Tea Statistics (2005),

J Thomas & Company Pvt. Ltd.

26


between 2003 and 2004 there was a marked increase in export from 173

Million kilograms to 197 million kilograms. The exports in 2005 fell to

191 million kilograms.

Table 2.2 International Tea Markets

Country 2004 Share 2005 Share

(in mn. kgs) (in %) (in mn. kgs) (in %)

India 197.67 12.8 191.85 12.3

China 280.19 18.2 286.56 18.4

Sri Lanka 290.6 18.9 298.77 19.1

Kenya 333.8 21.7 339.13 21.7

Vietnam 70 4.5 88 5.6

Tanzania 24.17 1.6 22.5 1.4

Indonesia 98.57 6.4 102.29 6.6

Malawi 46.6 3.0 42.98 2.8

Zimbabwe 14.91 1.0 8.45 0.5

Others 183.39 11.9 179.8 11.5

Total 1539.9 100.0 1560.33 100.0


Figure 2.3 Export of tea from India


Another notable feature which could be observed is that in 1999, India

exported about 102 million kg to Russia, or nearly 60 per cent of Russian

total import of tea. However, by 2003, exports dropped to 42.76 million

27


kg and by 2006 to 42.99 million kgs, The lucrative Russian market is

being replaced by unpredictable markets like Iraq and UAE.

The bulk of India’s production comprises the CTC variety. However,

Kenya dominates the world CTC market because of higher quality and

cheaper rates, Sri Lanka dominates the orthodox markets and China the

green tea market. The world’s biggest export market, Russia, is dominated

by Sri Lanka (45 per cent) and the other two biggest markets – the UK and

Pakistan – are dominated by Kenya (46 per cent and 65 per cent,

respectively).

Table 2.3: Destination-wise Indian Tea Exports (in Million kgs)

2005 2006

Country 2005 2006

quantity Quantity

CIS 48.13 42.99

Iraq 35.82 42.13

UAE 26.54 21.73

The Rest of the world 26.41 35.42

UK 21.36 19.99

Pakistan 14.99 11

USA 9.08 7.89

Kenya 5.91 8.52

Germany 4.85 4.13

Afghanistan 3.06 7.35

Netherlands 2.91 2.71

Source: Tea Board of India, 2007

Domestic Consumption of Tea

India is still the largest consumer of black tea in the world with domestic

consumption accounting for almost 80 percent of the total tea production

in the country. The pattern of domestic consumption has shown a steady

and positive growth since 2000. From a mere 73 million kilograms in

1951 domestic consumption has increased to 653 million kilograms in

2000. In addition, compared to the previous years there is a marginal

increase in 2004, 2005 and 2006 at 735, 757 and 779 million kilograms

Figure 2.4 Domestic Consum

28


respectively4. The following table shows the pattern of domestic

consumption in India.

The major tea consuming states in India include Maharashtra (87 million

kilograms) Uttar Pradesh (82 million kilograms), Gujarat (64 million

kilograms), Rajasthan (58 million kilograms) and Madhya Pradesh (42

million kilograms).5 The average annual per capita consumption of tea in

India varies considerably from region to region. It f luctuates from a

maximum of 1.2 kilograms in Punjab to a minimum of 0.36 kilograms in

Orissa.6

The Indian domestic tea market is predominantly a loose tea market,

constituting around 60 percent of the total tea consumption, while the

balance is served by packet tea. Over the past couple of years however,

there has been a shift in the domestic market from loose tea to branded

packet tea. The growth of packet tea has increased as in the over-all domestic

consumption in India. The share of the packet tea has increased from a

meagre 15 per cent in the early 1980s to over 40 per cent currently. The

big companies sell tea in branded loose and packet tea. Since 1985 the

branded tea segment has registered good growth and its share in the total

tea market is currently around 40 per cent.

Small local players in the unorganised sector were major stakeholders

in loose tea markets at various levels. Later on large players such as Hindustan

Lever Limited and Tata Tea took over the tea market as branded packed tea

producers. They created the nurtured the perception that non-branded/

packet tea was inferior. Consumers were offered branded teas in a variety

of aromas and flavours, packed in compact, attractive packets.7 Most of

Figure 2.4 Domestic Consumption of Tea in India

Source: Tea Statistics (2003), Tea Board of India and www.indiateaportal.com

29


the big players such as Tata Tea and Hindustan Lever Limited claim through

their tea promotional schemes that they provide good quality tea at

economical prices in order to make this tea available to all strata of society.

Hindustan Lever Limited with a market share of 33 percent is the leading

player in the packet tea business, Tata Tea has a share of 19.4 percent,

Duncan has 3.7 percent and large and small regional brand companies

such as Wagh Bakri and Runglee Rungliot etc dominate the rest of the

market.8 The following figure shows the trend of loose and packet tea

consumption in domestic market in India.

Despite a steady growth rate, the per capita consumption in India is

still one of the lowest in the world, with 0.65 grams per head. The average

annual per capita consumption of tea in India is relatively low vis-à-vis

other countries like UK (2.24 kilograms), Ireland (2.96 kilograms), Turkey

(2.6 kilograms) and Sri Lanka (over 1.38 kilograms).9

It has been noted during the course of field work that there is a need

for massive promotion for increasing domestic tea consumption in India.10

The figure 2.6 shows that per capita consumption11 of tea in India is very

low and it is stagnant during the period of 1999-01 to 2001-03, compared

to other major countries. It shows that there is high potential to expand

in domestic market. The per capita consumption of tea is very low among

the young population in India. Therefore the regulatory body of the tea

industry along with the other stakeholders has to join together to sustain

the domestic market and explore fresh market potential in the future.

Figure 2.5 Domestic Consumption( in Mn.Kg)


30


Indian Tea Industry and the ‘Crisis’

During 1998-2003 many tea plantations closed down and several others

abandoned by their managements as tea prices tumbled to a record low.

Thousands of workers were not paid their wages for months and basic

facilities like water, electricity and healthcare stopped. In situations where

closure and abandonment have not become a norm, the management was

forced to intensify work by either reducing the number of workers or

increasing the task load. This kind of situation led many of the tea industry

people and civil society organisations to refer it as ‘tea crisis.

The small growers have no control over green leaf prices and price

fluctuations in the auctions directly and immediately affect their price

realisations. Small growers during the crisis went for plunder plucking,

Source: Tea statistics (2003), Tea Board of India

increasing volumes at any cost to survive. Due to their inability to raise

resources, they have also abandoned almost all tea agricultural practices

like pruning, weeding and applying manure.

The consistent and unprecedented fall in tea auction prices, to the extent

that they are even lower than the cost of production, is perceived as the

most important cause of the present crisis. The average auction prices fetched

by tea producers of South India fell from Rs 68.79 per kg in 1998 to Rs

57.10 in 1999 and Rs 40.30 in 2003. The northern tea gardens have not

remained immune to this downtrend. From Rs 80.22/kg in 1998, the

price came down to Rs 69.80/kg in 2001 to Rs 61.32 in 2003.

Figure 2.6 Per Capita Consumption of Tea in Various Countries

in kilograms)

31


Any discussion with the stakeholders will lead to four major reasons

behind the fall in tea auction prices: Falling exports, growing imports,

falling tea consumption in India and rising labour costs.12 The availability

of the excess tea in the market was no doubt the single most important

reason for the fall in tea prices. Although, during the year 2005-07 has

seen improvement in the tea prices which has led to many stakeholders

declare that the crisis is over, the effect of this long crisis is still being felt by

all the stakeholders particularly the marginalised and the vulnerable ones

like the small growers and the workers.

Table 2.4 Demand and Supply of Tea (in million kgs)

Year 1995 1996 1997 1998 1999 2000 2001 2002

Production 754 780 810 874 824 846 854 826

Import 1 1.25 2.61 8.93 9.99 13.43 16.58 22

Total supply 755 781.25 812.61882.93 833.99 859.43 870.58 848

Domestic

consumption 562 580 597 615 633 653 673 685

Export 163.7 160 203 210 192 207 182 201

Total demand 725.7 740 800 825 825 860 855 886

Accumulated net tea stock28.3 69.55 82.16140.09 149.08 148.51 164.09 126.09

Source: Shatadru Chattopadhayay, Productivity, Decent Work and the Tea Industry in Southern

India, ILO, 2005.

32


Small Tea Sector in India

Small Tea Growers in India – an overview

Small growers have been a part of the Indian Tea Industry only for the past

few decades. They were initially confined to Nilgiris district in Tamil Nadu,

and to a small extent in Kerala and Himachal Pradesh. The trend of growing

tea over small areas spread to Assam, West Bengal and Bihar only during

the 90s.

As per the membership of various small growers’ associations in different

states the number of small holdings currently stands at 1,26,256. Only

56.8 per cent (71,676) of these have so far registered with the Tea Board,1

owing to the reason that small tea growers, particularly in the north-eastern

regions do not possess documents for the land they possess.2

Table 3.1 Registered Tea Gardens in India

Region Registered with Reported Percentage

with Tea Board by Associations Registered growers

South India 61773 68000 90.8

North East 5595 45132 12.4

North India 9903 58256 17.0

Total India 71676 126256 56.8

Source: Compiled Report on Small Tea Growers (2006), Tea Board of India

Despite the number of small growers having increased over the period,

especially in the post 90s, large estates still account for major production

of tea (78.8 per cent) in India. In Sri Lanka however, small growers produce

61 per cent of the country’s tea and in Kenya small holdings accounted for

Chapter 3

33


61.6 percentage of production in 2000.3 In India the majority of small tea

growers are from Southern India, mainly the Nilgiris region.

Table 3.2 Share of Small and Estate Tea Gardens in India

Small Growers Big Growers

Region No. of Area Prod- No. of Area Prod-

Estates in Ha uction Estates in Ha uction

Assam 98.2 15.2 14.5 1.8 84.8 85.5

W. Bengal 96.5 8.4 17.1 3.5 91.6 82.9

Others 98.0 42.5 20.3 2.0 57.5 79.7

Northern India 97.9 14.5 15.4 2.1 85.5 84.6

Tamil Nadu 99.6 57.1 55.0 0.4 42.9 45.0

Kerala 97.5 13.0 3.4 2.5 87.0 96.6

Karnataka 50.0 3.9 4.0 50.0 96.1 96.0

Southern India 99.4 41.9 39.2 0.6 58.1 60.8

All India 98.7 20.6 21.2 1.3 79.4 78.8

Source: Tea Statistics ( 2003), Tea Board of India

The number of small tea gardens has registered a high increase in Southern

India, particularly in Tamil Nadu. Around 53.9 per cent of small growers

are concentrated in Southern India whereas the share of small tea growers

in Northern India is 46.1 per cent. Out of the tea produced by small tea

growers in India, Northern India’s share is 54.5 per cent. Of this, small tea

growers in Assam constiute the major share, both in the number of estates

as well as in the production. In Southern India, the major share of

production as well as the number and area of production of small tea

gardens belongs to Tamil Nadu.

Productivity of Small Tea Gardens

Productivity of small tea gardens is based on several factors and there is

consensus on the view that the productivity of small tea gardens in India is

very low as compared to other tea producing regions in the world, namely

Sri Lanka.

Traditionally, India’s competitors for the export market have been

divergently different. Kenya has employed an aggressive tea extension

programme and has increased tea hectarage by over 63 thousand Ha mainly

34


Tab

le 3

.3 S

har

e of

Sm

all G

row

ers

Am

on

g D

iffe

ren

t Sta

tes

in I

nd

ia

(Fig

ure

s in

bra

cket

s sh

ow

th

e per

cen

tage

sh

are

agai

nst

All In

dia

leve

ls

Reg

ion

Sm

all G

row

ers

Big

Gro

wer

sT

ota

l

Nos

Are

aP

dn

.N

os

Are

aP

dn

.N

os.

Are

aP

dn

.

Ass

am4

24

92

41

24

96

277

07

80

22

94

34

37

05

57

43

27

227

06

83

43

33

27

(33

.7)

(38

.9)

(35

.2)

(47.

7)

(56

.0)

(56

.1)

(33

.9)

(52

.5)

(51

.7)

W.B

enga

l8

39

89

50

03

22

45

30

810

3613

15

5776

87

06

11

311

318

80

21

(6.7

)(8

.9)

(18

.1)

(18

.8)

(25

.3)

(23

.6)

(6.8

)(2

1.9

)(2

2.4

)

Oth

ers

727

77

35

521

08

148

99

67

82

92

742

517

32

210

40

0

(5.8

)(6

.9)

(1.2

)(9

.1)

(2.4

)(1

.3)

(5.8

)(3

.4)

(1.2

)

Nort

h I

nd

ia5

816

75

810

49

71

21

23

63

43

014

53

46

25

59

40

34

011

18

6317

48

(46

.1)

(54

.7)

(54

.5)

(75

.6)

(83

.7)

(81.0

)(4

6.5

)(7

7.8

)(7

5.3

)

TN

619

85

431

57

7876

42

28

32

46

26

43

57

62

21

37

561

914

31

21

(49

.1)

(40

.7)

(44

.2)

(14

.0)

(7.9

)(9

.7)

(48

.7)

(14

.7)

(17.

1)

Ker

ala

59

99

481

019

69

15

43

2157

55

80

361

53

36

967

5777

2

(4.8

)(4

.5)

(1.1

)(9

.4)

(7.8

)(8

.5)

(4.8

)(7

.2)

(6.9

)

Kar

nat

aka

16

83

23

216

20

45

56

01

32

21

28

58

33

(0.0

)(0

.1)

(0.1

)(1

.0)

(0.5

)(0

.8)

(0.0

)(0

.4)

(0.7

)

Sou

th I

nd

ia6

80

00

48

05

08

09

65

39

86

66

64

12

5761

68

39

811

471

42

067

26

(53

.9)

(45

.3)

(45

.5)

(24

.4)

(16

.3)

(19

.0)

(53

.5)

(22

.2)

(24

.7)

To

tal I

nd

ia10

0.0

100

.010

0.0

10

0.0

10

0.0

10

0.0

10

0.0

10

0.0

100

.0

Sou

rce:

Tea

Sta

tist

ics(

2003),

Tea

Boar

d o

f In

dia

35


in the small grower sector, since 1992 onwards.4 Sri Lanka has in fact

reduced the overall area under tea by nearly 57 thousand Ha, compared to

the planted area in 1980.5

Productivity patterns in the small tea gardens and large-estate sectors

vary and productivity is high in the small tea sector. In the tea sector as a

whole, the share of production from estates is predominant. India’s

performance (1690 kilograms) is lower than Kenya (2235 kg.) but better

than Sri Lanka (1611 kilograms)6 in terms of average yield per hectare of

total production of tea. Kenya has a much higher growth in yield per Ha

than India.7 As far as regional variations in India goes, the yield per Ha in

Southern India (2004 kilograms) is higher than that of the Northern India

(1601 kilograms). The productivity of Darjeeling is very low (545 kilograms),

and it has pushed down the total productivity of West Bengal (1770

kilograms).8

Table 3.4 Yield of Tea Cultivation

Region STGs Tea Estates

Yield (Kg/Ha) Yield (Kg/Ha)

Assam 1340 1601

Darjeeling 545

W. Bengal 3394 1770

Northern India 1670 1601

TN 1825 2203

Kerala 409 1569

Karnataka 2800 2476

Southern India 1690 2004

All India 1680 1690

Sri Lanka 2300 1875

Kenya 1651 1933

Source: Calculated from Tea Statistics (2003), Tea Board of India

The situation in the small tea sector is different and high productivity is

recorded in West Bengal (3390 kg). This is in contrast to the performance

of small tea sector of Kenya, which is lower than the Indian small tea

sector.9 The productivity of small tea gardens in India is far below that of

36


Sri Lanka (2300) though West Bengal (3394) and Karnataka (2800) show

high productivity.10 The figures below summarize the productivity of tea

sector in India and other major tea-producing countries that are in

competition with India.

37


Economics of Small TeaGrowers in India

SMALL TEA GROWERS IN COONOOR, TAMIL NADU

Migrants and settlers occupied the Nilgiris at various times down the ages.

Dominant among these were tribal communities such as the Kurumbas,

Irulas, Todas, Kotas and Badagas.1 The Badagas2 probably migrated during

the 16th century and are undoubtedly migrants from the plains of Karnataka,

earlier the State of Mysore.3 They are now a major community in the

Nilgiris and occupy the higher to middle (ranging between heights of 5,000

to 6,500 feet) uplands of the Nilgiris. Majority of the Badaga community

are small tea growers and earns their livelihood through selling tea.

The Badaga community initially consisted of only a few hundred people.

They brought with them, traditional technologies that gave them an edge

over other migrant groups. When their exploration for livelihood bore

fruit, the Badagas migrated to the Nilgiris in larger numbers. The British

tracked the tribal population from 1812 when there were only 2207 Badagas.

At the turn of the century (1901) this number had grown to 34176 and by

the 1971 census their strength was 1,04,392. Subsequently the Census

data clubbed them with Kannadigas leaving the actual population of Badagas

open to speculation. 4. Considering the fact that there has been a tendency

towards small family norms among the present generation of Badagas,

currently they are spread over 480 villages with a population of more than

7 lakhs. 5

Nature and Spread of Small Tea Growers

In Tamil Nadu, small tea cultivation is spread over five districts and the

Nilgiris has the largest number of small gardens (619,74). Small tea growers

are scattered over 4-5 regions mainly in Coonoor, Kotagiri and Gudaloor

Chapter 4

38


regions in Tamil Nadu. Though the number of the small growers is large,

their production is less when compared to that of big estates. Most of the

small growers are marginal land-holders and own between half to four acres.

Though there were small tea growers operational in Nilgiris from the late

1970s, the tea cultivation by small growers has witnessed a distinct growth

in the post 1990s and currently the number of small growers has grown to

more than 50,000 in Tamil Nadu. Small tea cultivation in Tamil Nadu

accounts for 55 per cent of the State’s total tea production.

The Nilgiris region constitutes the major share of small tea gardens in

Tamil Nadu. These gardens hold the predominant share of tea production

in Nilgiris, and they contribute 68.8 per cent of total tea production.

99.7 per cent of the total number of tea estates belongs to small tea growers.

Table 4.1 Tea Cultivation in Tamil Nadu

Small Tea Gardens Estate Tea Gardens

(up to 10.12 Ha) (above 10.12 Ha)

Actual

Nos. Area Prod. Nos. Area Prod.

000kgs. 000kgs.

Kanyakumari 1 2 6 431 141

Tirunelveli 1 4 3 796 1692

Madurai 2 13 3 960 1318

Coimbatore 7 56 141 45 11678 26983

Nilgiris 61974 43082 78623 171 18597 34223

Figure 4.1 Growth of Tea Gardens in Tamil Nadu

Source: Tea Statistics (2003), Tea Board of India

39


Tamil Nadu 61985 43157 78764 228 32462 64357

(Percentage of total tea cultivation )

No. Area Prod. No. Area Prod.

Kanyakumari 14.3 0.5 0.0 85.7 99.5 100.0

Tirunelveli 25.0 0.5 0.0 75.0 99.5 100.0

Madurai 40.0 1.3 0.0 60.0 98.7 100.0

Coimbatore 13.5 0.5 0.5 86.5 99.5 99.5

Nilgiris 99.7 69.8 69.7 0.3 30.2 30.3

Tamil Nadu 99.6 57.1 55.0 0.4 42.9 45.0

Source: Tea Statistics, (2003), Tea Board of India.

Majority of the small growers in the Nilgiris were earlier growing

vegetables but when the prices of tea boomed during 1990s most of the

small growers converted their land into tea holdings.6 Despite the large-

scale shift from vegetable cultivation to tea, the present crisis in the tea

sector has compelled growers to think of other alternatives. 7 As one of

the small tea growers observed, “… earlier we used to cultivate vegetables

like cabbage, potatoes etc. Risks were high in this due to wild animals and

the work load was also high. In tea cultivation everyday attention is not

required and we enjoy subsidies for tea cultivation at various levels. I was

not trained for tea cultivation but my neighbours were cultivating tea and

this influenced me to do the same...”8

The pattern of shifting to tea cultivation from the earlier dominant

practice of cultivating vegetables and agriculture crops began long ago. Large

areas of forest land were also converted to tea gardens by small land holders.

The high realisation from tea, and support from the Tea Board were

influencing factors for farmers to shift to cultivating tea, and the trend

grew from the late 90’s. Tea cultivation was also more attractive in terms of

work and was less risky as compared to vegetable cultivation.

The period post 90’s witnessed intensive tea cultivation in Coonoor. There is large-scale

conversion of forest land for tea cultivation. Earlier the region was well-known for vegetable

cultivation and multi-cropping.

Initiatives have now again begun for vegetable and flower cultivation from the community,

as well as the authorities. Fluctuating green leaf prices and the negative impact of monoculture

are the major factors for the new initiatives.

40


Nature of Production

The average leaf production in small tea holdings of Nilgiris is 5000-

6000 kilograms per acre annually.9 The figures vary depending on climate,

and maintenance of the gardens. Small growers give their tea leaves to the

nearest BLF through leaf agents. A few small growers deal with the co-

operative factory. In spite of the relatively low prices they get from the

factory, timely payments and reliability are motivating factors for their

dealings with the co-operative. As one of the growers says, “Though we get

lower prices from the co-operative than we would on the market, we get it

steadily and stocks are not sent back during peak season due to over supply.

It is common that local leaf agents often deny taking green leaves when

there is high supply”10

The factory also provides time-bound loans and other financial assistance

to growers who are members of the co-

operative factory. They also get ‘made

tea’ at lower rates than the local retail

market.11

Most of the small growers share

concerns about low price, insufficient

funding and maintenance being some of

the major problems they are facing at

present in tea cultivation. As price and

quality are correlated, low-quality green leaf is cited as the reason for the

low prices that growers get for their produce. On the other hand, small

growers share that owing to low realisation, which is often below the

expenditure they have incurred on cultivation, it is unaffordable for them

to focus on the quality of leaf. Maintaining consistency in quality requires

greater investments such as timely spraying of medicine, pruning, and timely

application of fertilizers.

Factors for Shifting to Tea Cultivation

� Positive Economics of Scale

� Low-risk owing to longevity of the product

� Low man-days compared to vegetable cultivation

� Availability of subsidies at various level of cultivation

� ’Demonstration Effect’ of the tea cultivation

� Financial support and development schemes for new tea cultivation from Tea Board

Major problems in tea

cultivation

� Low prices

� Insufficient funding for proper

maintenance

� Low quality of the tea leaf

� Lack of associations/networks

41


Plucking of tea leaves begins usually at 8 am in the morning and

sometimes goes up to 4 pm. While the leaves are usually plucked by hand,

in some cases, knives are used to cut the leaf. This becomes necessary,

particularly if the duration of the plucking period is more than the usual.12

While using knives helps increase the quantity of leaves that can be plucked

in the time available, it affects the quality of the leaf.

