The tea plantation Industry is clearly at a crossroads and financially stressed, affecting both the fortune of the investors and the many thousand plantation workers who are dependent on this industry for generations. This position is not a surprise outcome for a business that has 65 per cent of its cost of production loaded on wages and wage-related costs and whose revenues by way of farm gate prices haven’t kept pace at all with wage and input costs. Worker wages and need for better living conditions will continue to rise on real and aspirational basis adding a reputation risk to the Indian tea Industry.
Balancing factors for sustainability
Going forward, the tea plantation industry must be a fine balance between the economic viability of the business, the social and economic security of the workers/farmers, biodiversity conservation and climate change impact mitigation. These factors are complementary, not contradictory if one looks at the action required to achieve the objectives of these tenets. For the sustainability of the tea industry, win-win solutions are required and the compartmentalised approach is not taking us anywhere.
Plantation income augmentation
Augmenting plantation income by resorting to alternate crops/businesses, outside the definition of “plantations “is certainly a first step to boosting the economic viability of the sector. Land being a State subject, there needs to be a federal policy with buy-in from States, in allowing these alternate uses.
Biodiversity and climate change impact mitigation
The areas under the new crops must have strict biodiversity and regenerative agriculture guidelines, compete with integration of agroforestry, soil and water conservation measures, including micro watersheds as well as carbon neutrality and carbon economics support, integrating soil carbon dynamics and carbon credit mechanisms. This way, a proactive template can be created for land use, in the tea-growing areas.
Outdated plantation labour housing
Relinquishing of land by the plantation owners for housing under government schemes and then handing over the social and welfare provisions to the Government, resulting in considerable cost savings, could be the second win-win step. This will obviously need tweaking/repealing of the Plantation Labour Act.
Monetisation of plantation land
The current land legislation precludes plantations from alienating land for purposes other than growing plantation crops. Permission to monetise land assets for real estate/industrial purposes will lend much-needed liquidity to plantation owners, to invest in strategic development business items. All the above (items 4 to 7) would entail revisiting the Tea Act,1953, and working with Government agencies and stakeholders to develop alternative means of operationalising and enforcement of the proposed Occupational Safety, Health and Working Conditions Code 2020 (NO. 37 of 2020) and the Code on Wages (Central Advisory Board) Rules 2021.
Supply-demand equilibrium
Domestic consumption at below 2 per cent hasn’t kept pace with production growth of over 2 per cent. Neither the industry nor the government has made serious efforts to improve consumption (and consequently the consumer value of tea) leveraging on the now well-demonstrated health benefits of tea. Exports have also stagnated - an additional 20 to 30 million kgs of export is critical to maintaining the supply-demand balance. This needs a considered disposal masterplan that is self-sustaining. Admittedly production support in the underdeveloped areas of Northeast is a justified socioeconomic cause, but in the absence of a concurrent disposal master plan, this could become a remedy worse than the disease.
Primary Marketing Structure
Tea Board need to get de-entangled with Primary marketing. Free marketing has many advantages (as in coffee and NR). Auctions have too many intermediary layers, not justified in a digitally connected world and results in low value share at the farm gate following limited competition. Support from Block chain can deliver the much-needed traceability in sourcing.
Dual economy
Large grower model vs small tea growers: While the processors of green leaf of small tea growers (STGs) - the bought leaf factories, are making decent profit margins, the economics of the larger plantation model is stressed. In recent times. Many corporates have developed ‘bought leaf ‘verticals, which are also clocking decent profit margins. The small grower/bought leaf teas today are over 50 per cent of national production and growing.
SGT is a cost-effective model because of its structure. While it has issues of quality consistency, market access, transparency in green leaf pricing etc, it has the intrinsic socio-economic support of own land and own house and the underlying benefit of a low raw material cost. The two models need to draw strength from each other, given the current socio-economic order, by revisiting, remodelling structurally and operationally., going forward.
Skill development
Plantations have been suffering from limited skill development at all layers. This needs focused attention. Shortage of labour should be seen as an opportunity for mechanisation, addressed through machine development, both as a productivity and earning enhancer, as well as creating a superior job profile. Over-dependence on migrant labour is the line of least resistance.
Product safety: This has been a burning issue, in recent times, leading to much intra-stakeholder strife and many knee-jerk reactions. With proper awareness creation on integrated pest management technologies, there is no reason why the FSSAI specifications cannot be implemented across the industry. The SGT sector would particularly gain from such an awareness and training programme, running side by side with ‘policing ‘measures such as checks and control, both at the green leaf stage and at the finished product stages.
Darjeeling tea industry
This is plagued by low crop productivity, high cost, shortage of labour, low price realisation because of limited market access and competition from Nepal. These problems need to be addressed by revisiting much of the ways of the traditional model. The external scenario in Darjeeling is tailor made for the formation of a well-structured, professionally managed cooperative ownership structure, which has the potential to address much of the maladies affecting this industry.
The Government of India must lead dialogues and interaction to secure stakeholder participant support, preparatory to enabling the government to make suitable policy changes, that has the capability to redeem this distressed industry, especially on issues that fall within the concurrent list of the constitution.
(The author -an independent consultant in plantation crops, agribusiness and sustainable agri sourcing - is a past President of the United Plantation Association of Southern India (UPASI) and a former member of the Tea Board of India).