Why plantations are no one’s cup of tea

An engineer by training, Topojit Bagchi of Dibrugarh in upper Assam decided to manage his family’s small, century-old tea plantation, Phukan Bari Tea, in the early 1990s.

Two decades later, Bagchi owns a packet tea brand that fetches higher returns than auction prices. And he pays a higher-than-mandatory bonus to his workers, with whom he shares an excellent relationship.

Yet, he is determined to quit tea in the next ten years, once his children are settled, in careers other than tea. He wants to keep his children away from the tea business.

“Running a tea plantation is a daily challenge. I am continuing with it because this is the only business I know. There are not many takers for plantations either,” he told BusinessLine.

The organised plantation sector has been in trouble for quite some time. A visit to the vast tea plantations in Assam — contributing more than half of the national production — will tell you everyone is suffering from low morale.

Industry giants such as Tata Tea and HLL have either quit or divested their majority stake in plantations and concentrated on marketing for quite some time.

The world’s largest tea producer, McLeod Russel, is investing in fresh assets outside India. And, reports of sickness far outstrip mergers and acquisitions.

Planters blame it on rising costs vis-à-vis low returns. In 2012, the Parliamentary Standing Committee on Commerce pointed out that India is the highest-cost producer among all tea producing nations, while the price realisation has remained stagnant.

The scenario hasn’t changed much since then. The average prices at the Guwahati auction centre, the largest in the country, for the last five years were: ₹141, ₹135, ₹143, ₹145 and ₹140 per kg.

In contrast, expenses have increased manifold due to inflationary pressure on raw materials and pressure of politics to increase expenses on labour, which alone contributes to 60 per cent of the production cost.

Politics was not wrong in demanding better wages for tea workers. Despite a three-fold rise in wages since 2001, the current cash wage is only ₹137 a day. The BJP government came to power promising workers a sharp rise in cash wages.

The problem is that neither the State nor the Central government has a parallel plan to help planters reduce costs by improving ease of doing business and freeing them from social obligations, which are essentially the job of the government.

The Assam government, on the contrary, is adding to the social cost. Take the case of rations. Plantations offer a basic staple diet of rice and atta to workers and their families at a throwaway price of 50 paise a kg. In the past, gardens used to procure the supplies from the State at ₹7-8 a kg.

The West Bengal government took advantage of the National Food Security Act of 2013 to reduce the procurement cost of planters to ₹2/kg. But, Assam did the opposite. Gardens were asked to procure from the open market at ₹20/kg.

This is not all. Gardens are duty bound to provide quarters to permanent labourers. Around 2003 — when tea prices crashed to a record low — Assam handed over a new prototype for labour quarters, including one living room, two bed rooms of 100 sq ft each, a verandah, kitchen and toilet.

For an industry where even the smallest have 150-200 permanent labourers, such an upgradation is costly. Naturally, the industry was slow in fulfilling the obligations. The benefit went to inspectors.

According to Bhaskar Hazarika, a Jorhat-based planter who quit a highly rewarding IT career in the US to take up the family business in 2009, regulation is the biggest hurdle for the plantation business to survive. “This industry is untouched by reforms and is reeling under inspector and permit raj,” he said.

A tea manufacturer has to renew five licenses every year and has to deal with dozens of inspectors from the Tea Board, Central Excise, Inspector of Factories, Weights and Meteorology, FSSAI, Employment Exchange, Sales Tax, Agriculture Income Tax, Income Tax, Labour department, Revenue Department, Provident Fund, Pollution Control Board etc.

During his short stint in tea, Hazarika did a remarkable job in improving the quality. His teas consistently fetched one of the highest prices at the Guwahati auction in 2016. But he says he would be happy to quit the tea business.

“I took an emotional call to return home and look after my ageing parents. I was swayed by the stories about growth opportunities in India. Since tea was a ready option, I grabbed it. But, it was a wrong decision,” he says.

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