Well-maintained gardens however pluck the leaves at regular intervals

and are able to sell them at relatively higher prices.13 When gardens are not

properly maintained leaf yield is not proper and the grower lets the leaf

grow for longer periods. Such leaves do not fetch the standard prices that

prevail in the market. As a result the prices fetched do not leave small

growers with any surplus that can be invested in the garden.

Since a majority of them have less than 2 acres of land for tea cultivation

they are not able to approach any mainstream banks for loans. The banks

on their part do not encourage the individual farmer due to concerns of

receiving repayments on time.

Workers in Small Grower’s Tea Gardens in Tamil Nadu

An overview of the employment in the tea gardens in Nilgiris shows a

declining trend. Large numbers of

labourers are moving to nearby

villages in search of alternative jobs.

At one time, labourers migrated to

work in tea plantations both from

within the country and outside.

While workers from outside the

country were mainly from Sri

Lanka14, internal migration was mostly from the neighbouring districts of

Tamil Nadu. The first generation of international migrants was absorbed

in tea private and government plantations. Currently however, Sri Lankan

migrants who worked as seasonal, casual labourers in small tea gardens are

without work.

The patterns of work allotment

Female workers are mainly appointed as ‘leaf pluckers’ in small gardens.

As most of the gardens are away from the main road, or from the owner’s

house, male workers are employed to carry the leaves as head-loads from

the gardens. All workers hold temporary jobs in small tea gardens. Often

family members work in their gardens and appoint one or two female

A majority of the workers are migrants.

They include migrants from Sri Lanka and

other neighbouring districts of Tamil Nadu.

Currently a large portion of the labourers

are moving to nearby villages to find

alternative jobs in garment factories and

other small-scale industries.

42


workers in peak season for plucking the green leaf. Almost all workers are

temporary and get wages depending on their work. There is no other

provision for welfare schemes other than the usual daily wages paid to

workers in small tea gardens in Coonoor. Occasionally workers are given

cash/clothes during festival days by small growers. There are no formal

provisions or standards for payments during regional festivities15 and it

depends entirely on the goodwill of the employer.

Currently the demand from tea gardens for workers is dwindling owing

to the crisis in the tea industry. Tea growers are finding it unaffordable to

spend money on their tea gardens, and reports indicate that a mere 15-20

per cent of small growers have followed good maintenance practices in

their tea gardens in the recent years..

Work in tea gardens is usually gender specific. Plucking of leaves is

mainly performed by female workers. Male workers find it very difficult to

earn a livelihood as they find jobs for hardly 10-15 days in a month, as only

pruning, medicine spraying, etc are offered to them. The crisis in the tea

industry had adversely affected workers who depend solely on tea gardens

for their livelihood. Since tea-growing areas are geographically isolated,

workers find it very difficult to look for alternative jobs.

On an average, women earn Rs.60/- per day, while men get paid Rs.70/

-. The minimum wage has been fixed for tea plantation labour by the

Government for Nilgiris, Tamil Nadu16 at Rs 72. The wage for carrying

leaves is Rs.2 per sack. While workers get paid regularly, availability of

employment is sporadic.

As mentioned earlier, alternate jobs are hard to come by, and many

workers are migrating to nearby villages and to other small scale industries

in search of employment. Women workers migrate to other districts to

work in garment industries. Migrant labourers from Sri Lanka however do

not have other options for livelihood as they have no knowledge of any

profession other than working in tea gardens. As small tea gardens are

basically small plots scattered over different regions workers engaged with

small growers do not have representation in any unions or associations.

Workers from tea manufacturing factories belong to unions but this

entitlement is not available to casual and seasonal workers in small tea

gardens.

Workers in small tea gardens are challenged by poverty and deprivation.

Their socio-economic situation has deteriorated down the years. Many of

43


them are in the clutches of local money-lenders are have huge debts to

repay. They live in colonies built by the local panchayats and workers do

not own the houses they live in. The houses themselves are mud huts,

and devoid of electricity, water connections and sanitation facilities. Since

many of them are migrants they hardly own any land nearby gardens. They

rely on money lenders as only source of credit in any kind of expenditure.

SMALL TEA GROWERS IN IDUKKI, KERALA

A Short history of Tea Cultivation in Kerala

In 1877 Kerala Varma, the Raja of Poonjar (a minor principality in the

erstwhile Travancore state which includes the present day Indian state of

Kerala), sold 227 sq. miles of thickly forested and largely unexplored area

named Kannan Devan Hills to John Daniel Munroe, a British planter.

This led to the birth of Kannan Devan Hill Produce Company. Kannan

Thevan was name of an adivasi who showed the hills to the planters. The

hills named after him and today Kannan Devan Hills is internationally

known for its tea production.

In 1878 the Maharaja of Travancore recognized J.D. Munroe and the

North Travancore Land Planting and Agricultural Society. Members of

the society developed their own estates in different areas of the high ranges.

The first cultivation was undertaken by A.W. Turnor at Devikulam area in

1877.17

During the initial years, the total area under tea cultivation was 200-

500 acres. When planters from Sri Lanka began to come in, the area of

cultivation increased tremendously. The area of cultivation increased from

3352 acres (during 1885-90) to 34,555 acres in 1914. In 1900, Kannan

Devan Tea Company alone had 19 estates. There were several reasons for

accelerated development of tea and other plantation crops in Kerala.

Important among them were:

� Suitable climatic conditions

� Availability of workers at low wages

� The Company Act of 1862

� Strict rules for labour

� Introduction of banking

� Coming of roads connecting plantations and ports

9 percent (36,821 Ha) of the total cultivation area of tea in India

44


currently is in Kerala.

The Idukki District is characterized by large scale migration of people

from Kerala’s main land and also labourers from neighbouring state of

Tamil Nadu. Between 1890-1920 people came here to work in plantations,

while during 1920-30 the migration from plan land mostly from Travancore

was on account of the poverty, due to the post World War effect.

The period of 1933-47 recorded a huge migration for the reason of a

development project, the Pallivasal Project of Kerala. The Pallivassal Hydro-

electric Project, the first such project in the State was initially constructed

by the tea companies for their industrial use.

During 1946 Government allotted forest land to 2000 persons while

in 1950, colonies were established for ex-servicemen. In 1951 under the

Grow More Food scheme, 1500 acres of land was allotted among 1000

persons. This again was the cause for large-scale migration into the Idukki

district. Between 1960-1970 large numbers of people from neighbouring

districts migrated on account of the construction of the historic Arch Dam

at Idukki. Between 1901 and 1971 the population of the district has grown

16 times and is on a higher scale compared to the rate of growth of

population in the rest of the State.18

During the period of 1971-81 the population of the district showed an

increase of about 27 percent as against an increase of 19 percent of the

State as a whole (Census Reports 1981 and 1991). There has been large-

scale conversion of forest areas into arable lands over the past two decades.

The deforestation process started in the High Ranges with the advent of

the plantation industry by the end of the 19th century. The evergreen

forests in the area were totally destroyed and substituted with tea

plantations. 19 This resulted in an increase in population in the hilly taluks

STATISTICS FOR IDUKKI DISTRICT

Total number of tribal settlements 245

Number of tribal settlements in Thodupuzha 74

Number of tribal settlements in Peermade 34

Number of tribal settlements in Devikulam 126

Number of tribal settlements in Udumbanchola 34

SC/ST population 2.07 lakhs20

Total area of tea cultivation 23557 Ha21

45


of the district, especially in Udumbanchola and eastern parts of

Thodupuzha taluk. The inability of the industrial sector in the district and

neighbouring areas to absorb the labour force also acted as a catalyst for

large scale encroachment of forest areas.

Production and Growth pattern of Small Tea Cultivation

The study mainly focuses on Peermade and Pambanar regions of Idukki

District of Kerala. Rubber, coconut, cardamom and tea are mainly cultivated

in the region. When profit from the cultivation of other crops became

marginal, profits from tea began to grow due to its longevity and relatively

low initial investment.22

A majority of small tea growers are not trained. Some of them were

supervisors and workers in tea estates. A large number of them were peasants

and owned marginal lands. As in the other tea producing regions, the late

90s noted the mushrooming of small growers in this region.

Figure 4.2 Growth of Tea Gardens in Kerala (No. of tea orchards)

Source: Tea Statistics (2003) Tea Board of India

After peaking in 1993-1998 the sector shows steady growth. Though

the crisis period witnessed the closing down of many tea estates, the same

time also saw the emergence of a number of small growers in Kerala.

Profile of Small Tea Gardens

In Kerala small tea gardens exist mainly in seven districts. Idukki(4857),

Kottayam(953) and Waynadu(69) have the highest number of small tea

gardens. Small tea cultivation has a 3.4 per cent share of the total tea

production in the State. The table below shows actual number of the tea

gardens in both small and big estates and its share in total cultivation of

Kerala, based on 2002 data.

46


Table 4.2 Tea Cultivation in Kerala


(up to 10.12 Ha) (above 10.12 Ha)

Actual

No. Area Prod No. Area Prod.

Palghat 28 21 70 5 831 2845

Malapuram 1 174 0

Trichur 1 529 1467

Trivandrum 1 3 5 962 320

Quilon 89 138 14 1210 349

Eranakulam 2 2 0 0 0

Kottayam 953 776 226 1 64 31

Idukki 4857 3773 1498 99 22980 38709

Waynadu 69 97 175 28 5407 12082

Kerala 5999 4810 1969 154 32157 55803

(Percentage of Total Tea Cultivation )

No. Area Prod No. Area Prod.

Palghat 84.8 2.5 2.4 15.2 97.5 97.6

Malapuram 0.0 0.0 0.0 100.0 100.0 0.0

Trichur 0.0 0.0 0.0 100.0 100.0 100.0

Trivandrum 16.7 0.3 0.0 83.3 99.7 100.0

Quilon 86.4 10.2 0.0 13.6 89.8 100.0

Eranakulam 100.0 100.0 0.0 0.0 0.0 0.0

Kottayam 99.9 92.4 87.9 0.1 7.6 12.1

Idukki 98.0 14.1 3.7 2.0 85.9 96.3

Waynadu 71.1 1.8 1.4 28.9 98.2 98.6

Kerala 97.5 13.0 3.4 2.5 87.0 96.6

Source: Tea Statistics, (2003), Tea Board of India.

47


Price and production

Constant low realisation is a major problem for tea cultivation at

present. The quality of tea leaf is also an issue and closely related to the

prices. As expressed by a small grower…

“…getting good prices for leaf will in turn help us to grow good leaf.

Proper maintenance will then be affordable. It is widely accepted that

two leaves and a bud is considered of good quality but we get lower

price even for best quality green leaves. Due to this lower price we sell

dark colour leaves by assuring more quantity. Now, there is not much

difference in our profit whether it is fine leaves or dark leaves…”23

Lack of associations and proper networking among tea growers are also

major issues. ‘Though there are some associations, they are mainly affiliated

to the mainstream political parties, are politically oriented and very often

fail to address the issues of the small growers’.24 Growers can negotiate

higher prices for their leaves only through associations. Now they are not

in a position to bargain for higher price from leaf agent and avail financial

assistance from any bank.

A majority of small growers have not registered and due to this they are

unable to avail of subsidies under various schemes from the Tea Board.25

The Tea Board also reports that Kerala has very few registered buyers.26

There are however some recent initiatives among small growers to come

together and form new associations and begin dialogue with the Tea

Board.27 As reported by one of the small growers and the member of an

association

“…here nobody speaks for us, some of the BLF owners take benefits

from the Tea Board on our behalf with fake registration documents,

and we hardly get anything from them. Our prime objective now is to

register with the Tea Board to get guidelines and time to time about

available subsidies …”

The role of small growers in the value chain of the tea industry is very

minimal. During a discussion with small growers in Peerumade, Kerala it

was found that they were not aware of their end consumers. There were

also unaware of the destination for their tea and the process through which

the tea reached the market, either as ‘made tea’ or in packets.

They knew the tea chain up to the BLF and some of them were aware

that the BLF sold tea to the auction centres. However, they had no

knowledge what price their product fetched at the auction centre and did

48


not relate it to the prices they received at BLFs.

“…we know that we are getting low prices and BLFs and the leaf agent

take away the major share of the profits. However, none of us know the

price realization of our tea from the auction centre. We are also not

aware who the major players in the value chain of tea are…”28

Most small growers do not have direct contact with BLF owners. The

price and the quality of their tea leaves are determined by the local leaf

agent from time to time. The role of small growers in the whole value

chain process is marginal and in most cases, limited to the level of local leaf

agent. They have no idea where the tea goes and how much the tea fetches

at the auction centre and believe that ‘globalization’ is the cause for low

prices.

Many small growers observed that though wages had increased over

time the price of tea had declined drastically. A small grower noted, “Earlier

we could not sell our tea leaves properly. The leaf agent would sometimes

not collect it. For lack of any other option, we were forced to sell our tea

leaves at low prices, sometimes lower than Rs.2/- per kg. There were times

we had to send the green leaf to Tamil Nadu. That situation has changed

now. At least we have a market, now that new BLFs are coming up”. 29

While the tea crisis has affected the industry all over India in general, it

has affected the green leaf market and workers in tea producing regions

specifically. The tea crisis in Kerala has had more impact in Idukki, Ponmudi

and Wayanadu. There are three kinds of plantations in the Peerumade

region:

� The first category is that of plantations where plucking is still going

on and managements have not been paying regular wages for years.

Workers get only weekly cash advances, which are much lower than

their minimum wages.

� The second is where managements have abandoned the plantations

but plucking takes place with the help of trade unions.

� The third kind is the one where no plucking is taking place and

workers are slowly leaving the estates.

Workers are in severe crisis in the last two kinds of plantations. They

are without work, wages and almost in a stage of chronic destitution.30

Since there is no option for their livelihood, workers in some estates pluck

the green leaf and sell it in the market. This situation may impact the

small tea growers market now since workers of closed tea estates have also

49


begun selling tea leaves to BLFs. Due to the increase in supply the price of

green leaf has come down.

As one of the small growers says, “Though we were getting low prices

for our tea leaves some of the BLF owners became very rich over the period.

Earlier one of the BLF owners used to come and take the leaf as head load.

The status and economic condition of the BLF owner has improved so

much that he is one of the biggest BLF owners in the region.”31

The quality of green leaf has also deteriorated over time. Some of the

BLF owners says, “Many of the small tea growers do not maintain their

gardens. Some of them provide good quality tea but when it comes to

total leaf the average quality is low grade. They have also added that leaf

agents often mix different quality of green leaves to get better price from

BLFs. The duration of time which leaf agent takes to carry green leaves

from the garden to the factory also determines the quality of the tea that

would be manufactured out of those leaves. In many cases our prices are

based on the quality of leaf and we do give good prices. We give steady

price for green leaves even if there is a high fluctuation of price of the made

tea…” .

The Peerumade Development Society (PDS) is one of the manufacturing

units that have a widespread association with small growers in the region.

Small growers under the network of PDS follow organic practices and also

get training and other necessary technical advice. There is a large number

of small tea growers associated with the PDS. The price mechanism is

based on their price structure and on standard quality measurements. The

detailed function of PDS is analysed in later sections..

Workers at Small Grower’s Tea Gardens

Workers in Kerala are offered casual and seasonal work in most small

tea gardens. More than 90 per cent of the workers are working as daily-

wage and temporary labourers. Family members of small tea growers also

work in their gardens along with the workers or in some cases, by

themselves. As elsewhere, in small tea gardens also, the worker population

is dominated by women. Workers are mainly appointed for leaf plucking

and due to its nature it is mostly offered to female workers. Men usually

find less or no employment. Most of the men, including Tamil migrant tea

workers, are construction workers from nearby cities like Kochi.

Some of the workers from the closed and abandoned estates also have

moved into the small tea gardens as casual workers in search of livelihoods.

50


Around 22 estate factories have closed in Idukki district itself.32

The closed estates have resulted in the supply of cheap labour. Since

there are limited alternative jobs in the region many of the workers are

forced to work in small tea gardens for low wages. Housing, water and

sanitation facilities are also poor in the areas where the workers stay.

Most of the workers belong to the backward, middle and lower caste

groups such as Ezhava, Muslim and Dalit social groups in and outside the

region. The area also has a large tribal population. A small number from

tribal communities works as labourers in small tea gardens in some regions

of Idukki district. The workers also include early migrant labourers from

neighboring districts of Tamil Nadu.

Wage Rate and Daily Wages

Wages are relatively high in Kerala as compared to other tea producing

regions in India. The rates are however low when compared to other jobs

in Kerala. The district is also known for other agriculture and plantation

crops such as rubber, coffee, cardamom etc. Tea cultivation constitutes

only 11 per cent when compared to other crops.33 In the recent past, tea

labourers have been migrating to other plantations due to inadequate wages

in tea gardens. As a worker remarks, “Though we have worked as tea

workers since childhood we are now forced to leave and find jobs in other

plantations. We migrate with family and find temporary shelters near the

plantations. There are limitations to this also. Even though there are jobs

available on rubber plantations, since we are not trained to be rubber

tappers, we are unable to work in them.”34

Most of the small tea gardens except those associated with Peermade

Development Society (PDS) do not have fixed daily wages. The wages depend

on the quantity of tea leaf the workers collect and they are paid at the rate

of Rs.2/- per kilogram. This results in the workers having to work more.

The perspective of the garden owners is different. As one owner remarks,

“Since we get low prices from the market for green leaf, it is not economical

for us employ labour on daily wage basis. Therefore we pay them wages

based on the weight of the leaves they pluck per day. We are not strict

about the what form of plucking should be done though we do stress on

‘two leaves and a bud’.”35

Majority of the workers plucking leaves are women and it was reported

that their children often help them during the plucking. Since their wages

depend on the weight of the leaves they pluck, children help their mothers

51


get the ‘minimum wages’. When the labourers are unwell, they find it

difficult as they have to pluck a certain quantity in order to earn their

minimum wages. Though child labour is not encouraged in tea gardens,

children of workers help their parents when they are unwell. One of the

workers says, “Our wages depend on the market prices for the leaf. If the

prices are high we get better wages. If not, our wages also drop and we

don’t get the wages on time either.”36

The workers have very little role to play in maintaining the quality of

leaf. As one of them remarks, “We were plucking the leaf for the past

several years; we do pluck according to the direction from the owners of

tea gardens. We were told that two leaves and a bud is best quality and get

highest price but we were directed to collect upto 6-8 leaves so that volumes

are higher.”37 The workers often strip tea leaves instead of plucking them

with their fingers, the reason for this being their urgency to pluck as many

leaves as they can, as their wages depend on the quantity they pluck.”38

Despite the presence of several active trade unions in the tea sector,

workers in the small tea gardens are not associated with them. As a trade

union leader in Kerala says, “Presently the issues of workers in small tea

gardens are unaddressed. Unions have a significant role to play in helping

workers avail benefits, get their minimum working days and minimum

wages etc. on time. Owing to the unstructured nature of their work, and

that they are scattered over a large area it is difficult to unionise these

workers. Additionally, most of the workers in small tea gardens have only

casual or temporary status and this makes it difficult to address their issues

collectively.”39

SMALL TEA GROWERS IN WEST BENGAL

Brief history of Small Tea Growers

The history of small tea growers in West Bengal can be traced to the

80’s. But widespread development of small tea gardens began in the post

90’s. The tea gardens are situated in the northern region of West Bengal,

mainly Darjeeling, Dooars and Terai. As in other tea producing regions,

these tea gardens were earlier known for other agricultural crops mainly

pineapple. The areas were also utilized for paddy and jute cultivation. The

area recorded extensive tea cultivation from the late 1990s onwards. This

period also saw the deepening of the tea crisis in plantation sector. The

contradictions in the nature in the two models i.e. plantation vs small tea

52


gardens in India also became evident at about this time.40 The table below

shows the trend of tea cultivation in West Bengal since 1961 onwards.

What would be interesting to note here is that the big plantations have

actually come down in number and increase in terms of absolute number

is primarily due to emergence of large number of small tea growers.

Although the northern districts of West Bengal are among the oldest

tea-growing regions in the country, the presence of small tea growers there

is relatively new. Several reasons would appear to lie behind this, not the

least of which was the state policy of land redistribution pursued aggressively

since the late 1970s. Under this, the ceiling-surplus lands that had vested

with the state were progressively assigned to landless farmers both for

cultivation and for homestead purposes, leaving little land that could be

granted towards new tea leases. Also, tea in West Bengal has remained

largely confined to the traditional growing areas of the Darjeeling hills,

the Terai and the Jalpaiguri Dooars, where the conversion of forest lands

into revenue lands reached a virtual standstill after Independence. In any

case, most of the larger tea estates situated in the area were established

well before the 1930s.41

From the mid-1980s onwards after a tea boom recurred, the West Bengal

tea industry constantly sought release of additional land by the Government

to the plantations. Since most of the vested land acquired through the

implementation of land ceilings had already been exhausted through

redistribution to landless beneficiaries, there was a look out for models

through which tea production could be augmented. Hence, the Indian

tea industry suggested that small grower model could be explored. This

would mean tea production by ex-tea workers and others living in the

vicinity of the tea estates, who would sell green leaf to the nucleus factories

at prices determined on the basis of green tea quality, and the prices of

made teas. The Indian tea industry contemplated that the small grower

principle would allow the spread of tea cultivation into virgin areas where

no tea factory existed at the time.42

For the marginal landholder who is faced with the alternative of growing

a single rainfed crop without the accompanying wherewithal to invest in

modern agricultural inputs, this arrangement has made economic sense,

since it offers 174 assured mandays of work per ha from the fifth year

onwards, against the bare minimum generated by subsistence cultivation.

53


The estate also gains because the wage offer made to the former landholder

is lower than the prevailing statutory plantation wage, primarily because

the status of the new plantation does not attract the attention of Plantation

Labour Act of 1951.43

The small grower model also offered greater economies of scale to the

estates since they no longer had to internalise the social costs of labour

reproduction. The growth in small grower operations was rapid and showed

up in increasing levels of labour casualisation, rather than in the expansion

of registered tea factories and estates. Nevertheless, since the higher margins

created by reduced labour costs in combination with a price upswing at

the tea auctions made the BLF sector an increasingly viable investment

option, it was inevitable that the number of BLFs would also increase

rapidly and control over small tea growing operations would pass from the

nodal estate sector to the BLFs. This second phase of development also

allowed smallholder tea growing to be taken up well outside the periphery

of the traditional tea region. During the subsequent auction price crash,

the BLFs were able to steal a march over the integrated tea estates because

of their costing advantages and also their favourable labour economics.44

Figure 4.3 Growth of Tea Gardens in West Bengal


Tea Cultivation of Small Tea Growers

In West Bengal small tea cultivation is seen predominantly in two

districts i.e. Dooars and Terai. Darjeeling has no small tea cultivation. The

table below shows the actual number of tea gardens in both small and big

estates and its share in total cultivation of West Bengal based on 2002

data. The number of tea gardens under small tea cultivation comes to 96

per cent whereas total production from small tea gardens has a mere 17 per

cent share of out of the total tea production in West Bengal . This is

54


primarily because most of the small holdings are below 10.12 hectares. So

in absolute terms the small holdings comprises bulk of the tea gardens but

when it comes to size hectres after hectre of tea are produced in few large

tea plantations. In Terai district including West Dinajpur, small tea growers

produce 39 percent of the total production.

Table 4.3 Tea Cultivation in West Bengal


(up to 10.12 Hct.) (above to 10.12 Hct.)


(in ha.) 000kgs (in ha.) 000kgs

Darjeeling 0 0 0 85 17463 9180

Dooars(incl.

Cooch Behar) 2825 3000 11302 158 69792 113933

Terai (incl.

West Dinajpur) 5573 6500 20943 65 16358 32663

West Bengal 8398 9500 32245 308 103613 155776

(Percentage of total tea cultivation )


Darjeeling 0.0 0.0 0.0 100.0 100.0 100.0

Dooars(incl.

Cooch Behar) 94.7 4.1 9.0 5.3 95.9 91.0

Terai (incl.

West Dinajpur) 98.8 28.4 39.1 1.2 71.6 60.9

West Bengal 96.5 8.4 17.1 3.5 91.6 82.9

Source: Tea Statistics (2003), Tea Board of India.

The emergence of small tea holders registered an increase from 2001

onwards, while the plantation sector in tea industry showed a decline. As

small grower operations expanded, the average size of tea estates declined

between 1990 and 2000 from 416 hectares to 128 hectares in the Dooars,

and even more dramatically from 163 hectares to 23 hectares in the Terai.45

It is important to analyse why and how the new model in tea industry

emerged in the crisis period. The labour in the small tea sector consists

mainly of temporary workers and the risk factors in terms of cost-profit

ratio are also less.

55


Many of the issues are linked to the problems they have with registering

with the Tea Board. Most of the growers grow tea in their own land or

occasionally on Government, patta, R.R or tribal lands. In West Bengal it

is mandatory to take N.O.C or long-term lease for tea cultivation from the

Land and Land Reforms (Land LR) Department. Unfortunately, the attitude

from the L and L.R Department towards granting N.O.Cs for tea cultivation

to the growers is far from co-operative. This aspect according to the small

growers and the Association of Small Growers in West Bengal is vital and

needs to be settled soon. The following figure gives the total N.O.C petitions

received and issued during 2000-2005. This includes applications up to

30-06-2001.

Table 4.4: Details of N.O.C. Petition by Tea Growers to the District

Land and Land Reforms Department, Government of West Bengal

District Total petition received Total N.O.C issued

for N.O.C. up to 30-12-2005

Jalpaiguri 1960 620

Darjeeling 1947 865

Uttar Dinajpur 2005 249

Coochbehar 129 49

Source: V Chakraborty (2006)

Financial assistance and subsidies can be availed only by those small

growers who have registered with the Tea Board. As per figures of the Tea

Board only 166 (2 per cent) small growers are registered, and can avail

subsidies, whereas in Tamil Nadu, 70 per cent of the small growers are

registered with the Tea Board and can avail financial assistance for cultivation.

Lack of technical knowledge among growers is also a problem in the

small tea sector. Several cultivators were cultivating other crops mainly

pineapple before shifting to tea cultivation.46 BLF owners indicate that

growers need training on different aspects of cultivation with a view to

improve the quality of leaf.47 Cultivators depend on the local market and

buy pesticides of low price and quality as they do not have proper

information. They do not have information on proper ways to apply the

pesticides. For instance, “…it is widely accepted that medicine spray should

be applied just after plucking. But some cultivators apply it before plucking.

As it is visible on leaves it fetches low prices in the leaf market as well...”48

56


Low prices of green leaf are one of the major problems persisting in

small tea cultivation in the State. The growers get little or no financial

assistance from the Tea Board or any other financial institutions such as

banks. They take cash advances or credit from the leaf agents to meet running

cultivation costs. Therefore they have to give the green leaf to the same

agent though they it might be more advantageous to sell their produce to

estate factories. This reduces their bargaining options and results in

dominance by the leaf agents..

Similar to the other regions, in West Bengal as well, most of the

cultivators, particularly especially marginal farmers (those who have below

5 acres), are not aware where the tea goes from the production sector.

Their role is limited to the leaf agents. They agree that the criteria for

quality are laid down by the BLFs and that the high quality tea from BLFs

goes to the private market rather than to auctions. Low grade tea goes to

auctions and also fetches low prices. Small growers are of the opinion that

the price they get is very low even when they supply good leaf. They believe

that the Tea Board and Government must intervene in the production

sector and a price-sharing formula must be implemented. The present

price of leaf varies between Rs 5.45-Rs. 7 per kg. though they usually get

Rs. 6 per kg. This has declined from the previous year’s rate of Rs 7 per kg.

The price realization of green leaf in small tea sector from 2000 onwards is

listed in the table below.

Table 4.5: Price Realisation of Green Tea Leaves in West Bengal

Year Average Price.Rs/Kg

2000 6.02

2001 7.11

2002 5.89

2003 5.30

2004 7.71

2005 5.48

Source: Bijoy Gopal Chakraborty, United Forum (2006)

Though the Tea Board has set out a price-sharing formula, it is yet to be

implemented in this region. According to the formula, out of the total

sale proceeds of a BLF, 60 per cent must go the growers. However BLFs sell

only marginally in auctions and the good quality tea is sold directly in the

market. As they fetch low prices through auctions, it is difficult to

57


implement the ‘price-sharing’ formula. It has been noted that in many

areas in Assam (discussed below separately), small growers get higher prices

than through the formal price-sharing formula. Small growers also note

that, “Though there is a price-sharing formula which is applicable for small

growers it is not being practised here. We feel that Tea Board should

intervene and there should be a mechanism to monitor the leaf market

and the entire market mechanism.”49

Wages for workers take up a major portion of the total cost of

production. Since wage itself are unaffordable, small growers fail to provide

welfare schemes to the workers. Since they hardly get any subsidies they

have to bear the costs entirely by themselves. Though many factors have

changed over time, the small growers feel that if they get better prices they

could improve the facilities on the one hand and improve on the quality

of leaf on the other.

There are options for selling the green leaf to estate factories if they can

provide quality leaf as per factory standards. Some of them agree that if

they could provide good socio-economic situation to the workers they can

improve the productivity of labour and production as well. Initial

investment and running expenditure however are increasing and create a

huge gap between the expenditure and returns.

The introduction of Self-Help Groups (SHGS) in the small tea holdings

has brought about a positive change in the sector. For instance, the first

SHG named Panabari Small Tea Growers’s Society formed in Panbari village

of Maynaguri Block, in Jalpaiguri District, is working successfully. It was

formed two years ago and fetched better prices for green leaf. SHGs could

improve the quality of leaves and negotiate for better prices for green leaf

with BLFs and leaf agents in the locality. The SHGs could do so as they

were entitled for different government schemes which were earlier not

available to the unregistered small tea growers. The SHG initiated

programmes like collection of leaves in such a way which minimises damage,

provided transport facilities to interior places to carry leaves and storage

facilites in different regions and also provided short term financial assistance

to the growers to meet immediate expenditures. At present there are eight

such SHGs working in the small tea sector in North Bengal.50

Workers in the Small Tea Gardens

The workers in small tea gardens are mostly casual/temporary workers.

Their wages are often less than the official wage rate of the State. In many

58


cases families of small tea gardens work in their own gardens and temporary

workers are employed only in the peak season or for plucking leaf. The

estate workers from the closed tea gardens also work as temporary workers

in small tea gardens.

No formal labour legislations or welfare schemes exist in small tea gardens

and workers get only their wages. However, there are cases of support

provided to workers in an individual basis by some small growers. Male

workers do not find jobs in small tea gardens and most of the jobs such as

pruning, drainage, applying manure etc, which are usually done by the

small growers themselves and majority of the employment is given to women

workers primarily for plucking activities.. The small growers who have 20

acres or more land however do provide some benefits and have some welfare

provisions for the workers other than the usual wages. However, it not

based on a formal system and depend to large extent on the benevolence

and the financial capacity of the small grower.

Owing to scarcity of jobs in tea garden the workers look for alternatives

and several of them have found work in stone crushing fields. When the

plucking season is over (December-February), some of them find jobs as

stone crushers. A drastic increase has been noted in the number of tea

workers, including women and children in stone-crushing fields. There are

hardly any jobs available for the workers who depend on the tea gardens in

the area of North Bengal. Some go to Sikkim and Jharkhand in search of

jobs while the others survive on wild roots and tea flowers.51

While the workers do not appear to have any specific hazards associated

with the tea industry, they suffer from nutritional problems, minor injuries

and other seasonal illnesses. They are also prone to epidemics due to high

malnutrition and water-borne diseases. Unlike in the estate sector, workers

in small tea gardens have poor access to health facilities.

Trade unions are active in the estate sector but the small tea sector does

not have active unions. Though there are initiatives to unionise workers in

small tea gardens they have not had much impact. Trade unions for small

tea garden workers have inherent constraints due to the nature of their

jobs, which is casual/temporary. They have issues like problems of low

wages and other social security measures, which need to be addressed. It is

also noted that benefits (especially for pregnant and breast-feeding mothers)

and government relief programmes like Integrated Child Development

Scheme (ICDS) and the Mid-Day Meal Scheme (MDMS) are irregular,

59


inconsistent, and in some cases, inadequate or entirely absent. Workers are

often not aware how to make use of the schemes and provided by the Tea

Board and other Government institutions. Many workers have no idea as

to the existence of relief or Public Distribution Systems of Government

and where they do they have no knowledge about the procedures. They are

also uninformed about their rights under existing labour laws.52

SMALL TEA GROWERS IN ASSAM

The spread of small tea gardens began in early 90’s and peaked in late

90’s. The number of tea gardens increased specifically from 1993 onwards

and the numbers continue to grow.


Figure 4.4 Growth of Tea Gardens in Assam

In Assam small tea cultivation is spread over ten districts and is

concentrated in four districts that have more than 95 per cent of the tea

gardens. They are Dibrugarh (98.9 per cent of total number of tea gardens

in the district), Sibsagar (98.5 per cent), Lakhimpur (97.2 per cent) and

Karbi Anglong (96.7 per cent). Total number of Small tea gardens shares

98.2 per cent of the total number of tea gardens in Assam whereas the

their share in production is only 12.8. The table below shows the actual

number of the tea gardens in both small and big estates and its share in

total cultivation in Assam, based on 2002 data.

Small growers in Assam get relatively better prices. At present Rs.11/- is

the average price for tea leaves/kg. As one of the officials of the Tea Board,

Assam says, “There are several new BLFs in the region. They are technically

better equipped for manufacture as compared to many of the estate factories.

If they get good green leaves they can produce quality ‘made tea’ which

60


Table 4.6: Tea cultivation in Assam

Districts Up to 10.12 Hectares Above 10.12 Hectares

Actual

Nos. Area Prod. Nos. Area Prod.

000kgs 000kgs

Darrang 1446 853 1229 94 40840 74514

Goalpara 251 374 566 12 3149 5465

Kamrup 41 53 108 13 3401 4326

Lakhimpur 448 252 356 13 4541 8723

Dibrugarh 22590 25762 36012 244 67936 122994

Nowgong 341 253 334 23 7788 11362

Sibsagar 16893 12809 15367 256 63953 99876

Cachar 102 340 350 104 32435 45219

N.Cachar 0 0 0 8 4071 4340

Karbi Anglong 380 553 963 13 1320 1223

Assam 42492 41249 55285 780 229434 378042

Percentage of total

Darrang 93.9 2.0 1.6 6.1 98.0 98.4

Goalpara 95.4 10.6 9.4 4.6 89.4 90.6

Kamrup 75.9 1.5 2.4 24.1 98.5 97.6

Lakhimpur 97.2 5.3 3.9 2.8 94.7 96.1

Dibrugarh 98.9 27.5 22.6 1.1 72.5 77.4

Nowgong 93.7 3.1 2.9 6.3 96.9 97.1

Sibsagar 98.5 16.7 13.3 1.5 83.3 86.7

Cachar 49.5 1.0 0.8 50.5 99.0 99.2

N. Cachar 0.0 0.0 0.0 100.0 100.0 100.0

Karbi Anglong 96.7 29.5 44.1 3.3 70.5 55.9

Assam 98.2 15.2 12.8 1.8 84.8 87.2

Source: Tea Statistics, (2003), Tea Board of India

helps them obtain high price realisation from the market”53 . It is important

to note that one of the BLFs, TEAMFCO, achive high price realisation

61


and they have also focus to improve the

development of the small growers.54

Small growers face several problems while

collecting and transporting green leaf. There

was a long wait before they could supply the

leaf to the agent, and the leaf would then

reach the BLFs late. Infrastructure such as roads and vehicles to transport

the leaf are poor. At present there is no provision to transport the green

leaves directly from the tea gardens to the BLF other than through the leaf

agents. Distances from the garden to BLFs are long in Assam. For instance,

most of the BLFs either in Lahoal or in Tinsukia are situated near the main

road. As the agent collects leaf from different small growers, it sometimes

takes till evening to reach the BLF.

Small growers in Assam especially in the Tinsukia region belong to

associations of small growers. The association members interact with the

Government of Assam regarding necessary steps to improve the situation

of small growers in Assam. One of the members however points out, “Many

of the small growers do not come to us when they get good prices, they

approach us only when there is a crisis, or they have a problem with prices

and this affects our functioning as well.”

Small growers face a shortage of insufficient skilled and trained labour,

as unskilled and inexperienced local surplus labourers are engaged in the

small tea gardens. Former tea garden workers also from a major portion of

the labourers since opportunities for alternative jobs are limited. This

leads to a very high supply of workers in the region.

Nature and Profile of Workers in Small Tea Gardens

In Assam, a majority of the labourers are ex-tea garden workers or their

kin/relatives. In the peak plucking season,

most of these labourers are engaged in estate

gardens. During this period, small growers face

severe shortage of labour. Additionally small

growers face a problem of shortage of skilled

labour. Small growers in Assam also are

challenged by limited knowledge about

cultivation. Most of the small growers are not trained cultivators. They

shifted to tea cultivation when tea started fetching high prices. Some of

them brought roots from Darjeeling and began cultivation here. The quality

Continuous instruction on use

of chemicals and knowledge

about leaves is important. BLF

should control the quality of

Leaf with small growers -

TEAMFCO.

“Lack of knowledge of tea

cultivation in small tea

segments has negatively

affected the productivity and

quality of the tea leaves in the

region”- Tea Board

62


of tea is related to and dependant on geography as in the case of Darjeeling.55

At present green leaves fetch relatively high prices in Assam. Though

the hike in price is purely seasonal, the small growers admit that the quality

and price of green leaves are positively correlated. As in the case of West

Bengal, title deeds of cultivable land is one of the major problems faced by

small growers in Assam. Only 25 per cent of the growers have registered

with the Tea Board. When asked growers say, “Land issues are not settled

yet, so we are unable to register with the Tea Board. This makes it impossible

for us to avail of the benefits provided by the Tea Board.”56

Despite the issues of land settlement being common knowledge, the

Tea Board as a statutory body does not have the authority to resolve them.

A resource person from Tea Board says, “We have several welfare and other

schemes for small growers but they can be availed only by registered small

growers. We cannot however take the responsibility of settling their

problems.”57

The Tea Board is also ready to cooperate with the initiatives taken by

civil society and other initiative groups for the development of small growers.

The introduction of SHGs in Assam is cited as an example of initiatives by

the Tea Board.58 Tea cultivation has entered forest land including reserved

forest and government land and most of them are have 100 per cent tea

cultivation, though they are combined with bamboo and pineapple as

well. The ecological imbalance and deterioration of the fertile land due to

these plantation crops are rarely discussed and noticed.

Many of the small growers and their associations have pointed out that

resurgence in the small tea cultivation has improved the situation of the

labour market by providing employment to a large number of people.

Many of the workers also agree

that they find jobs in small tea

gardens. However employment

in small tea gardens is not

sustainable in terms of wage

rates and working days. Work-

ers are offered only min-mum

wages and no other benefits

such as Gratuity, PF, etc.

Additionally, steady employ-

ment is available only during

“Employment has increased due an increase in

the number of small tea gardens.” – Association

of Small Tea Growers.

The generation of employment is not sustainable

in terms of minimum wage and working days.

Wage and working days are regulated only in

peak season. Workers are forced to find jobs in

other agricultural fields during the off-seasons.

This pattern of employment by small tea gardens

is not attractive to skilled labourers.

63


peak season, while families of tea garden owners work in their own gardens

on other days. When there is a fall in tea leaf prices, jobs for workers also

become scarce. It has been proven that this form of employment is neither

sustainable nor dependable. Therefore the argument that there has been

an increase in employment is valid only for a short period.

On an average, labour employed by the small growers of Assam was

estimated to be 4.36 per Ha, comparatively higher than that of estate gardens,

at 2.39 per Ha.59 No permanent labour was employed and the causal labourers

received daily wages ranging from Rs. 60 to Rs. 65 per day.

Often many workers known as tea tribes are forced to leave their places

of work and look for jobs in other sectors. Tea labour communities

constitute the oldest among Assam’s immigrant groups. They were

recruited by British Tea Planters from the present day Jharkhand,

Chhattisgarh, Bihar, Andhra Pradesh, Orissa, Uttar Pradesh and West

Bengal between 1861 and the early 20th century to work as captive labour

in tea plantations in Assam. They were spread over the districts of Western

Assam i.e. Morigaon, Nagaon, Sonitpur and Darrang in Middle Assam,

Golaghat, Jorhat, Sibsagar, Dibrugarh and Tinsukhia in Eastern or Upper

Assam, North Cachar and Karbi Anglong districts in Southern Assam

and the Barak Valley.60

Among the workers, a majority of them are from tribal groups, also

known as the tea-tribe community. They are manly Santhals, Mundas,

Oraons, Kharias, Gonds, Khonds, Kisang and Nagesias, they settled down

in Assam at the end of the contract period, though some of them left the

tea plantations to settle in the surrounding agricultural lands before the

expiry of the contract. The group later on came to be known as the Ex

tea-labourer community which lives in villages neighbouring the tea estates

and provides casual labour to them depending on seasonal demand.61

Men and women receive equal wages. Workers in small tea gardens are

excluded from any kind of association and are not members of any union.

As some workers observe, “ some producers fear that if we get associated

with unions it will go against their interest. We all stay in nearby estate

gardens mainly because we are kin and kith of tea garden and some of us

are ex-tea garden workers.”62

Since all the workers stay in the estate garden along with some of the

family member who is a permanent worker, they are not paid any monetary

benefits other than the daily wages. At present there is no provision for

64


the welfare schemes or even the proper safety methods while using fertilizers

and pesticides.

Some of the workers are of the opinion that if they have a union of

their own opportunities for negotiation would increase. During peak leaf

plucking season they get jobs but they have no job guarantees for off-season.

The role of the Government is also minimal, and though there are standards

for minimum wages, many areas do not following the minimum wage rate

standards. There are no provisions or measures ensure that workers in small

tea gardens get the benefits of social security measures. This is in contrast

to estate gardens, where there is some sort of social security system in place

in the form of welfare schemes etc.

65


Value Chain and SmallTea Growers

Value Chain and Tea Sector

The concept of value chain is understood as an organised system of exchange

from production to consumption, with the purpose of increasing value

and transforming inputs and competitiveness. The global value chain (GVC)

concept is one of a number of approaches to inter-firm relations. This

approach draws on the simple idea that the design, production and

marketing of products involve a chain of activities divided between different

enterprises, often located in different places.1

The value chain concept can also be defined as the combination of

design, product development, marketing, production and retailing by which

products progress from conception to the final consumer.2 As single

companies rarely turn raw materials into finished products for sale to end

consumers, the value chain concept recognizes the role of various

stakeholders who control and who add value along the chain. The tea

industry in India is a buyer-driven commodity chain3 and is primarily

controlled by big tea companies.

There is a lack of transparency in the tea industry about different stages

of price creation across the chain e.g. the destination of tea going out of a

particular garden. The blending process occasionally begins from the BLFs

itself. This process is likely to result in a loss of identity for gardens/small

growers. It is obvious that the pre and post-auction value chain for tea is

long and complicated and involves a number of intermediaries. This generally

includes producers, BLF owners, brokers and buyers. The buyers include

buying agents (at the auction centres), sub-agents (in the upcountry markets),

wholesalers and semi-wholesalers (in the smaller upcountry markets).

Chapter 5

66


The value chain of the tea industry involves various stakeholders, and

their roles are sometimes conflicting and affect convergence at operational

levels. The ‘structured and pre-determined’ role of stakeholders and the

interactions among them however help maintain the value-additions and

the price mechanism in the industry.4 The workers who are important

stakeholders in the value chain often do not have any knowledge of the

trade initiatives and the CoC. They have no role to play in its development

and implementation. The section below defines the role of various

stakeholders in the value chain of the tea industry.5

The key stakeholders include

(a) Auction organizers, who are designated as Tea Auction Committees

or Tea Trading Associations.

(b) Tea producers cum sellers, who are either estate factories or BLFs or

cooperative factories who manufacture tea from tea leaves. These

producers are considered as sellers in tea auctions. Presently, dealers

who purchase/procure tea from such estate factories/BLFs/

cooperatives are not allowed to sell their tea in the public tea auctions.

(c) Tea brokers, who are auctioneers of tea, and sell tea on behalf of

sellers at the auction centres.

(d) Tea buyers, who are purchasers of tea in the auction centres. These

buyers are not necessarily the bidders for tea in the auction centres

all the time. They could be packeters/blenders who buy for their

own brands or packets. Buyers are also agents who buy tea at auctions

on behalf of other tea dealers.

(e) Warehouse keepers are those who store tea to be sold in the auction

in warehouses. Producers-cum-sellers can also store their teas meant

for auctioning in their own warehouses. There are no restrictions on

the location of such warehouses for storing teas at present.6

Other major stakeholders include retailers and consumers. The role of

retailers in the value chain is also significant, as with the trend of increasing

imports, these retailers are importing greater quantities of tea. They

determine when and what products are to be made available as well as

their characteristics (quality, appearance, packaging and so on). This involves

interpreting market trends and specifying what products should be

produced to meet these trends. It may also involve specifying the processes

to make the product. Supermarkets however may merely dictate the ‘what’

and leave the ‘how’ to the supplier. Consumers are the ultimate decision

67


5.1 Value Chain of the Small Tea Growers in the

Tea Industry of India

Source: Formulated on the basis of fieldwork

makers. Tea marked as high quality in auction centres may not be in demand

by the consumer. Consumers even from the locality of tea gardens may not

prefer tea which directly comes from the gardens i.e. without blending,

because of its taste. Historical factors and agents have influence over the

preference of consumers and these preferences have evolved over a period

of time. Consumer preferences are not homogenous, but heterogeneous,

and they determine the value chain of tea in the domestic market. The

agents and actors in the buyers’ chain make tea dependent upon the nature

of the consumers at various levels and strata of society. The schematic

68


representation 5.1 below shows multi-stakeholders in the value chain in

Indian industry

The schematic representation shows the interconnectedness of various

stakeholders in the value chain of tea industry. The auctioneers (called

‘brokers’ in tea trade) play a significant role in the whole transformation of

the value chain. They taste and value tea, based on prevailing market

conditions and these valuations, released to all members of the trade, act

as guidelines for the sale.

The brokers divide tea into different grades based on quality, make

samples and fix prices. The quality of tea is measured by a tea taster from

each auctioneer based on different criteria such as flavour, colour and

thickness. They taste the made tea and determine the price based on value.

In addition, they make samples of different grades and quality. The tea

which arrives at the warehouses is catalogued and samples are distributed

to all the registered buyers, so that they can come prepared for the auction.

The prices also depend on the demand from the internal and external

market.7 The tea available at the consumer level is in blended form, either

as branded packets or loose tea.

The auctioneers collect the sale proceeds from the buyers normally within

14 days from the date of sale at the auctions, known as the ‘prompt date’.8

The amount is remitted to the producers after deducting 1 per cent

brokerage and government levies such as sales tax. The buyer’s payment is

assured more or less automatically within 14 days. The strength of the

auction system lies in the sanctity of the ‘prompt date’ and timely remittance

of sale proceeds to the producers. These factors demonstrate the integrity

and financial standing of auctioning companies. On receipt of payment,

the buyers are issued a Delivery Order for the tea to be collected from the

warehouses. The auctioneers also undertake promotion to ensure

maximum demand for the tea on offer in their catalogues.

The brokers are also allowed to produce printed catalogues with the

name of the garden and essential particulars of tea available for sale every

week. They also circulate market information, coupled with their own

views on the market conditions in India and other countries. The tea traders

associations of each region maintain and administer the auctioning system

and facilitate the good governance of tea auctions.9

The value of and demand for tea is fixed through negotiations and

convergence with producers. Tea auctioneers have regular dialogues with

69


producers and buyers and are able to monitor changes in demand and

production patterns. His/her standing in the trade depends on how prompt

and accurate s/he is in giving information to both the sections. The

auctioning companies offer manufacturing advisory services to producers

in response to changing market requirements.10

They have direct links with buyers as well as producers. They also keep

in direct contact with semi-whole-sellers.11 This requires strong

international connections as well as a network of correspondents all over

the world. Additionally, auctioning companies occasionally give short-term

finance12 to tea producers for the purchase of machinery, capital investment,

etc., recovery of which, is made from the sale proceeds of tea.

The profile and nature of buyers are dynamic and have different

connotations in the market. ‘Buyer’ means any person, firm, company,

corporate body or cooperative society including a consignee or commission

agent, with a place of business in tea in India who receives tea by way of

stock transfer from the manufacturer. They can be engaged in purchasing

or procuring tea either from public tea auctions or directly from

manufacturers of tea, but the term ‘buyer’ excludes those who buy only

instant tea and other value added products of tea i.e. tea bags, packet teas,

flavoured tea, quick brewing black tea etc. and also excludes the secondary

buyers who do not source their tea either from auctions or from

manufacturers.

Marketers play a major role in the value chain of the tea industry. They

include packeters/blenders and a majority of them come are national brand

companies. Large retailers or marketers only supply the specifications for

the branded products they order. These companies design and/or market,

but do not make the products. They form a new breed of manufacturers

that do not have factories. This separates the physical production of goods

from the design and marketing. For instance, Wagh Bakri a large regional

player focused in Gujarat will not integrate its operations backward by

acquiring tea estates.13 They meet their requirements from auction centre.

The Tea Board plays a key role in the industry as a regulatory and

promoting body. It is a statutory body set up under the Tea Act, 1953 to

promote all round development of the tea industry and comes under the

administrative control of the Ministry of Commerce and Industry,

Department of Commerce. The functions of the Tea Board are directed

towards:

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� Development and production of tea

� Extension of areas under tea cultivation

� Improvement in the quality of tea

� Undertaking promotional campaigns for increasing exports of tea

and domestic promotion

� Promotion of co-operative efforts of growers

� Research and development efforts in tea

It has also certain regulatory functions such as issue of Exporters’ License,

Tea Waste License, and Tea Warehousing License etc.14

The role of small growers is marginal in the whole value chain process

of the tea industry. At present their role is only in production sector and

as we have seen, only up the level of leaf agents. They share just 21.2 per

cent of the total production. Many of them are not aware of the different

processes and the key stakeholders in the value chain of tea industry. The

production sector in the tea industry is one of high risk and low profit.

Small tea growers as reported above share only a marginal benefit and the

larger profits go into value added processes and into the final products.

Therefore there should be an upward shift of small growers in the value

chain.

Current trends show that big companies are withdrawing from

production and concentrating only on marketing. Globalization has been

marked by the efforts by companies to slice up the value chain, and break

the production process into many steps. MNCs are no longer as keen on

production processes as they are to organize and manage commodities i.e

garments, footwear, consumer electronics or big brands of tea.15

MNCs capture the value of the product at various stages of the value

chain. Among Indian tea companies, the two biggest multinationals are

Hindustan Lever with over 45 percent of the retail market share followed

by Tata Tea with an estimated market share of 28 percent in the packet tea

segment. Goodricke Group Ltd. is the third most important multinational

tea company in India. Most of these multinational and big national tea

companies have their own estates along with trading, processing, blending

and packaging facilities. Their ownership of both plantations and processing

factories is called horizontal integration. However, there is a vertical

integration also as they control transport companies, fertilizer companies,

shipping agencies etc. Due to this control on entire production process

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from tea shrubs to tea bags, these companies have considerable influence

on supply and demand and thereby on the tea trade policies of the tea

producing countries. These MNCs also control the small tea growers by

controlling the packet tea segments in various producing countries.16

However, big companies are becoming increasingly reluctant to operate

in the old estate system of production because it is highly labour intensive

and the bulk of costs for producing tea goes towards labour wages (in some

cases as much as 60 per cent). However, the real profits are in the retail

‘packed tea’ market. For example in India, the average tea auction prices

are less than Rs. 50/- per kg but in retail the tea is sold for Rs.140/- per kg.

While the prices for tea at auctions are falling around the world, balance

sheets of big tea companies show that they are still making profits. This is

possible because most of the MNCs pack and sell their own tea without

bringing it to the tea auctions and they are also the biggest buyers of the tea

from the auctions.17

Value Chain Analysis (VCA), or more accurately ‘global’ VCA, is about

better positioning of a firm or sector within the context of global markets.

It involves finding a competitive or investment ‘niche’ within the full range

of production and informational activities. This involves handling a product

or service from conception, through intermediary phases of production,

export and distribution, reaching it to retailers, end-users and consumers,

and its disposal after use. It is also about identifying strategic interventions

that the public sector can make to strengthen local business infrastructure

and re-position regulations so that they can act as advantageous competition

advantage rather than a hindrance. CSR standards, codes and practices

offer one set of opportunities for finding this type of competitive investment

‘niche’ within global value chains.18

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Competitiveness of NewModel of Production inTea Sector

Cost of Production of green leaf

Low rates of return and high costs of production are major issues in tea

cultivation in India. Over time, while the cost of production has increased

drastically productivity has not improved. The plantation segments is high

costs of production sector relative to profitability and this is considered

one of the chief factors for the closing down of several tea estates in India.

On the other hand however, the crisis in the plantation sector has also led

to the emergence of a new model in the tea sector. This new model is

charecterised by big integrated tea companies moving out of tea production

processes and consolidating the packaging segment. The present phase of

globalisation has intensified competition among various players and the

big players are trying to consolidate or increase their brand presence across

the world. For example, Tata Tea’s major emphasis on plantation business

has over the years shifted significantly, as the company has transformed

itself into a major global player in the world’s branded tea market. As

much as 86 per cent of the turnover of Tata Tea’s consolidated operations

now comes from sale of branded products. The same goes for Hindustan

Unilever which also completely moved out of tea production.

Experts believe that this change in strategy by big companies is essentially

meant to dispense with the estate system, as the companies are not willing

or unable to provide social benefits like housing, water, education, health,

etc., to their workers. The emphasis of reducing costs has been entirely on

labour. One of the labour journals claims that the strategies for such

activities would be:

Chapter 6

73


a) Growth in production of tea through expansion of small growers

and sourcing green leaves from them.

b) De-link processing factories from plantation-related regulations by

supporting BLFs on cost conversion basis.1

The small-tea sector with its relatively low costs of production and low

cost manufacturing has emerged as a new model of production. Though

wages consume the major share in the cost of production in the small-tea

sector as well, it is well below what the plantation sector consumes.

However, majority of the labourers work as temporary workers in both

production and manufacture and the small growers receive much lower

price in the auction markets. The costs at different levels of the production

process in small-tea segments are discussed in following section. The table

below shows the cost of production in small tea gardens in India.

Table 6.1 Cost of Production for Green Leaf among Small Growers

(per kg of green leaf)

Assam WB Tripura Niligiris Kerala

Inputs- Fertilizers/

pesticides etc. 1.74 2.12 1.6 1.78 1.26

Wages 3.58 2.87 2.73 2.92 4.54

Direct Expenses 0.15 0.69 0.32 0.11 0.19

Overheads 0.81 0.64 0.42 0.52 0.6

Total cost per

kg. of green leaf 6.27 6.32 5.07 5.33 6.59

Average price

realisation 7.41 5.5 4.54 4.87 5.35

Source: Compiled report on small tea growers, (2005), Tea Board of India

Bought Leaf Factories (BLFs)

BLFs do not have their own tea plantations and depend on small farmers

for green leaves to produce made tea. small growerThere has been a steady

growth in the numbers of private tea manufacturing factories in India in

the post 90’s. In 2004, there were more than:

� 162 tea factories in Assam producing 77 million kgs of tea

� 79 factories in West Bengal producing 50 million kgs of tea

� 185 factories in Tamil Nadu producing 81 million kgs of tea

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� 18 factories in Kerala producing 3 million kgs of tea2

The following table shows the growth of BLFs in India.

Table 6.2 Growth of BLFs in India

Region 2001 2002 2003 2004

No. Prod. No. Prod. No. Prod. No. Prod.

(mn. kg) (mn. kg) (mn. kg) (mn. kg)

Assam 119 43.0 139 53.29 151 65.32 162 77.6

West Bengal 44 24.6 56 33.44 69 37.74 79 49.59

Others 4 0.5 4 1.67 8 2.78 9 3.04

North India 163 67.5 199 88.4 228 105.8 250 130.23

TN 155 65.6 159 67.43 182 75.9 185 80.72

Kerala 13 2.1 13 1.49 17 3.03 18 2.95

South India 168 67.6 172 68.6 200 78.19 205 83.79

India 331 135.2 371 157 428 183.99 455 214.02

Source: Tea Statistics (2003), Tea Board of India and Tea Statistics (2005),

J Thomas Pvt. Ltd.

The average price at the state level shows that tea from estate factories

fetches higher prices compared to co-operative and BLFs except in Tripura.3

In Tripura BLFs fetch better prices than estate factories. The productivity

of small tea gardens and BLFs is high since they have been launched recently.

The adoption of advanced technology in BLFs also facilitates the production

of high quality tea and they get higher prices from auctions. The newly

opened BLFs are technically better equipped than many of the estate

factories.4 Hence, the made tea is also better in terms of quality at the level

of manufacturing. In many of the BLFs production quality is mainly

influenced by the basic raw materials, i.e green leaf from the small growers.

Since the competition among BLFs has been high in recent times the BLFs

hardly keep any quality measures to green leaves and are purely competing

with other factories in terms of volume. Some of the BLFs maintain close

contact with small growers and monitor standards and as a result their tea

fetches higher prices in auctions e.g. TEAMAFCO. In spite of BLFs being

technically better equipped, their tea occasionally fetches lesser prices in

tea auctions as compared to the estate factories. This is primarily because

of the buyers perception that the tea produced in the estates are of better

quality as they are well maintained.

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Table 6.3 Price Realization of Various Factories in Guwahati

Region Co-operatives BLFs Estates

Price in Rs/Kg.

Arunachal 44.45 60.65

Assam Valley 57.32 54.70 64.43

Cachar 41.37 47.54

Nagaland 63.54

Tripura 46.85 44.54 43.66

Source: Compiled data in season 2005-06, from Auction Centre, Guwahati.

The price variations between tea from big estates and BLFs are also very

high in Coonoor auctions. The figure below shows the price variation

between BLFs and big estates during the recent auctions in Coonoor.

Source: Market Report (2006), Coonoor Auction; Compiled by UPASI

However, in individual cases, some of the BLFs get high prices for their

tea in auctions. In Nilgiris itself there are 55 BLFs and some of them obtain

average prices that are higher than what estate factories fetch. On the other

hand, some of the BLFs auction at lower prices which are far below the

average auction price. On the whole however, the average auction price of

BLFs is far below the average price of estate factories.5

Small tea growers are presently facing problems of low prices and low

quality of tea leaf. They are dependent on BLFs to buy their tea and BLFs

play a major role in determining prices and quality of tea. As evident from

the schematic representation of the value chain, BLFs have direct linkages

to wholesalers, up-country buyers and foreign markets. The price of tea in

auctions has been declining in all regions of India.

Figure 6.1 Price difference at Auction in Coonoor

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Even though some BLFs get higher prices than estate factories, the average

price has reduced drastically. Market trends show sales through auctions

are declining in India, a major factors that pushes auction prices downward.

In order to get quicker realisation and other benefits BLFs look forward to

direct sales within their localities as also to up-country and international

buyers. However even in the direct selling process price realisation is based

mainly on auction prices. The auction price is the standard/base price for

direct sales. Direct buyers negotiate with BLFs on the basis of auction

prices and fix prices which are more or less the same as auction prices or a

little above them. The variation is never more than 10 per cent of the

previous auction rate. BLFs get quick settlements through direct selling,

while in auctions there is a wait of 14 days before settlement. BLFs also get

advance from buyers.

Owing to the large number of buyers who buy tea directly from BLFs

there is reduced participation in auctions. Most BLFs sell their first-grade

tea to the direct market. Low demand at auctions automatically reduces

bargaining power and adversely affects auction prices. In several instances

only big companies or large buyers are present to bid for the tea at auctions.

They are able to finalise prices marginally above the price fixed by the

brokers, while the same quality tea might have sold at better prices with

better participation from buyers a the auction.

The leaf agent acts as a mediator who collects the tea leaf from small

growers and transports it to BLFs in nearby localities. Fixing the prices and

checking the quality of leaf are done by the leaf agents. Most of the growers

do not have transport facilities and the factories do not have the leaf

collected.

Agents get a commission of 50 paisa (cents) per kg, and as there is no

communication between the grower and the factories, the agents

occasionally report lower prices and thereafter give the growers lesser that

what is due to them.

Leaf agents are known to collect leaf from different growers and mix

different varieties collect from the same or different localities. The growers

are then told that their leaf fetched low prices owing to low quality. The

difference in quality between leaves taken from different gardens influences

the prices and is also a factor that limits the fixing of floor prices for tea

leaves. It is also difficult to maintain minimum standards for quality of

leaf.

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Floor Prices at Gardens

There is no uniform quality checking system either in the gardens or at

BLFs. Discussions with various small tea growers reveal that they are not

ready or capable of adhering to any quality standards. As their leaf is inferior

when measured against the set standards, it pushes the price of entire

green leaf of the same agent downwards. This problem is mainly seen in

some regions in Kerala and Assam.

The institutional set up at PDS in Kerala and TEAMAFCO in Assam

have their own consortiums and measure the quality of leaf based on their

own standards. The price systems that they follow do not affect the price

of green leaf at individual levels. Occasionally the consortium fails to check

the quality of leaf and gives low prices to the growers.

Though associations in certain regions insist that the Tea Board/

government should adopt strict measures to sell tea only through auction

centres, none of them have strongly negotiated with any of the BLF owners

near them. A majority of small growers and associations are unaware of

the proportion of tea sold through auctions and direct sale from the BLFs.

They are however told that their tea fetched lower prices at auction, and

therefore get paid at the lower prices.

Some brokers have noted that BLFs benefit even when prices at auctions

are low, as their production costs are low. BLFs always sell their best teas

directly in the market, and are able to command a premium.

Price Mechanism at Auctions

Auctions have traditionally been the main platforms or primary

marketing of tea in India and serve as the principal price determining

mechanism for tea in the country. The auction system is governed or

strongly regulated by provisions of the Tea Marketing Control Order

(TMCO), 1984.6 The sale and determining of prices takes place as a result

of the interaction and inherent negotiations by various stakeholders. It is

also a system of participation by various stakeholders i.e. producers, brokers,

warehouse keepers and buyers.7

Several associations demand that there should be a minimum floor

price at auction centres. But its implementation is questionable as buyers

bid for tea based on quality. If there is price fixed as floor price, it might

affect the auction system itself. Tea is also available directly. Auction sales

in India are lowest at 53.3 per cent after Indonesia (34 per cent);

Bangladesh (96.9 per cent) and Sri Lanka (91.3 per cent) who sell a majority

78


of the tea produced through auction centres.

There is a demand for strict monitoring of the quality of tea as very

often, low quality products pull down the auction price of the entire stock.8

In addition, there is also a demand by some producers and brokers for

action to be taken against BLFs/factory owners with regard to this. Closing

down the erring BLFs/factories or cancelling their licenses is recommended

if quality of the product is low.9 Several buyers and producers are of the

opinion that sales through the auction system are ideally suited for tea,

because of the infinite varieties and grades and the scattered and often

remote locations of estates.10 On the other hand many others prefer private

sales it leads to the low share in auction. .

Auction centres give producers the option of having their products

inspected, tasted, graded, valued, catalogued and exhibited by specialists.

Brokers, who know the needs of buyers and countries, choose and bid

depending on the marketing conditions and the tea on offer. 11 Auctioning

companies and large buyers occasionally give short-term financial support

to tea producers for the purchase of machinery, capital investment, etc.,

and recoveries are affected from the sale proceeds of tea.12

The key stakeholders in the auction system are auction organisers, tea

producers cum sellers, tea brokers, tea buyers and warehouse keepers in

each region. Auction organisers, designate as ‘Tea Auction Committees’ or

Tea Trading Associations from each region maintain and administer the

auctioning system and facilitate good governance at tea auctions. Tea brokers

are auctioneers of tea who sell tea on behalf of sellers at the auction centres.

Tea brokers, the brokers are auctioneers of tea, who sell tea on behalf of

sellers at the auction centres. The quality of tea is measured by different

criteria such as flavour, colour, and thickness by a tea taster from each

auctioneer. They taste the made tea and determine the price based on

value. The price also depends on the current market demands, both internal

and external.

Tea producers cum sellers are either estate factories or bought leaf factories

or cooperative factories who manufacture tea from the tea leaf. Such factories

are considered as sellers in different tea auctions. At present dealers, who

purchase/procure teas from such estate factories/bought leaf factories/

cooperatives, are not allowed to sell their teas in the public tea auctions.

Even when the auction prices continued to fall and the tea industry was in

a crisis, this fall was not reflected in the retail prices of tea, which ruled

79


high.13 While producers and consumers were affected, buyers were not.

There is a wide gap between auction prices and retail prices.14 While there

is a general consensus that the huge difference between the auction and

retail prices go to brokers, traders and other middlemen at the cost of the

producers, it is also true that middlemen have major roles to play in the

value chain of the tea industry.

Tea buyers are purchasers of tea in the auction centres. Such tea buyers

are not necessarily the bidder of tea in the auction centres all the time. Tea

buyers are also buying agents who buy tea at auctions on behalf of other

tea dealers or companies. The details about whom each buyer is bidding in

auction are not transparent. Buyers also keep as secret about they buy tea

from auction to sell in same state or to up-country buyers. Major portion

of ‘dust tea’ from the Guwahati auction centre are sent to southern India

market and ‘leaf tea’ for Gujarat, Rajasthan and Madhya Pradesh. Buyers

claim that information about to where exactly the tea goes and whom they

represent is a business secret. Indian buyers at auction centres are more

fragmented compared to some of the international auction centres.15 Several

buyers are registered in more than one auction centre in India. For example,

Tata Tea alone has a number of registered buyers and they are registered at

various auction centres. It is also the same in companies such as Hindustan

Lever Limited and Wagh Bakri. In India, two companies - Tata Tea and

Hindustan Lever Limited share most of the business. In other words several

buyers represent one big brand company, for instance HLL or Tata Tea,

and they sell tea to their regional packeters as proxy buyers.16

Loose tea traders represented by small buyers at the regional level procure

their requirements mainly from auction centres and none of them have

their own plantations. Most of the buyers at auctions and national packeters

are dominated by big players i.e. one or two companies. To produce their

own products they fulfil their requirements from auction centres and

through private sales. Scattered and fragmented small buyers have less power

to hold prices in the dominance of big buyers.

It is generally felt that buyers often push down the price in the auction.17

The compulsory sale of ‘minimum lot size’ in auction may lead to the

pulling out of small buyers. The low participation in t he auction and low

competition are the major reasons for lower price. Large buyers, who buy

more quantity, and buyers represent for big companies dominate in the

auction and plays a major role in price fixation and sale practice. Due to

80


low participation they can easily bid with lower than the earlier price of

the tea of same grade.18 In this way big companies play a major role in

price realisation and dominate the large segments of the market of tea.

Lower prices at the auctions benefits the big companies and therefore

they have a major stake at keeping the prices at auctions low.19 This benefits

them mainly in two ways. They dominate auctions and buy large amounts

of tea at lower prices. Additionally they buy tea for their other requirements

through private sales or directly from producers. The base price for this is

the auction price. If they can offer a price which is marginally better than

the auction prices it can benefit both parties. Producers are also benefited

by exemption of tax and other charges which they had to remit in auction

sale. This is a reason why despite the various benefits of selling tea through

the auction system, private sales have been on the increase in all the regions

of India.

Though the volume of trading tea through auctions is gradually

decreasing and often the small holders are not in a position to benefit

from the auction system the system remains very relevant. The primary

reason is that private sale prices are determined using auction prices as a

bench mark.

Adulteration and Formation of Quality in VariousStages of Value Chain

The adulteration process affects tea in three ways - quality, supply and

demand, and the price of tea. This section examines the usual methods of

adulteration in various stages of the tea value chain.

1. Garden: Different grades of tea leaf are collected together. For

example, grade A which is two leaves and a bud, and Grade B are

not separately collected. When the two grades are mixed, it affects

the quality of leaf. Plucking of leaf after the prescribed duration

makes the leaf stronger and increases quantity, but also affects the

quality.

2. Leaf Agent: The leaf agent often mixes different grades of leaf before

selling it to the BLF factory. The process of mixing different grades

of leaves also reduces the quality of leaves and reduces the price of

the leaf. As a result BLFs get low quality leaf to produce made tea.

3. BLFs:

3.1. BLFs produce various kinds of tea of different grades: They sell

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tea at various levels - at auctions, through direct sales and local

wholesalers/semi-wholesalers and retailers, based on quality.

3.2. Tough it cannot be generalised but in many cases it is reported that

BLFs resort to adulteration while producing made tea. Local

communities point out that some BLFs use a wild root, or a variety

of potato to adulterate made tea. The waste left in the tea production

at the big estate factories are mostly taken to the BLFs. The use of

such inferior products to increase the volume of tea directly affects

the quality and increases the supply within a short period in a

particular locality. It also affects the longevity of made tea.

4. Wholesalers, semi-wholesalers and retailers: It has been reported

that many of the stakeholders involve the wholesalers, semi

wholesalers and retailers in selling processes. They focus mainly on

the loose tea market. In India, the loose tea market dominates the

tea market it constitutes around 56 per cent (439 million kgs) of the

total domestic consumption. The regional players supply low quality

adulterated tea

5. Retail shops and tea shops at different localities: Even though some

of the retailers and tea shops opt for low priced tea of low quality,

they further adulterate it to increase their profit. This is mainly

applicable to loose tea at the retailer level.

Adulteration is happening in other ways as well.20 It has been reported

by some of the brokers21 that there is always demand for low quality tea

because of its lower prices. Most consumers in low income groups choose

loose tea due to their low purchasing power. Since there is a demand for

low quality tea, there is no major motivation for the BLFs to produce

better quality tea and they draw margins through volumes. And,

interestingly, all these teas are above the standard PFA act.

It is seen that adulteration also happens at regional packeters and at the

retail level. Regional packeters adulterate tea in order to add strength and

colour to tea. These are sold mainly to labourers. For instance, adulterated

tea sold in the tea producing regions of Idukki district is more in demand

with local tea shops rather than small retail shops.22

Consuming such tea also involves health hazards. Consumers have

reported irritation and itching of their tongues on consumption of such

adulterated tea. These incidents have been brought to the notice of health

experts who pointed out that consumption of such adulterated tea can

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lead to severe health hazards.23

Supply/Demand of Tea at Different Localities

The increase in the supply of tea leaf at garden levels has lead to a decline

in the demand and price in leaf market. To increase the overall volume of

leaf the agents take leaves without checking the quality. This affects the

overall quality and finally leads to low prices. The practice of leaf agents of

mixing different qualities from different small growers is an easy method

to cover up minor defects in the leaf. The changes in the overall quality of

leaf leads to low prices from the BLFs, and it ultimately leads to lower

prices for small growers even if some of them always maintain minimum

standards for their leaves.

Increase in the production of made tea at BLFs due to various

adulteration practices creates a change in supply over short periods in the

market. Since the domestic consumption demand is steady, changes in the

supply pattern results in low prices and low quality of the tea. The increase

in supply at lower prices to wholesalers and semi- wholesalers leads to a

decline in the demand. Automatically, the supply of made tea leads to low

prices at the auction as well as in direct sales and at the local tea market.

The availability of low-priced tea from local suppliers adversely affects

the quality of tea as well as the tea markets of national packeters. By selling

at lower prices, smaller regional players have raised their market share to

38 per cent from less than the earlier 20 per cent. They command a major

share in the regions and rural pockets. They have to often compete with

national picketers or big companies like Hindustan Lever Limited, Tata

Tea and so on.24

Several BLFs have mushroomed in West Bengal and in South India in

recent years. Several BLFs do not have efficient technicians. This has led to

a flooding of inferior quality tea in the domestic market. Smaller players

offer this tea at cheaper rates. Market analysts say that the poor quality tea

produced by these players not only affects domestic price levels, but also

damages the quality perception of the Indian tea in export markets. There

has been a decline of quality in the tea sent by India to international markets

in recent years mainly due to the cheap quality tea produced by smaller

units. The intervention of Tea Board and other agencies to create awareness

and quality and technical up-gradation has however increased productivity

of BLFs. Table 6.4 shows the impact of quality upgradation programmes

(QUP) for BLFs in Coonoor.

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Table 6.4 Beneficiaries of Subsidy from Tea Board

Region Number of Total STGs % of STGs

beneficiaries

Assam 311 42492 0.73

W.Bengal 166 8398 1.98

S. India 48018 68000 70.61

Source: Small Tea Growers, Compiled Report (2005), Tea Board of India

Table 6.4 shows that the grade of tea has increased by 38.5 per cent and

price realization has increased by 25 per cent and price realization has

increased from Rs.35 to Rs.45 after quality upgradation programmes for

BLFs. In case of withering the impact is 92.8 per cent. This indicates that

quality and productivity improve when BLFs receive proper training. Small

growers agree that they benefit from the trainings and study classes initiated

by the Tea Board. One of the small growers observes, “Earlier many of us

used knives while plucking leaves. But after training by UPASI we have

stopped the practice.”

Wholesalers/Semi-wholesalers: the supply of low quality, low priced

tea in local markets pushes down the market prices of high quality tea.

Since local markets are price-sensitive, price variations of particular products

have a major role to play in local markets. Low-priced tea, despite it being

of inferior quality is seen to be in greater demand from regional and local

retailers. The choice of local consumers is also seen to be determined by

what the retailer decides to stock. Consumers accept whatever tea the

retailers offer.25

Most small growers mention low prices and insufficient funding for

maintenance as the major problems they currently face. On the one hand,

as price and quality are correlated, deteriorating quality leads to low prices.

On the other hand, small growers feel that since their produce fetches

prices below the cost of cultivation they cannot afford to increase/focus

on the quality of leaf.

Maintaining quality of tea is cost-intensive and large investments are

required for various activities associated with quality management, such as

timely spraying of medicine, pruning, and application of fertilizers on time.

Shortage of funds among small growers renders them unable to follow the

prescribed norms. Since a majority of them possess less than two acres of

cultivable land no mainstream financial institution is willing to lend them

the resources required.

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The Tea Board has initiated a number of programmes for small growers

such as quality awareness programmes and training on usage of chemical

and fertilizers etc. to improve the overall performance in the tea sector in

different regions of India.26 Table 6.5 shows the effectiveness of the quality

upgradation programmes for small growers in Coonoor.

Table 6.5 Impact of Quality Upgradation Programme

on Small Tea Growers

Parameters Existing QUP Achievement

Harvesting Practices Technologies in Quality centres

and Pruning Recommended areas run by SHGs

Harvesting

interval in days 18-21(extended Rush period: 8 to 10 10-12 Rush period

interval) Lean period: 10-12 13-12 lien period

No Plucking 18 to 20 rounds 30.32 rounds 28 rounds

rounds in a year ( less)

Pruning Ranging from 4-5 year pruning 5 years

interval 8 to 10 years cycle

Pruning Generally low 18-24 inches 18 to 20 inches

height height below (medium/light pruning)

10 inches (low pruning)

Tipping height At 16-18 inches At 28 inches At 28 inches from

fromground level ground level

Yield increase

per ha of green 6250 10,000 9,000

leaf(Kgs)/ year

Price realisation Rs.6 Rs. 7.51 Rs.7.50

Income per ha Rs 37,500 Rs. 70,000 Rs. 67,500

Cost of

production

at Rs.5/Kg Rs.31250 Rs.50,000 Rs.45,000

Net Profit per

ha per year Rs. 6250 Rs. 20,000 Rs.22,500

Benefits by

adopting

technologies – Rs.18,750 Rs. 13,750

Source: Tea Board & UPASI – KVK (2004)

A resource person from the Tea Board observes that despite the presence

of several initiatives being taken by regional institutions such as UPASI-

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“Small growers should form joint forums or associations to negotiate and avail collective

benefits, such as technical assistance from appropriate bodies. The SHG concept does

not work anywhere in the Kerala tea sector, even though the concept began there. The

Tea Board is prepared to provide assistance in many ways but the initiatives should

begin from below in the form of association, SHGs etc” ..…Tea Board, Kolkata.

KVK at Coonoor and the Agricultural University, Jorhat, Assam to improve

the quality of tea the impact is limited.27

There are very limited schemes of the Tea Board available for registered

small tea growers. More importantly growers themselves must start initiatives

that will help enhance quality.28 The following table shows the subsidy

beneficiaries of the Tea Board, and indicates the low number of beneficiaries,

owing to the small number of registered small growers in India.

Despite possessing title deeds for their land, most of the small tea growers

in Kerala are not registered with Tea Board. Similarly, gardens are not

members of any producers associations or tea research institutes and as a

result do not enjoy necessary scientific and technical assistance from the

competent bodies.29 As a resource person from the Tea Board observes,

“The interventions of the Tea Board with associations from the local research

and other institutes have positive impact on small growers and can increase

awareness regarding quality and price of the product. However, the impact

is limited to certain regions. For instance, Kerala does not benefit from the

Tea Board and other institutions, as a large number of farmers are not

registered with the Tea Board, and therefore unable to avail the subsidies

and other programmes from the Tea Board.”

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Corporate SocialResponsibility and Small TeaGrowers

CSR and Tea Sector

The social, environmental and economic consequences due to the operations

of a business have a direct impact on human lives. Therefore, an enterprise

is considered responsible if it assumes responsibility for minimizing the

negative impact and maximizing the positive impact due to its operations

on all its stakeholders, within its sphere of influence, in relation to

recognition and fulfillment of human rights.

To achieve this, ‘We’ believe a ‘Responsible Business’ must integrate

the following corporate social responsibility elements in its core business

strategy:

� Compliance with the national laws and voluntary standards or codes

to which it has signed on

� Accountability to all its stakeholders across its sphere of influence

(particularly, supply chain)

� Institutionalisation and internalization of responsible management

practices.

The attempt here is to give a brief overview of ongoing discussions on

CSR and tea industry in India. There is also an effort to discuss the social,

economical and environmental issues in tea gardens and examine how they

impact workers and overall productivity in the sector. The initiatives of

major companies and tea industry in India are also discussed.

The social, economic and environmental issues are the emerging focal

Chapter 7

87


points in industry. This gives the opportunity and the space for wide-

ranging discussions at various levels. There is a demand from consumers,

CSOs and even government for products which are socially and

environmentally sustainable, and for CSR commitments across the supply

chain that will contribute to sustainable economic development. Various

types of moral consumer behaviours have been observed such as the selection

of products based on a criterion of environmental1 and social responsibility2

as well as consumer boycotting.3 This pattern therefore calls for involving

employees, their families, the local community and society at large to

improve the quality of life, in ways that are both good for business and for

development.4

The following table summarises major standards and practices of CSR.

Social

Health and safety of employees

Labour standards and working conditions

Corruption and bribery

Human rights Violence and conflict

Social impact assessment and Management

Community and stakeholder engagement

(non-commercial)

Charitable giving Social/community

investment

Social reporting and management systems

Corporate Governance

Rights and treatment of Shareholder

Governance policies and business

Principles Information disclosure and

reporting

Responsibilities of the Board

Customer/end-user care

Economic

Monetary flows to the public sector

Employment and human resource

Development Procurement and supply

chain management

Technology transfer andintellectual

property rights

Environment

Environmentally safe production,products

and services

Resource and energy efficiency

Environmental impact assessment and

management

Environmental reporting and Management

systems

Table 7.1 CSR Standards, Codes and Practices

Source: Minton, A. and Rose, R (1997)

At the core of the CSR concept is the fact that it reflects both the

social imperatives and the social consequences of business success, and

that responsibility accordingly falls upon the corporation. But the precise

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manifestation and direction of the responsibility lies at the discretion of

the corporation..5

Subsequently, concerns with corporate social performance, stakeholder

relations, corporate citizenship, links with financial performance and

developments in the field of ethics have become extensions of CSR theories

and practices.6 It is important to mention here, the key initiatives of HLL

and Tata like ETI/ETP/Fair Trade/Individual Company Codes etc.

CSR and Small Tea Growers

The small tea growers working on tiny plots and most of the time with

family based employment are hardly in a position to address issues of CSR.

Financial constraints are the main reason for this, as CSR processes add to

costs of production. As expressed by some brokers and buyers,

“Implementing CSR in the tea sector adds to production costs. The

Table 7.2 The TBOD for CSR in Small Holdings

Threats Opportunities

Protectionism by backdoor Business case benefits: Better alignment with

consumer concerns, cost savings,

productivity and innovation

The burden of compliance and monitoring Growers as beneficiaries of CSR initiatives

The CSR paradox: Limited reputational Broader benefits of CSR, eg. Lifelong

or business benefits for small grower. learning community development

Barriers Drivers

Lack of technology, expertise, training Supply chain pressure from TNC codes of

and investment necessary to make conduct and demand certification

improvements

Few CSR initiatives oriented towards Shifting markets, the need to align

growers production towards changing consumer

preferences, internationalisation of

standards

Little understanding of business case. Local pressure from regulation, public

Supply chain initiatives rarely extend policy and civil society

beyond first level suppliers

More pressing need to upgrade

technology management and marketing Strategic business case benefits

Price competition and limited consumer

pressure

Source: Shatadru Chattopadhayay (2006)

89


Plantation Labour Act (PLA) also addresses issues in tea sector and CSR is

an additional cost for the producers for the same processes. It seems

needless.”7 However, the international tea market demands that tea is

produced in a socially and environmentally responsible manner. The

initiatives of small growers like Peerumade Development Society (PDS) in

Kerala who are involved in fair trade practices etc. are notable exceptions.

While major companies like Hindustan Lever Limited or Tata Tea are

profitable currently, small growers get low returns and therefore compromise

on the quality of leaves in order to get minimum levels of earning out of

their cultivation. CSR practices have remained confined to few big tea

companies, and even there CSR is still equated with philanthropy and

have not been integrated within core business strategies. This has more to

do with the tea management culture developed over more than 100 years.8

The global tea brands often pass on the costs of necessary improvements

down the supply chain to their suppliers while claiming the reputational

benefits of these improvements as well as the commercial gains from their

CSR stance. The growing NGO movement and consumer campaigns are

demanding that large companies take responsibility for the entire supply

chain, from plucking of green leaves to reaching the end consumer. The

following table summarises the major concerns and issues of CSR in small

holdings.

Small tea growers and tea industry workers in India are in difficulty owing

to distortion of trade practices at both domestic and international levels as

well as control of MNCs over the global tea market. Globalization has been

marked by the efforts from MNCs to slice the value chain, and break the

production process into many steps. MNCs are currently engaged in moving

away from production processes and limit themselves to organizing and

managing commodities i.e tea, garments, footwear, consumer electronics.9

Worker’s rights: focus area of CSR

A core area of CSR is the role and rights of workers. Fair wages, working

hours and conditions, child-care centres, healthcare, redundancy, protection

against unfair dismissals etc have been the key issues which CSR policies

have addressed. Workers who are key stakeholders often have no awareness

on the ‘Code of Conduct and have no role to play in its development or

implementation. Therefore the issue of collective bargaining and the role

of trade unions vis-à-vis tea industry need further examination in the present

models of CSR.

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Discussions on female workers and their role in decision-making processes

are rarely addressed. Women workers constitute the majority in both large

and small tea gardens in India. Though trade unions address issues of

workers, attention to female workers is minimal. Women are also

stakeholders as customers, shareholders, suppliers, supply chain workers,

and community members. Whether from a social justice, stakeholder or

business case perspective, CSR should systematically address the question

of gender equality.

The Business Case for Integrating CSR Practices in theSmall Tea Holdings

CSR policies that are currently being practiced in tea gardens give rise

to questions about whether the tea sector implements them for economic

reasons or because CSR policies have intrinsic merit.10 There has been few

or no empirical tests in support of the intrinsic merit11 and this makes

CSR policies open to accusations of being mere gimmicks for profitable

public relations and marketing strategies.

The CSR and welfare matrix shows how closely each factor is related.

Raises Social Welfare Reduces Social Welfare

Raises Profits Good Management Pernicious CSR

Reduces Profits Borrowed Virtue Delusional CSR

Situationat Impact on Impact Impact

at Garden Producer on labour at Garden

Water Insufficient Reduce Epidemic Low total

Supply water running diseases productivity

supply expenditure

Sufficient Additional No water- High

Water expenditure borne productivity

CSR in Tea Garden

Welfare Productivity Profit

Source: formulated from field work

Figure 7.3 CSR and Welfare Matrix

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The following figure demonstrates the three broad areas under which

CSR works, though each aspect of CSR has many indicators.

Child Care Enhance the Increase the labour

Productivity of Productivity

mother

Economical

High Margin Quality, move Competitiveness

for Small Tea Growers on value chain

Environment

Health Safety Reduce the Risk Increase the productivity

Ecological Balance getting affected disease and production, profit

and Biodiversity

Environmental

Sustainability

7.4 Process of CSR in Small Tea Sector

Sustainability of

production,

Productivity and

Profit,

Move up in

value chain

Competitiveness

in national and

international

Market ,

As demonstrated above, the social, environment and welfare measures

are deeply related to the business case of the tea industry. Since the industry

is labour intensive the productivity of the worker is closely linked to the

productivity of the industry as a whole. Welfare measures in different areas

directly influence the workers as well as the industry. CSR practices denote

different things to the various stakeholders. Field observations have shown

that though many stakeholders are aware about CSR practice in the tea

industry they hardly address these issues in their business.12 For instance,

brokers point out that it is necessary to look into the matter of social and

environmental responsibilities as the international market is more case

sensitive to these issues. TThe following table summarises the perspectives

of various stakeholders regarding CSR and its implementation in the tea

industry in India.

Source: Formulated based on field work

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Table 7.5 Perspectives of Stakeholders on CSR and Tea Industry in India

Stakeholders Perspectives

Workers at Small Not part of it, not addressing labour issues, especially

Tea Gardens women.

No role of decision making process and there are hardly any

CoC suited to the small tea holdings including the Fair Trade

codes.

Increase the cost production

How CSR increase the productivity and business case is not

clearWhether there should be the same social, economic and

environmental responsibilities of the big planters and the small

Small Growers/ growers

Other tea producers How the cost of improvement in the small holdings are shared

between different actors is a major issue as the margins lies

mainly at the upper end of the value chain. The big tea

companies need to share the cost of improvements and this

should not be pushed to the small holders as their sole

responsibility.

CSR is going beyond law; there should not be any efforts to

Trade Union dilute the mandatory laws with voluntary CSR guidelines.

The CSR practices should be evolved in consultation with the

trade unions and should play a role in its implementation

Research Institutes PLA already exist, whether CSR add the /Statutory Board/

NGOs additional cost, can we focus on fullyimplementation of PLA

rather go for CSR, Benefits of CSR to Producers are still

ambiguous and doubtful

BLF No direct control over productionKnowledge to be acquired

for usage of fertilizers

Brokers No control over production sector, but dialogue with

producers and buyers are on

Auction Centres CSR is out of their control and it works only as a platform

for auction

Registered Buyers Looks for quality and price.Though they are aware about the

CSR never insist on producers

Upcountry Buyers CSR is not part of the business since consumers are not

demanding

Retailers No mechanism to trace back to gardenConsumers are not

demanding, and many cases their preference on regional

mark instead CSR at gardens

Consumers Not aware of the CSR but prefer good quality of tea.

Source: Formulated from field work

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Ethical Trade Initiative and Fair trade

The Ethical Trading Initiative (ETI) is an alliance of companies, NGOs

and trade unions working to promote and improve the implementation of

corporate codes of practice which cover supply chain working conditions.

ETI is a UK based partnership of NGOs (including Oxfam, the Fairtrade

Foundation and Save the Children), trade unions and High Street

companies. ETI’s aim is to ensure that internationally recognised labour

standards are observed at all stages in the production of High Street goods

sold internationally. The ETI seeks to achieve this by ensuring

implementation of codes of conduct that embody such standards, and

backing them by monitoring and independent verification. The table below

shows the CoC and its implementation.

Employment is freely

chosen

Freedom of association

and the right to collective

bargaining are respected

Working conditions are safe

and hygienic

Child labour shall not be

used

Living wages are paid

Working hours are not

excessive

No discrimination is

practiced

Regular employment is

provided

No harsh or inhumane

treatment is allowed

Member companies accept the principle that the

implementation of codes will be assessed through

monitoring and independent verification; and that

performance with regard to monitoring practice and

implementation of codes will be reported annually.

Companies will engage with other members in the

design, Implementation and analysis of pilot

schemes to identify good practice in monitoring and

independent verification and share this experience

with other members.

Company members will draw on this experience in

establishing where relevant with other ETI

members’ work plans to implement programmes of

monitoring, independent verification, and reporting,

and will report progress against these programmes

to and through the ETI in a format and timing to be

agreed.

Workers covered by the code shall be provided

with a confidential means to report failure to observe

the code and shall be otherwise protected in this

respect

Base Codes Implementation

Fair Trade Practices

The origins of Fair Trade can be traced to 1940 when churches in North

America and Europe provided relief to refugees and poverty-stricken

Source: Shatadru Chattopadhyay (2006)

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communities by selling their handicrafts to the northern markets. In 1988,

the Marx Havelaar convention in Holland established international standards

to define what constitutes liveable wages, and what constitutes safe and

healthy working conditions. This created the Fair Trade Labelling

Corporation, an international non-profit organization that certifies farms

and growers as ‘Fair Trade’.13

Fair Trade focuses on trading with poor and marginalised producer

groups and helps them to develop skills and sustainable livelihoods through

the trading relationship. Fair Trade pays fair prices that cover the full cost

of production and enables producers to earn adequate wages to live and

other fair rewards. Fair trade targets small farmers and supports them to

become involved in international trade by guaranteeing a minimum price

to producers. It provides the credit required by farmers for orders to be

fulfilled and pays premiums to provide further benefits to producer

communities. This trade encourages the fair treatment of all workers and

demands good conditions for them in the workplace and throughout the

supply chain. It also aims to build up long-term relationships, rather than

looking for short-term commercial advantage. The conditions and terms

of trade of Fair Trade are given in following table.

Conditions

Small scale farmers can participate in a

democratic organisation.

Plantation/factory workers can

participate in trade union activities and

have decent wages, housing, and

health and safety standards

No child or forced labourProgrammes

for environmental sustainability

Terms of Trading

A price that covers the cost of

productionA social premium to be used

by the producers to improve their living

and working conditions

Advance payment to avoid small

producer organizations falling into debt

Contracts that allow long term planning

and sustainable production practices

Source: Amaeshi M K and Adi B (2006)

Small farmers can join Fair Trade if they have formed organisations

(cooperatives, associations or any other), which are able to contribute to

the social and economic development of their members and their

communities and are democratically controlled by their members.14

The success story of villagers whose life changed from one of deprivation

and impoverishment after they participated in Fair Trade practices15 is set out

below. They are currently exporting organic Darjeeling tea to US consumers.

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With the initial support from local NGO, Darjeeling Ladenla Road

Prerna (RCDC), and Tea Promoters of India (TPI) villagers of Harsing,

Yankhoo and Dabaipani in Darjeeling began their own cooperatives and

developed four organic tea gardens which were run according to Fair Trade

Standards. Samyukta Vikas Cooperative is the first non-plantation

cooperative tea supplier established in Darjeeling. Tea leaf production from

the villages has grown steadily since the first collection by TPI in May

1998. Tea collectors are selected from the community by each hamlet

committee, and paid a wage by TPI. Other co-operative members transport

the leaves to TPI’s nearest tea garden where it is processed and blended for

export.16

The initiatives of Fair Trade have had impact on small growers though

there are certain issues that are unaddressed. In Fair Trade the role of trade

unions is extremely limited. The trade union leaders interviewed mentioned

that the issue of collective bargaining needs to be further elaborated in Fair

Trade norms. It is demonstrative in nature and might not have the capacity

to replace the normal trade in tea. The issue of monitoring needs to be

understood better. Some questions that need to be asked:

� Can CSR be the same for big players, medium planters and small

growers?

� Should the CSR yardstick be the same for all of them or should

there be different requirements for different sizes?

� How can the essential differences be brought in and how can CSR

Codes be observed throughout the supply chain?

� How is the cost of observance shared?17

Consumer’s Preference and Participation in CSR

The study also discusses the participation of consumers as part of an

ethical group. Consumers have been seen to demand environmentally,

socially and ethically superior goods18 and play a major role in the value

chain of the tea industry. It is important to understand how their social

consciousness, based on criteria of environmental and social responsibility

influences selection of products. Their understanding on various social

issues within the tea sector is based on how informed they are about the

environmental and social conditions under which products they buy have

been produced.

Studies that examine consumer’s preferences with regard to CSR issues

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present arguments that are conflicting. Some claim that consumers are

aware and demand products that conform to CSR standards, while others

claim that they are not aware about CSR standards on specific products.

The study on consumer demands in OECD markets revealed that the actual

effects of CSR on the perception and behaviour of consumers are mixed

and unclear.19 Existing market research reveals that consumers of OECD

are increasingly attaching importance to this issue and are interested in

buying goods that match their expectations. However, the actual purchasing

behaviour of consumers does not match their statements and attitudes.20

A study conducted in Middlebury, Vermont clearly states that

consumers generally respond positively towards higher levels of CSR. 92

percent of consumers say they would be influenced in their purchase by

the knowledge of a company’s responsibility. In addition to this, roughly

36 per cent of all individuals surveyed had read a CSR report. This indicated

that many members of the Middlebury community were familiar with the

concept of CSR and its implications. However, the study also pointed out

that the attitudes of consumers did not reflect in their actions.21

Studies conducted in various countries show that the consumers prefer

products which are produced under environmentally and socially responsible

conditions. However, the behaviour pattern of the consumers does not

match their preferences. From the surveys reviewed, a substantial number

of consumers also express a willingness to pay more for products associated

with acceptable environmental and labour conditions of production.22

For instance, in a survey conducted among adults of several countries in

2006, an average of 39 per cent of respondents reported they had chosen

to buy a product or service because of the company’s ethical, social or

environmental reputation. In individual countries the shares were:

� United States 45 per cent

� United Kingdom 42 per cent

� France 34 per cent

� Italy 35 per cent

� Germany 28 per cent

� Spain 26 per cent

When asked whether they had advised someone against using a product

or service of a company because of its environmental, social and ethical

policies, affirmative responses were:

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� United States 41 per cent

� United Kingdom 26 per cent

� Germany 22 per cent

� Italy 21 per cent

� France 17 per cent

� Spain 16 per cent 23

A survey conducted in several developed countries to study consumer

attitude towards CSR also shows that a majority of them were aware about

the issues of social responsibilities. Around 8 out of 10 among the British

public reported in 2005 that it was important to know about a company’s

activities in society and the community before forming an opinion of it.

35 per cent said it was very important for a company to display a high

degree of social responsibility when forming decisions about buying a

product or service from a particular company or organisation.24 In a survey

in 2000, 70 per cent of the European public stated that a company’s

commitment to social responsibility was an important consideration when

buying a product or service. This was particularly prominent in Spain (89

per cent agreed) and the Netherlands (81 per cent agreed).25 In other survey

64 per cent French participants of a poll said they would like to know the

conditions of production of the products they buy. 73 per cent said a

social label would influence their purchase decision positively.26

Culture, market concentration and other factors seem to play a major

role. Companies seem to prefer certification and labelling schemes from

private standard institutions rather than the government, often with a view

of what competitors are doing.27 The role of companies in communicating

their responsible practices to the consumers and appealing to their

sensitivities to various issues are also key elements that create awareness

among them.

A survey conducted on consumer reactions to socially responsible and

environment friendly tea in India demonstrates that consumers displayed

a low level of involvement with the social and environmental issues in the

food and beverage industry.28 Research reveals that the social and

environmental issues do not influence buying decisions of the consumers.

In general, though they are aware about certain issues they are merely passive

onlookers. The environmental issue i.e. good for health scored over other

issues. Social issues in isolation failed to evoke any interest. The concept of

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tea grown with adherence to social and environmental norms created

positive responses. Uniqueness and distinctiveness got high scores. In all,

20 per cent of the respondents claimed awareness of the tea production

process. Mumbai claimed the maximum awareness (27 per cent) followed

by Kolkata (23 per cent) and Bangalore (21 per cent) and the lowest

awareness was recorded in Delhi (8 per cent).

MNCs and Government fails to communicate responsible practice

related products in India. Advertisement and promotional schemes hardly

address the issues of social and environmental responsibilities at production

level.29 Taste and preferences of consumers are not habituated naturally by

themselves. It is constructed consciously over the period. The penetration

of MNCs in remote villages can be cited as example as to how brand

companies create awareness and preferences among the consumers. They

use the mass media for wide advertisements and give many offers with

their packets to attract ‘new consumers’ for their newly launched products.

Similarly retailers also have a major role in the choice of consumers,

especially in villages.30 The market is dominated by the MNCs and a major

share of their income, consumer products companies, comes from

villages.31 They create a space where the MNCs products are available and

where there is shortage in basic food items. The concept of ‘social

responsibility at the production segments’ never see the space in the process

of the market intervention of the big companies. Effective communication

could be one of the missing links along with the other standard factors

between potential consumer demand and purchasing behaviour.

CSR and Trade Initiatives in Tea Industry

The following section provides case material from a selection of

corporate-community ventures and initiatives from small tea growers in

India tea sector.

Industry Level Initiatives

CSR approach of Tata Group32

Tata Tea has initiated various welfare projects to provide welfare and economic benefits

to their workers. Some of them are listed below:

Srishti - located in Munnar, Kerala.

DARE- Educational and special help to children who have learning disabilities.

Vocational Training Centre (VTC) - conducts courses in blacksmithy, carpentry, tailoring

and knitting.

Box 7.1 Trade Initiatives

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Aranya- A natural dye manufacturing unitThe Tata Group has already adopted a

comprehensive written code of conduct for each company in the group called the ‘Tata

Code of Conduct’ which serves as a guide to its employees on the standards of values,

ethics and business principles, which should govern their conduct.

The Tata Group is also a participant of the Global Compact announced by the Secretary

General of the United Nations in 1999.

Tata Tea has adopted the Tata Business Excellence Model as a means of driving excellence

through the organization as also the Balanced Score Card methodology for tracking

progress on longer term strategic goals.

CSR approach of Unilever Limited

Unilever’s CSR reporting is oriented towards three principal issues:

The social impact of Unilever’s products, principally on people’s health through nutrition

and hygiene.

The steps Unilever takes to minimize its environmental footprint and secure sustainable

supplies of key raw materials.

The role of corporate operations in creating wealth and how this benefits stakeholders

and local communities.

Hindustan Lever Limited: developing markets at the bottom of the pyramid33

Hindustan Lever generates approximately half of its business from rural areas, where

products are sold over 100,000 towns. However, by the late 1990s, those markets were

saturated and the company sought penetration into the 500,000 smaller villages and

remote parts of the country with poor infrastructure and limited retail coverage. For this,

Hindustan Lever tapped into the growing number of women’s SHGs. The Shakti

programme trains women from SHGs in selling, commerce and book-keeping. With this

initial training they can choose to set up their own business or become Shakti distributors.

Hindustan Lever took a conscious decision to address only women through this programme,

perceiving they would be the best communicators for the company’s message and education.

The Shakti project has proved to be a great success. After the pilot phase, it expanded to

over 13,000 Shakti women entrepreneurs, selling to 70 million consumers. It has been

expanded using information technology. Through the i-Shakti programme, village kiosks

with internet linked computers provide access to information in villages which are not

reached by television, radio or even newspapers. Hindustan Lever aims to scale up this

program to reach 100 million rural Indian consumers.34

To address the crisis in the Indian tea sector, Unilever and its subsidiary Hindustan Lever:

Applies ethical trade principles to all trade with producers in developing countries as

standard corporate practice.

Pays fair and sustainable prices and negotiates with trade unions and other stakeholders

to find practical ways to stabilise the price of tea.

Supports locally-owned and locally-driven processes in tea producing countries to ensure

decent living and working conditions on tea estates.

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Initiatives from Small Tea Growers in India

There is a widespread impression in the tea production sector that the

produce of small tea growers is of inferior quality and fetches low prices at

auctions. The case studies in the following section disproves this and

demonstrates the fact that small growers who are organized well can perform

just as well, and in fact serve as role models. An interesting fact about

small initiatives is that they are all the results of joint ventures of various

stakeholders at different levels i.e. TEAMFCO a BLF from Assam. This

initiative fetches higher prices when compared to other estate factories

that hold major shares in the direct market with their own brands.

Peermade Development Society (PDS) in Kerala

Peermade Development Society (PDS) is a registered NGO working for

the integrated and sustainable development of the rural poor in Idukki

District, Kerala. PDS has initiated the ‘comprehensive organic tea

promotion programme’ for small and marginal farmers in Idukki district.

As part of this, PDS promotes a joint venture of The Sahayadri Organic

Tea Factory and The Sahayadri Tea Farmers Consortium in the region.

The factory currently supports around 1088 farmers who are members of

Consortium.35 It is an attempt to promote long term sustainable organic

production methods, and takes into account environmental issues and

helps marginal farmers get premium prices for the tea produced in the

neighbouring areas of Peerumadu. Though the initiative attempts to focus

on production sector marketing is also one of the major challenges it seeks

to address.36 PDS has also initiated quality awareness programmes i.e.

plucking and pruning methods, for small growers in the region in association

with the Tea Board.37

PDS has adopted Fair Trade practices in an attempt to enable small

farmers to use them for economic and social development. They would

otherwise have been unable to develop at a sustainable pace owing to

Supports the participation of workers and tea producers in standard setting processes

and assists suppliers in meeting such standards.

Transfers ownership of their plantations in a transparent and responsible way in consultation

with trade unions and other stakeholders in order to protect the rights of plantation workers,

adivasi and tribal communities and smallholder tea producers.

Supports the introduction of a legal ‘duty of care’ on directors of multinational companies

under UK law.

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unviable returns from their gardens. Fair Trade benefits reach the smallest

of the marginal growers and basic capacity building also help to attain

sustainable development. A farmer’s consortium has been formed, which

is democratically elected and has a transparent form of administration.

The general body of the farmers is empowered to change the consortium

members if the majority of the members decide that such a change is

warranted. The benefits of Fair Trade are decided by the general body and

projects are taken up after its approval. Frequent meetings are held and

there is a minimum requirement for the general body to meet at least once

a year. A women’s development wing has been formed and entrusted with

the task of upgrading quality of green leaves harvested, improving on the

standards of organic cultivation and identification of projects that could

be taken up under the fair trade premium norms.38

The factory has the capacity of producing 6-8 lakh kgs of made tea per

annum, thought the factory is currently under-utilizing its capacity. A

positive scale of economics and proper utilization of their potentialities

would enable them to fetch relatively higher prices for their farmers.

Marketing organic tea in domestic as well as in international markets is

a challenging task. Despite the potential available in domestic markets

lack of proper channels and options are proving constraints to expanding

the market.

United Small Tea Producers Association (USTPA) - Nilgiris.

United Small Tea Producers Association (USTPA), which has been

formed in association with Partners in Change (PiC), New Delhi, is a new

initiative among small growers from Nilgiris. It has the broad objective of

promoting sustainable livelihood for small tea producers. USTPA is the

outcome of a series of consultative workshops organized by PiC with small

tea growers in Nilgiris with the purpose of exploring different possibilities

of jointly addressing the crisis in the tea small holdings in Coonoor. Initially

USTPA started with around 400 small growers from five neighbouring

villages in Nilgiris. The major areas of focus within the initiative are to:

� Improve the living and working conditions of small tea producers

and workers

� Promote coherent, collective, coordinated and concerted (4Cs)

approach of small tea producers of TN with regard to various social,

economic and environmental issues related to the tea sector

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� Engage with various stakeholders in the tea industry on behalf of

the small tea producers

� Initiate various agricultural improvement programmes in the small

tea producing areas

Positive changes that have occurred within a short period

� Organized small growers and negotiated with other stakeholders,

especially with the Tea Board within a short span of time.

� Availing subsidies and other grants from the Tea Board as a result.

� Created awareness among small growers regarding quality

improvement and the importance of co-operation among each other

for their own well-being and for sustainable livelihoods.

� Made efforts to directly involve national level companies and

purchase directly from small tea gardens in order to procure better

prices in the long run.

� Attempted to move up in the value

Constraints:

� Difficulties in finding markets for green leaf.

� Dependency on the leaf agent and BLFs for selling their green leaf

Measures to mitigate the ecological imbalances and other environmental

problems owing to large-scale conversion of forest land into tea cultivation

are proving to be a challenge because the region is known as for large scale

forest conversion into tea cultivation.

JustChange, Gudalur, Tamil Nadu

JustChange is a network pioneered by the Adivasi Munnetra Sangam

(AMS) from Gudalur, and three more people’s organisations - Bhoodhan

Vikas Mandal (BVM), SAWARD and Sahabagyi Vikas Abhiyan (SVA) in

Gudalur.39 The basic objective of the initiative is to ensure that the profits

are shared by the various stakeholders who engage in trading including

workers and consumers. JustChange seeks to link these producers,

consumers and investors in a co-operative chain where they can work for

the mutual benefit of all within the chain, irrespective of where they might

reside.

The network seeks to change the structure under which trade is

conducted in a way that will change the power relationships between labour

and capital. Stan Thekkekkara, Chairman and CEO, says that “We need a

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structure that recognizes that labour and capital have important roles to

play in the economy, and in a way, ensure that they are not in competition

with each other but work in tandem for mutual benefit”40

The final value of the tea when consumed goes back to the common

pot and when books are closed, the surplus is divided between all the

shareholders. JustChange challenges the notion that investment is just a

matter of the capital employed, that one can scoop up the entire surplus

of any economic activity simply by putting up the necessary capital. Instead,

JustChange offers a structure where it is possible for any participant in any

economic activity to be seen as an investor as long as they are willing and

prepared to work as part of this structure. JustChange ensures that the

generation of surplus is not for the benefit of any one participant but for

all. The purpose of economic activity then changes from the creation of

wealth (profit) to the creation of well-being for all.

However, it has been observed that the impact of this trade practice is

limited to a particular region and so also its viability. It can therefore be

considered as one of the alternative methods available to the industry.

TEAMAFCO

TEAMAFCO is a well-accepted and recognised BLF in Assam and has

been instrumental in developing the small plantation sector in the District

of Dibrugarh in the state of Assam as well as in Arunachal Pradesh. It

manufactures CTC teas in its units at Assam and Arunachal Pradesh. The

average auction price of TEAMAFCO’s tea (CTC leaf) is about Rs. 87 per

kg. whereas the average price in auctions at Guwahati is about Rs.77 (2006

June 14-26 sale, Guwahati Tea Auction Centre The price fetched by this

CTC demonstrates that BLFs can also provide good quality tea and find

space in traditional auction centres.

“We provide follow-up to tea growers on aspects such as quality and technical guidance

for the usage of pesticides. We have noticed that small growers sometimes do not give the

leaf if it is not of good quality. We occasionally arrange for our vehicles to collect the leaf

directly from the gardens to maintain its quality till it reaches the factory.”41

A resource person from GTTA, Auction Centre, Guwahati, says, “The

tea from TEAMAFCO always fetches a higher and better price than the tea

from many of the well-known estate factories though the quantity they

provide for auctions is less.”42 The table 7.8 shows the green leaf rate effective

from 1/08/2006.

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Table 7.8 Price realization of green leaf of TEAMAFCO

Fine (in %) Effective Rate(In Rs. P)

From To

71 Onwards 10.50

66 70 10.00

61 65 9.50

55 60 9.25

51 54 9.00

46 50 8.75

41 45 8.00

40 Below 6.50

Source: Price list of green leaf, TEAMAFCO, Dibrugarh.

TEAMAFCO monitors the quality of green leaf strictly and has in many

cases sent it back due to the low quality.43 Small growers often sell green

leaves to other BLFs if the quality of green leaves is not matching with

stadandard of TEAMFCO.

Services provide by TEAMAFCO to small tea growers

� Guidance on leaf plucking and storage

� Vehicles to transport leaf, and assistance with identifying leaf agents

� Strict monitoring of leaf quality

� Awareness on use of pesticides

� Financial assistance if necessary

Self Help Groups (SHGs) in Assam

The movement began with initiation from the Tea Board keeping in

view the prime objective of the X plan period (2002-06) that sought to

stress on the improvement of quality and enhance the productivity of the

existing tea areas.44 It has become imperative to organize the small tea

growers sector by forming tea producer’s societies/SHGs for achieving this

goal.

SHGs demonstrate modern post-harvest technologies in leaf handling,

storage and transportation to produce and supply better quality of green

leaf to the manufacturing units.45 Small growers are being motivated to

set up SHGs amongst themselves so that it becomes easier not only for

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obtaining technical support but also for disposal of the green leaf directly

to the manufacturing factories at reasonable prices.

Main Objectives

� Technology and information dissemination

� Collection, storage and transportation of leaves

� Procurement and supply of inputs

Financial assistance to set up leaf collection centres in places close to

growers’ fields, purchase of weighing balances and leaf carry bags/crates etc

is given to SHGs by way of 100 per cent grants. 50 per cent of the cost of

purchase of transport vehicles required for carrying the leaf from the

collection centres to the processing factories46 is also provided. Apart from

the financial assistance, to produce better quality and impart managerial

and technical skills, the board would send two people from each society

for training so that each society had trained managerial and technical

expertise in-house.47 SHGs have helped create awareness about the

importance of quality products and enthusiasm within the small tea sector

and receive support from the small growers. As some of the members point

out,48 ‘‘Earlier the price of green leaf was fixed by the BLF or leaf agent,

now we fix the price of our green leaf.”

Constraints of SHGs

Most SHGs find that their activities at the garden-level do not help

small growers to move upward in the value chain, and there is a tendency

to limit themselves to the lower levels of the value chain. There is a need to

form groups which can participate in decision-making at various levels of

the value chain.

It has also been noted that though the concept of SHGs has been adapted

from Kerala, SHGs are not working in that State.49 While SHGs are formed

to help in marketing they do not play significant roles in the process. On

the contrary they buy low quality tea and blend it according to the demand,

which is more for low-priced tea rather than quality.50

Discrimination based on gender is also one of the reasons that SHGs

have roles to play only in the lower levels of the value chain rather than in

the decision-making process.

As part of the CSR trade initiatives big companies like Tata Tea Limited

and Hindustan Lever Limited have initiated various projects for the welfare

and economic benefits of their workers. CSR practices in the small tea

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sector would help forge links between big companies and the small tea

sector. The effect of CSR is limited and consumers are not knowledgeable

about the products they purchase. There are problems in marketing organic

tea in domestic as well as in international markets. Though there is a lot

of potential in the domestic market itself, the lack of different channels

and options to expand the market are some constraints.

Additionally, the small tea sectors fail to address environmental issues.

Large-scale conversion of forest land to tea cultivation, and measures to

correct ecological imbalance and other environmental problems sometimes

pose challenges to small growers. Fair Trade initiatives have impacted small

growers, even though there are certain questions that are unaddressed.

The role for trade unions is extremely limited in Fair Trade practices. The

trade unions interviewed mentioned that the issue of collective bargaining

needs to be further elaborated in Fair Trade norms. It is demonstrative in

nature and may not be able to replace the normal trade of tea. The issue of

monitoring needs to be understood better.

There is widespread ambiguity on CSR and fair-trade/ETI practices.

Different stakeholders look at the concept of CSR, its implementation

and various trade initiatives differently. It has been observed that many

stakeholders are aware about the CSR practice and tea industry though

they hardly address the issues in their business. How can a uniform code

be implemented? Achieving consensus of multi-stakeholders on a uniform

code and different international standards are challenges in the Indian tea

industry.

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Challenges and Competence ofSmall Tea Segments PolicyOptions and Recommendations

Introduction

This chapter summarises the role of various stakeholders and processes

in the value chain of the small tea sector and enquires how they can make

the small tea sector more competitive in a sustainable way. It makes an

attempt to delineate the prevalent characteristics of different stakeholders

in the small tea industry and tries to formulate the feasible intervention

options and institutional innovations to make small tea segments more

competitive at the international level. This study tried to situate how

competitive production segments can be developed among small tea growers

so that they can be integrated into the value chain of the Indian tea industry

to empower them, strengthen their capacity and livelihood. Low income

returns , limited market accessibility, high cost of production, low quality

of production, low price realization, ineffective role in tea industry,

inadequate collective bargaining power and so on are the existing challenges

facing the small tea segment sector.

The major initiative is the effective entry points and effective governance

that would collectively address the present and future challenges for the

small tea growers in industry. It is also important to see how small tea

segments can be strengthened through capacity building in a sustainable

way and what the challenges this sector faces are. Though many attempts

have been initiated by various institutions, government bodies, the Tea

Board and non-profit organizations to introduce new development pathways

in the small tea sector over a long period, effective implementation and

enforcement of these institutional innovations was lacking.

Chapter 8

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Characteristics and Challenges of major Stakeholdersof Small Tea Segments

Workers in Small Tea Gardens

PREVALENT CHARACTERISTICS

Nature of Work, Wage and Social Security

The majority of the workers in small tea gardens are temporary and

casual workers and most of them are migrants. The wage rate is below than

the official minimum wage rate in all states except Kerala. However, in

some regions of Kerala, the wage is fixed according to the weight of green

leaves which workers collect each day rather than regular daily wage. It is

reported that very often, they are paid less than the official minimum wage.

In addition, payment is also irregular in many small tea gardens in India.

Since the workers do not have any other alternative, they are forced to stay

back in tea gardens. In many regions, workers are appointed only during

the peak season and family labour replaces hired labour in the off season or

when price of green leaf is low.

Gender Discrimination

In many tea gardens female workers are paid lower wages than their

male counterparts. It is also noticed that female workers are engaged to

carry green leaves to the store room or to the leaf agent rather than usual

leaf plucking due to their low wages. No welfare and social security measures

are specifically taken in any of the small tea gardens for female workers.

Lack of Training and Safety Measures for Workers

No training has been conducted for the workers to upgrade their skills

and to use fertilizers/medical sprays to prevent from any health problems.

It has been observed that workers are not offered any measure by small

growers to look after their health and safety. Health measures and health

care are the responsibility of individual workers. No social-environmental

benefits are allotted to workers at small tea gardens. In many cases workers

receive only some gifts other than usual wages during the festival season.

Lack of Associations/Unions among Workers

There are no associations/unions for workers in small tea gardens. In

fact, trade union leaders in plantation sectors suggested that there are many

problems for workers in small tea segments but there is no union to address

their issues. However, some initiatives have been taken in different regions

but constraints such as the majority of workers being temporary workers

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and the large number of tea gardens have delayed the implementation of

these initiatives.

POTENTIAL OUTCOME/RISKS ON TEA INDUSTRY

Productivity of Labour and Tea Cultivation

Inadequate working conditions and lack of training for the workers

lead to low productivity of labour in small tea gardens. Lack of health care

facilities make workers incompetent and affect their productivity as well.

Unavailability of skilled labour and inefficient working conditions have a

major role in the low production and productivity in small tea segments as

a whole. Incompetence of workers and low productivity are the main

challenges that the small tea sector faces in competing at international

standards and participating in fair trade and so on. Low quality and the

insensitivity to social and economic issues prevalent in small tea segments

are the major reasons why tea from small tea segments is not preferred by

many buyers and big companies in the world market.

Recommendations /feasible intervention options

� Initiate an institutional mechanism with representation of multi-

stakeholders from the tea industry, Government bodies and nodal

agencies to provide minimum and regular wages for workers at small tea

gardens.

� Development schemes meant for workers such as training programmes

and skill up-gradation programmes, healthcare, adequate housing facilities

and other necessary welfare measures can be materialized only through

separate institutional framework and small growers are unable to provide

otherwise.

� Institutional support for governing promotional schemes for workers

is required and workers should be adequately represented in such

schemes.

� The participation of workers and their role in value chain of tea industry

can be enhanced through this collective institutional and social network.

Small Tea Cultivators


Title Deeds

Lack of title deeds for cultivable land of tea cultivation is a major concern

for small tea segments in India. This is severe in the case of West Bengal

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where, for example, around 6000 petitions are pending for N.O.C. in

recent times.

Registration with Tea Board

Absence of title deeds prevents cultivators from registering with the Tea

Board. In all regions, except Tamil Nadu, the registered small growers are

very few. 90.8 percent of small tea holders are registered in South India,

whereas it is only 17 percent in North India. The high share of unregistered

small growers is also a major problem since they fail to avail of subsidies

and financial assistance under various schemes of the Tea Board and other

financial institutions.

Lack of Associations

It has been noted that associations among the small growers could help

in negotiations and collective bargaining for better price and financial

assistance from various Government bodies including the Tea Board.

However, in many regions of India, small growers are not organised.

Associations are formed in some regions but they are still not very effective.

It has been observed that in Idukki, problems of forming Self Help Groups,

getting registration and title deeds, etc, could have been solved if the existing

associations had functioned better. Many of the associations reported that

they are in initial phase of forming new associations to address the issue of

tea cultivation rather than paying attention to various agricultural crops.

In Assam and West Bengal, the associations could address many issues of

small tea holders but still, they have reported that they are looking to

enhance their capacity to build strong collective power in the future.

Marginal Growers

The share of marginal growers is high in the small tea sector. They mostly

own less than 5 acres of cultivated land and are predominantly unregistered

producers. They get relatively lower prices for green leaves and face severe

problems in meeting their cost of production. Mostly, family labourers are

engaged in cultivation rather than hired labourers. Marginal growers are

relatively high in Kerala and Assam.

Competitiveness of Gardens

There are no uniform leaf collecting practices, for instance, regular

plucking time for small tea growers in India. This affects the price of green

leaves as these tea growers fail to maintain good quality. Instead of quality,

small growers very often rely on the quantity of leaves. There are no measures

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to maintain high quality leaf in small tea segments. Leaf agents still play a

major role in quality of green leaves. It has been observed from the field

that leaf agents often mix various quality leaves together before selling it to

the BLFs . This is mainly to maintain minimum quality of leaves because

it contains a high share of low quality- leaves. The price fixation is based on

overall leaf quality though some of BLFs have their own grading system

based on quality. This automatically reduces the price of leaves. In many

regions, especially in Dibrugarh, the lack of transport facilities and long

distance from gardens to factory are also deciding factors in determining

the quality of leaves.

Interconnectedness of Different Stakeholders

The multi-stakeholders approach in production sector is lacking in small

tea segments. There is no interconnectedness and dialogue among

stakeholders in various value-addition processes of the value chain of the

tea industry. Many nodal agencies are ineffectual in the development of

the production sector due to the lack of social and collective networks

among small growers. Furthermore, co-operatives and Self Help Groups

have limited their role in the initial phase of production. In many regions,

Self Help Groups are stuck at the phase of leaf collection and cannot move

up further in the value chain in the tea industry.

Cost of Production

Almost all cultivators reported that they are unable to meet high cost

of production and fail to maintain their gardens properly. Uniform

standards for proper maintenance in small tea gardens are very limited

though agencies like UPASI with the Tea Board have made many initiatives

to upgrade the quality of production. Only a few cultivators could maintain

their garden in a sustainable manner by regular harvesting, fertilizing,

weeding, pruning, control of pests and diseases and carrying out other

sundry activities on time. This is mainly due to inadequate returns from

cultivation and lack of proper training and awareness on the part the

cultivators. Many small growers started their tea cultivation due to the

demonstration effect and this has affected the quality of production in

different ways. For example, many producers in Assam bought their tea

plants from the Darjeeling due to ‘Darjeeling’ fame. As noted earlier, the

quality of leaves and productivity is related to geographical factors as well.

Forest Land Conversion and Ecological Imbalances

A study of many regions show that a high percentage of forest land

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have been converted into tea cultivation since the post 90’s. The issues of

deforestation/conversion of forest land into tea cultivation have hardly

been addressed on the eve of drastic expansion of tea cultivation in different

regions in India. There can be many impacts of these ecological imbalances

over a period. For instance, soil erosion is one of the major concerns in

agricultural land in the high ranges of Kerala.

Social and Economic Responsibilities

There are no mechanisms to ensure that small growers provide minimum

working conditions and welfare schemes to workers including the family

based workforce. At present, given the low returns, and unwillingness of

the big companies to directly engage with the small holders, they are not in

a position to integrate acceptable social and environmental standards in

tea production. However, this induces low productivity in at small tea

gardens.

Limited Upward Mobility in the Value Chain

There is no deciding role for small growers in the value chain of the tea

industry. The process of value chain is used as an organised system of

exchange from production to consumption with the purpose of increasing

value, maintaining the quality and competitiveness. It hardly gives any space

to small growers. Due to incompetent production structure and financial

instability, small growers fail to negotiate with various agents for better

price and stable market. There are no interlinks between big companies

and small tea cultivators so that they can get direct access to various markets.

The accessibility in national and international market is still a constraint

for small growers due to their ‘low profile’ production structure and

inaccessibility to other actors in the value chain. The high cost of production

is also a constraint in facilitating social and economic responsibilities in

gardens unlike in the plantation model.

Introduction of Organic Cultivation

At present, organic cultivations are very few in small tea segments. As

noted, lack of co-operatives or associations has forced them to limit

themselves to organic cultivations. Small landholdings, inadequate financial

assistance and lack of awareness are the major reasons which have prevented

many of them from shifting to organic cultivation. Though fair-trade

promotes organic cultivation, its share is very little in the world market.

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Potential Outcome/Risks on tea industry

The non-registered small tea growers are unable to use subsidies and

other welfare schemes from the Tea Board effectively. Lack of associations

and title deeds are constraints in accessing financial assistance from

Government bodies and other financial institutions.

It is reported that small growers are unable to maintain the quality of

their green leaves. Their returns are declining over the period since many of

them give priority to the quantity of leaves rather than quality. Irregular

maintenance affects their returns from the market and this leads to the

supply low quality leaves to factories. The deteriorating quality of green

leaves excludes the growers from competitive markets.

Inadequate working conditions and irregular payment and employment

for workers have led to paucity of skilled labour and regular workers in the

peak season. Low productivity and inability to ensure the basic social and

environmental responsibilities lead to low participation in alternative trade

practices and the international market in the long run.


� Implement ‘right over the land’ to small growers. This would increase

the number of the beneficiaries of the Tea Board and this is crucial for

sustainable nature of production, quality and platform for small growers.

� Monitoring and creating new development schemes for small tea

growers.s.

� Strengthen and increase the participation of small growers implementing

various quality upgradation programmes at various levels of productions

through various agencies and institutions.

� Develop a mechanism to maintain quality of leaves and fair price at

garden level with the involvement of various stakeholders, development

agencies and Government bodies in the locality.

� Provide inter-linkages and participation with various stakeholders

including civil societies, Tea Board and other international agencies.

This would also help to obtaining feasible financial assistance from

various agencies and Government institutions.

� Increase subsidies to various production and marketing process

specifically and implement its efficient use in sustainable way. This would

provide a situation where farmers can add value for their green leaves

from the garden itself.

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� Develop market inter-linkages with multinational companies with the

aid of various nodal agencies to mitigate the impact of short-term

industrial fluctuations, crisis of one sector to another, decline of price

and quality and cost of production and so on. The underlying social

and economic issues related to the international market which

contributes to this situation in the long term should also be addressed.

The innovative quality up-gradation programmes by UPASI, KVK and

the Tea Board underline how formal institutions can develop and deploy

new strategies for otherwise imperilled smallholders (Neilson and Bill

Pritchard, 2006).

� Introduce self- help groups in each region to reduce dependence on leaf

agents so as to ensure fair price to producers and quality of leaves.

Initiatives should be taken to expand their formulation in various phases

of value chain of tea industry other than those centred around cultivators

and leaf agents.

� Licensing leaf agents in locality would also improve the quality of green

leaves and stabilize the price of green leaves.

The drastic conversion of forest land into tea cultivation can cause

ecological imbalance, biodiversity losses and decline in ground water levels

in a particular locality. Therefore, reforms to issue title deeds of cultivated

land and to increase productivity are crucial in reducing the conversion of

forest land and maintaining ecological balance.

Bought Leaf Factories


Drastic increase in Factories

There has been a steady growth in the number of private tea

manufacturing factories in India in the post 90’s. In Assam, the number of

BLFs increased to 162 in 2004 from 119 in 2001. Similarly, in West Bengal,

the number of BLFs was 79 in 2004 while it was 44 in 2001. There is high

tendency among newly-launched and technically-competent BLFs to direct

sale rather than the Auction. They remarked that they get better price in

direct sales and they get financial assistance as advance from private buyers

which is used as working capital.

Technical Competencies

Most of the BLFs are inefficient in the economics of production due to

their technical inefficiency. However, there is an emerging scenario of

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technologically upgraded BLFs in India, especially in Upper Assam. It is

reported that most of BLFs are equipped with outdated manufacturing

units and unskilled and temporary technicians and workers. There is also a

consensus among wholesalers and retailers that longevity of made tea from

BLF is very short and some of them are reluctant to buy it due to this.

New Phase of Production

On the eve of the crisis in the plantation model in India, many BLFs

sustain in the industry due to their high productivity and low cost of

production. Due to high cost of production, many factories have also closed

down in the recent period. Expansion of BLFs has also led to an increase

in tea cultivation especially by marginal farmers. It has also generated wide

employment options.

Adulteration

It is noted that many BLFs increase the volume of output by practising

various methods of adulteration. This affects both the individual as well as

the overall price of tea from BLFs like it reduces the quality of tea and

decreases the overall price in the Auction. There is no strict monitoring of

green leaves and many of them do not have any measures in place to maintain

the quality of green leaves which they collect from leaf agents.

Inadequate Market and Working Capital

The flaws and limitations of BLFs vary from region to region. These

include lack of high quality inputs, unavailability of markets, inadequate

working capital, insufficient skilled workers, lack of training and quality

upgradation programmes and so on. The quality of made tea is influenced

in two ways: the presence of improper manufacturing units with unskilled

labourers in the factory and due to the low grade green leaves with

adulterated in various ways.


The incompetent structure of BLFs leads to production of low quality

of made tea. Due to the absence of strict monitoring and standards, there

is no control over the quality of green leaves procured from small growers

and leaf agents. Low quality of made tea pushes down the average price of

tea in the Auction. The increase in supply due to various means of

adulteration causes only a decline in demand and price in the long run.

The increase in direct sales leads to low price realization in both direct

and the Auction sales in the long run. The base price of direct sales is the

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average price of the Auction sale. Since tea is available in the direct market,

the price realization is low in the Auction. BLFs’ intake all the available

green leaves irrespective of the quality of leaves. This leads to the production

of low-quality tea in gardens. BLFs produce high volume of made tea but

mostly, as reported, low-quality tea. This pushes down the average price of

tea in auctions. The present structure and process of BLFs leads to the

vicious circle of low quality and low price linkages rather than expanding

their market internationally.


� Quality upgradation: Create a role for BLFs in the value chain of

industry and create awareness of how their role in the value chain

industry is important. This will make BLFs themselves to take part in

the quality upgradation programmes. Various stakeholders and

Government bodies should make an attempt to improve the quality of

production from BLFs. There should be a continuous mechanism to

encourage, monitor and sustain to provide high quality green leaves

from small growers.

� Financial Assistance: There should be financial assistance for working

capital for BLFs. Financial assistance and subsidies to the BLFs can

increase their productivity and quality of production. Continuous

monitoring and evaluation of their performance make a base for various

subsidies and financial assistance. Since BLFs confronts problems from

region to region, the intervention should be locality-specific.

� Monitoring: There should be strict monitoring from Government or

Tea Board in the production of tea to prevent adulteration of tea. The

monitoring process should be at different levels of intervention of the

production process. There should be strict procedures for providing

license and this should also based on the BLFs’ production profile.

� Open-up markets: Various stakeholders and nodal agencies work

together to open up markets at the international level for BLFs. This

would enhance direct participation from Big Companies in the

production segments of the small tea sector. Initiate a linking process

and provide mechanisms for BLFs to expand their market at the

international level through various alternative trade practices. The trade

practice in Indonesia in which multinational tea companies are

increasingly contracting with larger agro-processing firms who are able

to effectively coordinate deliveries and quality standards from small

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farmers through effective supply chain management is worth mentioning

here (Neilson and Bill Pritchard (2006).The common platform of

participation of various stakeholders only could make a space where

BLFs can negotiate for better market openings at the international level.

Buyers and Retailers


Participation of buyers

Tea buyers purchase tea from the auction centres and directly from

BLFs. It has been observed that the number of buyers participating in the

Auction has declined over the period. As stated, direct sale is increasing

over the period and most of the buyers prefer direct sale from producers. It

is reported that the Auction dominates with the proxy buyers of

multinational companies. The role of small and regional buyers in price

mechanism is very limited since they buy a relatively small size of total

stock. It is reported that the buying mechanism and its supply to the up-

country markets are kept private within buyers and it is conceived as their

trade secret. Buyers find hardly any need to address the issues of social and

economic responsibilities and welfare measures of workers at gardens in

their trade mechanism. Tea buyers are not necessarily the bidders for tea in

auction centres all the time They also act as multiple roles such as either

packeters/blenders who buy for their own brands or packets, buying agents

who buy tea at auctions on behalf of other tea dealers and even as retailers

in their own localities.

It is reported that many of the retailers come across difficulties for

registration and getting license from the Tea Board. In the loose tea market,

very often, various levels of adulteration are prevalent which is done by the

retailers mainly to increase their profit from the ‘original’ tea. This also

denies the ‘real’ taste of good quality tea to consumers as their preferences

mainly rely on retailers. Regional packeters and retailers sell packet tea on

their own brand in their locality. It has been observed that the sale of stolen

tea from factories is prevalent in many tea-producing regions. Generally retailers

prefer tea with which they can make good profit and they are not sensitive

about the social and economic responsibilities issues in tea gardens. There is

no interface between producers and retailers., However, retailers play a major

role in deciding consumers’ tastes and preferences especially in rural markets.

Unregistered retailers are quite common and institutional set-up lacking to

forbid them from getting access to the tea markets.

118



It is reported that low participation of buyers and proxy buyers lead to

low bargaining in the later phases of auction and is may lead to low or

stable prices for further lot size. The price mechanism is very often dominated

by big buyers and their role in price fixation at various phases of the auction

is significant. As reported by the auctioneers, unproductive competition

due to low participation rates may not lead to high and steady prices for

tea. As stated, increase in supply due to the import of low quality and low

price tea in the local markets also causes low price realization in the Auction.

Due to the consideration of short-term profit, low quality, adulterated

tea and imported tea ae sold in retail markets in the rural areas. There is

no interface between producers and retailers and it influence on promotion

of high quality tea. It is reported that adulterated tea in local market push

down demand for quality tea and it may harmful to health as well.

Consumers may not avail and access quality tea and mostly what they are

offered is based on the retailer’s preferences.


� Initiatives should be taken to increase sale through the Auction sale by

creating some mechanism to increase participation of buyers from

different segments. The movement from development agencies and the

consumer campaigns may build the direct linkages with buyers and small

tea growers which may create awareness and increase demand for their

tea at the Auction.

� Initiate institutional reforms to create awareness and provide sale

promotional schemes to retailers to provide better quality to consumers.

This will also make buyers and retailers more conscious about social

and economic issues in the tea gardens.

� Initiate the participation of non-profit organizations and other

stakeholders as at present intervention of various stakeholders are limited

at the retailer and consumer level.

Consumers


Consumers’ preference for tea is very limited mainly because the market

is dominated by various soft-drink companies. Many consumers consider

that tea is not a healthy drink. There is a lack of availability of good tea-

drinking (teashops) outlets at different regions and even in tea-producing

119


regions. Lack of tea promotion with its various varieties, for instance tea as

a health drinks, is lagging in the tea market. Continuity in generic-promotion

schemes through various phases and ways are limited. There are no direct

linkages of interaction with tea producers and consumers. Consumers prefer

good-quality tea but are hardly conscious about the social, environment

and economic responsibilities at gardens. As stated, though consumers are

willing to pay the same, their behaviour patterns do not show their

preferences. The domination of branded tea of multinational has created

their own consumers over the period due to various schemes and options.

At present, the market is very limited. So, to choose high quality tea

specifically from small tea segments, even if consumers are intend to do so

is difficult, if not impossible


The low per capita consumption of tea in India shows that there is high

potential to utilize the market. If an initiative is taken to strengthen the

domestic market, it would also demand an increase in the volume of

production. Consumers are becoming more quality conscious but the

choice for them is limited. Due to various promotional schemes,

advertisements and levels of intervention, the consumer market is dominated

by soft drinks. The expansion of tea market in this present market scenario

is very difficult. The existing process of tea industry provides no space for

consumers to be part of the whole value chain of tea industry. As noted by

other studies, consumer behaviour and consumption patterns in India

hardly get space to address the social and environmental issues and workers’

conditions in the tea industry.


� Intensify various schemes for generic promotion of tea with wide varieties

of tea products. It is important to introduce a variety of tea outlets/

accessibility of quality tea can be launched with the joint venture of

various stakeholders.

� Extensive and intensive promotion schemes should be launched through

the various channels including media and other public spaces.

� Create awareness about social and environmental responsibilities of the

product and sensitiveness of working environment at the production

sector through various forms of communication.

� Introduce outlets of various-priced and various varieties of tea where

consumers, irrespective of class get access to good quality. Urban-centered

120


outlets only provide access to a minor portion of consumers otherwise.

This would also provide linkages with production sector and consumers.

The promotional programmes and studies need to address the different

segments of society irrespective of purchasing power and behaviour of

customers and social groups. This also creates a situation where consumers

can choose their own tea in various retailers rather than focusing on

very few classes of consumers in urban areas.

� Initiate the linkages with production sector and the consumer level

through the involvement of the retailers. Various marketing channels

appropriate to region to region (for instance, use of Self-Help Groups,

PDS shops and so on) should be used for this.

We find that small tea segment are competent in many ways but are not

in a position to address the social, economic and environmental

responsibilities at the production level. It is also important to empower

the small tea segments to rise to the preferences of consumers who seek

environmentally, socially and ethically-superior products. More significant

than this is that it is to identify strategic interventions that the small tea

sector can make to strengthen local business competitiveness in infrastructure

and re-position regulations so that they can act in a advantageous

competition making an advantage of it rather than finding it as a hindrance.

The production and market segments of small tea emerge as a new

alternative to the plantation-model economy. The emergence of this new

model with its own dynamism influences production, domestic market

and the labour market as well. A sustainable growth policy for tea cultivation

to support small tea segments will necessitate coping with recent initiatives

of short-term remedies for tea industry and a holistic and stable policy

environment. This initiative, as noted by Jayne T S, et al. (2006) is crucial

to generating the economy-wide benefits to the poor associated with the

inter-sectoral multiplier effects associated with structural transformation.

As noted, a large number of people depend on the tea industry in India

and it also produces a good amount of foreign exchange for the country.

As formulated above, the necessity of multi-stakeholders approach or

common platform is inevitable due to small units and scatteredness of

small tea segments. They can attain accessibility despite their vulnerable

individual conditions, control or negotiate over resource allocation and

participate in decision making, and alternative trade to intervene in

international market due to adoption of the multi-stakeholder approach.

121


Investments to the networks of association of small growers and other

stakeholders have become important to facilitate the structural

transformation of the small tea segments of the Indian tea industry. It is

quiet necessary to have intervention and co-ordination of major

development and nodal agencies to expand their market through various

forms of trade and other suitable schemes. Effective governance is central

to the effective operation of various state enterprises and donor agencies

and markets (Jayne T S, et. al, 2006) to enhance these institutional

innovations. Institutional innovations, as argued by Neilson and Bill

Pritchard (2006), are decisive for small growers to compete with the estate

sector.

How to create a common platform with the involvement of various

stakeholders with attention to the institutional underpinnings of markets

for coordination between producers and sellers, multinational input and

commodity trading firms, a supportive public sector and other mechanisms

to reduce the costs and risks of investing in the value chain of tea industry

needs to be researched further. Finding workable strategies and effective

governance to make small tea segments more competent and move-up in

the value chain are to be the key challenges in the small tea segments in

India

122


Notes

Chapter 1: Introdction1Indian Tea Association: Indian Tea Scenario (Kolkata, 2002).

2Chambers, 1993:11., Chambers, R. 1993, Challenging the Professions: Frontiers for Rural

Development. London: Intermediary Technology Publications.

Chapter 2: Indian Tea Industry: Pattern and Growth1Source: Ministry of Commerce and Industry, 2005

2Tea Statistics (2005), J Thomas & Company Pvt. Ltd and www.indiateaportal.com

3www.indiateaportal.com

4Tea Statistics, (2003), Tea Board of India, Kolkata.

5NSSO 55th report, as quoted in A. F. Ferguson & Co. (March, 2002) Report on Primary

Marketing of Tea in India, Tea Board, GOI.

6Ibid.

7Saji (2005), Indian Tea Industry: Value Chain and Domestic Market.

8see details in http://www.indiainfoline.com/sect/teil/ch06.html

9Tea Statistics (2003), Tea Board of India, Kolkatta.

10The advertisements and other promotional ventures of soft drinks dominate in urban and

villages spaces in India. The majority of the youngsters have some prejudices on habit of

drinking tea.

11Per capita consumption is average consumption per head of total population in Kilogram.

12D. Chakrabarty, Secretary General of Indian Tea Association, “Current Crisis: A Challenge

Industry Should Face”, Labour File (May-June 2003).

Chapter 3: Small Tea Sector in India1Tea Act for Registration, Tea Board of India, Kolkata.

2Steps taken by Tea Board for small Growers Development, Compiled report, Tea Board

(2006), Kolkata.

3Smallholder Model in the Tea Industry of Sri Lanka And Kenya (2001), Feasibility Study on

Community Participation on Tea Plantations Plan Sri Lanka; Management Frontiers (Pvt)

Ltd.

123


4http://tcdc.undp.org/sie/experiences/vol1/Tea%20leaves.pdf.

5B Sivaram (2000) Productivity Improvement and Labour Relations in the Tea Industry in

South Asia, ILO.

6Tea Statistics 2002-03, Tea Board of India, Kolkata.

7B Sivaram (2000) Productivity Improvement and Labour Relations in the Tea Industry in

South Asia, ILO .

8Ibid.

9Smallholder Model in the Tea Industry of Sri Lanka And Kenya, Feasibility Study on Community

Participation on Tea Plantations Plan Sri Lanka; Management Frontiers (Pvt) Ltd.

10Tea Statistics 2002-03, Tea Board of India, Kolkata.

Chapter 4: Economics of Small Tea Growers in India1K. N. Reddy and N.S. Balaji Rao http://www.sasnet.lu.se/tribalbalaji.pdf,

2The name, Badaga, is derived from ‘Vadagar’ means ‘north’, i.e., people from north, i.e.,

Karnataka.

3The migration of the Badagas to the Nilgiri hills happened over several centuries starting

mainly with the fall of the Vijayanagaram empire in 1565 at the hands of the Moslems to

Tippu Sultan’s conquest of Mysore in the late 18th century. The Badaga community comprises

six major sub-groups. The Wodeas or the Lingayats who trace their origin to the Wodeyars of

the royal house of Mysore. The Kongaru from the Kongu region in the plains. The Haruvas or

the Brahmins. The Adikaris or the Magistrates. The Kanakkas or the account keepers. The

Gaudas or the cultivators and the Toreas or service-providers. The Gaudas are the dominant

group and generally suffix their names with ‘Gowder’. Though each group continues to

preserve its identity there is hardly any social or cultural segregation among them.

4http://www.geocities.com/TheTropics/Cabana/3841/badaga.html

5Census of India,( 2001), provisional.

6Discussion with small tea growers and Brokers, Coonoor

7Discussion with Small Tea Growers in Coonoor.

8Ibid.

9Calculated from data collected from the interview with small tea growers from Coonoor.

10Interview with the member of co-operative tea factory in Coonoor.

11The rate is Rs. 60 per Kg, and the local market the tea rate is Rs. 80-120 depends on the

quality.

12Literature and awareness of using knives for leaf collection and so on, UPASI, Coonoor

13Ibid.

14These Sri Lankan repatriates came to India under the October 1964 accord between Prime

Ministers Lal Bahadur Shastri and Sirimavo Bandaranaike. They were settled in the Nilgiri

region by the government.

15Interview with female temporary workers in small tea gardens in Coonoor.

16Tea Statistics (2003) Tea Board of India, Kolkatta.

17Uma Devi, Plantation Economy,

124


18Ibid.

19Usha T V (2002) Plantation and crisis in Tea industry in Kerala.

2019 per cent of the population (Census, 1991)

2111.62 per cent of the total cropped area of the Idukki district, Kerala (Kerala Economic

Review 2005)

22Discussion with tea cultivators, Peerumade Kerala.

23Interview with small tea growers in Peerumade, Idukki district, Kerala.

24Ibid.

25This is one of the problems with small tea cultivation in Kerala. Many of the small growers

from Coonoor, Tamil Nadu, reported that they could avail the financial assistance from the

Tea Board for cultivation related matters and even financial allowance for the education for

their children. It could mainly achieve only those who have registered with Tea Board.

26Discussion with Tea Board resource persons, Tea Board, Kolkata.

27 Meeting held with Tea Board Regional Director, Kochi with the small growers in Peerumade

in July, 2006, regarding the registrations and other issues related to the small tea cultivations.

28Ibid.

29Interview with small Tea Growers at Peerumade.

30Shatadru Chattopadhayay (2005), Productivity & Decent Work in the Tea Industry in

India. A Consultative Report by ILO, March 2005.

31Focused group discussion with small tea growers in Peerumade.

32See details in Shatadru Chattopadhayay (2005), Productivity & Decent Work in the Tea

Industry in India. A Consultative Report by ILO, March 2005

33District Economic Profile, www.keralagov.in

34Interviews with migrant workers, some of them were earlier casual workers in small tea

gardens in Pambabnar.

35Interview with small tea growers in Peermade

36Discussion with women worker from small tea gardens in Peerumade, Idukki district, Kerala.

37 Plucking of two leafs and a bud makes the quality of leaf better because of chemical

reactions it generates during

38Interview with workers from small tea gardens in Pambanar, Idukki District, Kerala

39Interview with one of the trade union leaders in Kerala.

40See advent of small-holder tea sector in Jeta Sankrityayana (2005), Plantation Labour in the

West Bengal Tea Industry in Productivity & Decent Work in the Tea Industry in India. A

Consultative Report by ILO, March 2005.

41Jeta Sankritayan, Productivity, Decent Work And The Tea Industry In North Eastern India-

Plantation Labour In The West Bengal Tea Industry, ILO, 2005

42Indian Tea Association, Annual Report, 1985

43Jeta, 2005

44Jeta 2005

45Jeta Sankrityayana (2005), Plantation Labour in the West Bengal Tea Industry in Productivity

125


& Decent Work in the Tea Industry in India. A Consultative Report by ILO, March 2005.

46Discussion with small tea cultivators North Bengal.

47Discussion with BLF owners in North Bengal.

48Ibid.

49Discussion with West Bengal Small Growers Association members.

50Discussion with Association members.

51Though the issues are came up in public space through the media no Government intervention

made any difference on this deprived situation. There are some temporary measures but many

implementation failed before meet the victims.

52Nutritional survey of tea workers on closed, re-opened, and open tea plantations of the

Dooars Region, West Bengal, India, October, 2005; http://blog.stonegrooves.net/05-11/

final-report-malnutrition-of-tea-workers.html.

53Discussion with officials at Tea Board, Regional Office, Guwahati

54TEAMFCO, a Bought Leaf Factories situated in Dibrugarh district of Assam. Teamfaco

argues that BLFs also have a major role in maintaining the quality of green leaves. Details of

TEAMFCO is given in a Chapter 7

55As pointed from the Officials, Tea Board, Guwahati

56Interview with committee member of Association of small tea growers, Assam

57Discussion with resource persons, Tea Board, Guwahati.

58Detailed discussion of SHG in Assam has included in separate session below.

59Techno-Economic Survey of Small Tea Growers in Assam ( 1994), Tea Board, Kolkata.

60Problem of Small Tea Gardens: A case study of Dibrugarh District, Assam. Partha Ganguli

(2000).

61Ibid.

62Interview with one of the workers.

Chapter 5: Value Chain and Small Tea Growers1John Humphrey and Hubert Schmitz (2000) ‘Governance and Upgrading: Linking Industrial

Cluster and Global Value Chain Research’, Working Paper No. 120, Institute of Development

Studies (IDS), University of Sussex, UK.

2Wilkinson 1995, Quoted from John Humphrey and Huber Schmitz (2000).

3The value chain is also organised in many different ways mainly as a producer-driven

commodity chain and buyer-driven commodity chain. Generally, buyer-driven commodity

chains refer to those industries in which large retailers, marketers and branded manufacturers

play pivotal roles in setting up decentralised production networks in a variety of exporting

countries, typically located in the third world. The distinction between buyer driven and

producer-driven value chains highlights the role of retailers and brand name companies (the

buyers) in structuring global trade in labour intensive products and the role of producers in

structuring global production in capital and technology intensive industries

4Saji (2005). Indian Tea Industry: Value Chain and Domestic Market.

5The formal description of key stakeholders, see http://commerce.nic.in/Proposed%20e-

auction.pdf and detailed discussion of other stakeholders are included in the discussion of

126


developing the argument of value chain in small tea growers in concerned sessions.

7Saji (2005), Indian Tea industry: Value Chain and Domestic Market

8Ibid.

9See Report of Primary Marketing of Tea in India (2002), A F Ferguson & Co. submitted to

Tea Board, GOI, for detailed discussion on rule and practices of auction system in India

10Saji (2005), Indian Tea Industry: Value Chain and Domestic Market.

11Discussion with Auctioneers in Cochin.

12It is not official but depends on the personal relationship with buyers and brokers to

promote the business. Discussion with brokers from Coonoor.

13Ibid.

14Tea Board, see details of Tea Board and its function

15see the details of how MNC dominates the tea market in India, Shatadru (2006). International

workshop of tea industry in India., Darjeeling

16see the details of how MNC dominates the tea market in India, Shatadru Chattopadhyay

(2006). International workshop of tea industry in India., Darjeeling

17Ibid.

18Methodology for value chain analysis.

Chapter 6: Competitiveness of New Model in Tea Sector1Ashim Roy, “Labour File”, May-June 2003

2Source: Tea Board of India, 2003

3Auction price, Various Auction Centres Report

4Discussion with Resource Persons from Tea Board, Guwahati and BLF Owners in Assam.

5Weekly Market Report( 2006)Tea Auction Centre, Coonoor.

6Tea Digest, CTTA, Kolkatta.

7See details of function of auction system and price mechanism in A F Ferguson & Co. (2002)

and Saji (2005).

8Discussion with Brokers in India.

9See Saji (2005) for further discussion in tea auction and quality of tea.

10V. Ramaswamy, A strong role for tea auctioneers http://www.thehindubusinessline.com/

2003/09/22/stories/2003092200010900.htm

11Saji (2005), Indian Tea Industry: Value Chain and Market.

12Discussion with brokers in Coonoor. It is not official but depends on the personal relationship

with buyers and brokers to promote the business.

13See details of crisis in Indian tea industry, for instance, Shatadru (2005 & 2006) and CEC

(2003).

14A F Ferguson & Co. (2002), Report on Primary Marketing of Tea in India , Tea Board, GOI,

for detailed discussion on rule and practices of auction system in India

15A F Ferguson & Co. (March, 2002) Report on Primary Marketing of Tea in India, Tea Board,

GOI, for detailed discussion on rule and practices of auction system in India

127


16See details in Saji (2005).

17Discussion with various brokers and buyers in India.

18Discussion with brokers.

19Many brokers disagrees this process. They claim that if auction prices become higher their

profits will increase. However, this needs to be addressed separately.

20Nalllasangam, demands that there should be strict action against the adulteration at BLF

level. They argue that the adulteration process reduce the quality of tea and automatically the

market will decline and price of tea also reduce at auction level.

21Discussion with Brokers at Coonoor and Guwahati.

22Plenty of adulterated tea Mathrubhoomi, (Malayalm Daily), July 14, 2006.

23Ibid.

24See the details of role of national and regional packeters in domestic tea market in India, Saji

(2005) and A Ferguson (2001)

25The preferences of the retailers are based on their margin, benefits and other facilities. See

Saji (2005) for details of retail market.

26Impact Report, Quality Upgradation Programme in Small Tea Sector, Nilgiris, Tea Board &

Upasi-Krishi Vigyan Kendra, Coonoor, The Nilgiris, February, 05, 2004

27For instance, Nerittu valangale vangi misritamakki ela edukkunna thottangalkku

nalkunnathukondu kittunna nanmakalum labhavum (Malayalam), Tea Board & UPASI-KVK,

Quality Up-gradation Programme, October, 2003.

28Quality Upgradation Programme in Small Sector ( September, 2003) Tea Board & UPASI-

KVK, The Nilgiris.

29Techno-Economic and Socio-Economic Survey of Kerala Tea Industry (1994), Tea Board,

Kolkata.

Chapter 7: Corporate Social Responsibility and SmallTea Growers1Ibid.

2Strong C, 1997

3Smith C N, 1990

4Minton, A. and Rose, R; 1997 and Robert J. C, 2004

5Friedman, M 1970

6Schwartz, M S & Carroll, A B 2003

7Discussion with some of the brokers and buyers, Kolkata.

8Shatadru Chattopadhyay (2006).

9Ibid.

10Donaldson, T & Preston, E L. 1995

11Harrison. J G & Freeman, R E. 1999

12The issues of CSR are discussed with all stakeholders in major tea producing regions, namely

Assam, West Bengal, Tamil Nadu and Kerala, in India during the field work.

128


13As quoted in Shatadru Chattopadhayay and Pramod John (2007), ‘Bitter Beans’ The Coffee

Crisis and its impact in India’ Partners in Change, New Delhi.

14Ibid.

15Shatadru C and Pramod J (2007)

16See details in Shatadru Chattopadhayay and Pramod John (2007), ‘Bitter Beans’ The Coffee

Crisis and its impact in India’ Partners in Change, New Delhi.

17Shatadru Chattopadhyay (2005).

18Minton and Rose, 1997

19Barbara Flies et. al, CSR and TradeL Informing Consumer about social and environmental

conditions of globalised production, OECD, Trade Policy working paper, http://

www.olis.oecd.org

20Ibid.

21Kevin Bright et. al (2005), Consumer Responses to Corporate Social Responsibility in

Middlebury, Vermont

22Barbara Flies et. al, CSR and TradeL Informing Consumer about social and environmental

conditions of globalised production, OECD, Trade Policy working paper, http://

www.olis.oecd.org.

23Ipsos G6 Study of February 2006, quoted from Barbara Flies et. al, (2007)

24 MORI, 2003. Survey of British public – 2026, quoted from Barbara Flies et. al, (2007)

25MORI, September 2000, quoted from Barbara Flies et. al, (2007)

26Alter Eco France, March 2000, quoted from Barbara Flies et. al, (2007)

27Barbara Flies et. al, (2007).

28Franziska Krisch (2006) Report on findings of a study Of consumer reactions to Socially

responsible and Environment friendly tea , CEC, delhi and fakt consult for management,

training and technologies, Germany, Traidcraft, UK.

29Discussion with Buyers, Kolkata.

30Saji (2005), Indian Tea Industry: Value Chain and Market.

31See Uniliver.com

32see details of CSR of Tata Tea in www.tatatea.com

33Beyond Corporate Social Responsibility: The Scope for Corporate Investment in Community

Driven Development, Report No. 37379-GLB, December 21, 2006, World Bank.

34Unilever Environmental and Social Report 2005; www.unilever.com and Hindustan Lever;

www.hll.com

35PDS- note on PDS.

36Proposal for promoting marketing activities of organic tea through various visual, audio and

print media in the state of Kerala by SOTF, unpublished document collected from SOTF,

Peerumade, Kerala.

37Quality Up-gradation Project for Tea- in Small Sector, Supported by Tea Board & PDS,

Peerumade, Kerala.

38Discussion with PDS resource person.

129


39See details of this trading initiatives in http://www.justchangeindia.com and http://

www.adivasi.net

40http://www.feasta.org/documents/review2/thekaekara2.htm

41Discussion with resources person, TEAMFACO office, Dibrugarh.

42Discussion with Resource person from GTTA, Auction centre, Guwahati.

43Discussion with resource person from TEAMAFCO, Dibrugarh.

44Discussion with Director, Tea Board of India. Kolkata.

45See the details of schemes in Tea Plantation Development Scheme: Scheme for Setting up

of Pilot Tea Producers Societies (SHG) amongst Small Tea Growers, Tea Board, Dispur,

Guwahati.

46Ibid.

47Discussion with Director, Tea Board of India, Kolkata.

48One of the members in SHGs pointed out that this is the one of the positive outcome which

they can communicate with others, SHG units, Assam.

49As stated by the one of the resource person from Tea Board, Kolkata. It also shows that lack

of association and initiatives are the one of the factors of the tea sector in Kerala which lags

behind attain the financial assistance from the Tea Board. It has been observed from the field

that the high tendency of the agents those who works in tea sector pointed out that the

intervention from Tea Board is lacking and Tea Board has major role to play.

50It is also noted in session above that the SHS groups in the participated in marketing sells

low quality tea in the rural areas mainly in tea shop and it made notice that it is harmful and

not tested the quality control.

130


Acknowledgments

We sincerely thank all the people who gave their valuable time and

shared their experience and insights with us, which made this study possible.

As are were too many people involved in various stages of the project,

we do not want to take the long route of listing all the names and say

thank you to every one. But, we gratefully remember all the people involved

in one way or other. We will remember them always and it is a fact that

many of them have become our good friends in the course of the study and

the follow up actions for improvement of the tea supply chain.

We specially acknowledge the deep interest shown in the report by

Viraf Mehta, Chief Executive, Partners in Change and Liesbeth Unger of

Oxfam Novib, Netherlands. We also thank them for writing the Foreword

and the Preface respectively. We are also thankful to Mr. Pramod John,

Senior Programme Manager of Partners in Change for painstakingly going

through the draft report and offering his valuable comments and suggestions.

We sincerely thank the trade unions and small tea growers associations

from West Bengal, Assam, Kerala and Tamil Nadu. The study would not

have been possible without the active participation of several individual

small tea growers, exporters, NGO leaders, consultants, government officers

particularly from Tea Board of India, auctioneers, corporate executives and

all others who allowed us to enter their lives and learn from their experiences.

We thank Koshy Mathew, Wordmakers Bangalore for the editorial and

design support and Rajiv Govind for the cover design.

131


Researchers and Authors

Dr. Shatadru Chattopadhayay

Senior Programme Manager

Shatadru Chattopadhayay is a doctorate in South Asian Political Economy

and received his education at Delhi University and Jawaharlal Nehru

University (New Delhi). Shatadru has been involved for the last eight years

in various research, campaign, advocacy and capacity-building programmes

around trade and labour rights issues, both nationally and internationally.

He also specializes in designing and implementing Corporate Social

Responsibility programmes involving different stakeholders across the value

chain of businesses. He has worked with/initiated many multi-stakeholder

networks for improving social, economic and environmental practices of

businesses with a focus on marginalised stakeholders.

He has been associated with the tea sector in India and abroad for the

last ten years as a researcher and as an active stakeholder with the goal of

making tea industry more sustainable. Currently he is working with Partners

in Change and managing programmes on key CSR issues across the value

chain of tea, coffee, cotton and garment sector. He has written or coordinated

various research works on these sectors. He also actively participates in

various CSO alliances and networks related to CSR in India and South

Asia.

Saji M Kadavil

Research Consultant and Author

Pursuing PhD in Economics in Jawaharlal Nehru University, New Delhi

on issues of livelihood and agro based industries in India. Has been

associated with Government institutions, Non-Governmental Organizations

and academia as research consultant and educator. Major works include

Tea industry in India; Inequality in Development of Social groups;

Negotiation of Livelihood Trajectories of Marginalized Communities;

Poverty – Development Issues.

132



Chai time: sustainable livelihood for small tea growers through CSR

Documents

economics of small tea

small tea holdings

indiasmall tea growers

supply of tea

supplydemand of tea

export of tea

tablesproduction of

small tea growersvalue