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Sustainable Livelihood for Small Tea Growers through CSR


Sustainable Livelihood for Small Tea Growers through CSR


Sustainable Livelihood for Small Tea Growers through CSR

Chai Time


Sustainable Livelihood for Small Tea Growers through CSR CHAI TIME Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

Chai Time Sustainable Livelihood for Small Tea Growers through CSR

Partners in Change


Sustainable Livelihood for Small Tea Growers through CSR

Abbreviations

6

Competitiveness of New Model in Tea Sector

Glossary

7

73

Preface – Liesbeth Unger

11

Cost of Production of Green Leaf for Small Growers

Foreword – Viraf Mehta

13

Bought Leaf Factories

74

Floor Prices at Gardens

78

Introduction The problems of small tea growers

15

Price Mechanism at Auctions

78

PiC and small tea growers

17

Objectives and Methodology

18

Adulteration and Formation of Quality in Various Stages of the Value Chain

81

Methodology

18

Overview of Chapters

19

Supply/Demand of Tea at Different Localities

83

Indian Tea Industry - Pattern and Growth Overview of the Tea Industry in India

24

CSR and Tea Sector

87

Trend of Production

25

CSR and Small Tea Growers

89

Export of Tea - Variations and Growth

26

Workers Rights - Focus area of CSR

90

Domestic Consumption

28

Indian Tea Industry and the ‘Crisis’

31

The Business Case for Integrating CSR Practices in the Small Tea Holdings

91

Ethical Trade Initiative and Fair Trade

94

India’s Small Tea Sector Small Tea Growers in India

33

Fair Trade Practices

94

Productivity of Small Tea Gardens

34

Consumer Preference and Participation in CSR

96

Economics of Small Tea Growers in India Small Tea Growers in Coonoor, TN

38

CSR and Trade Initiatives

99

Small Growers in Idukki, Kerala

44

Small Growers in West Bengal

52

Initiatives from Small Tea Growers in India

101

Small Growers in Assam

60

Value Chain and Small Tea Growers Value Chain and Tea Sector

4

Corporate Social Responsibility and Small Tea Sector

66

Policy Recommendations and Feasible Intervention Points Notes

111


Sustainable Livelihood for Small Tea Growers through CSR

Chai Time Sustainable Livelihood for Small Tea Growers through CSR

Table of Contents List of figures

List of tables production of tea in the World

25

Tea Industry in India

24

International tea markets

27

Trends of Tea Production in India

26

Destination-wise Indian Tea Exports

28

Tea Exports from India

27

Demand and Supply of Tea

32

Domestic Consumption of Tea

29

Registered Tea Gardens in India

33

Domestic Market for Tea

30

Share of Small and Estate Gardens

34

Share of Small Growers in Indian States

35

Per capita Tea Consumption in Various Vountries

31

Yield of Tea Cultivation

36

Growth of Tea Gardens in Tamil Nadu

39

Tea Cultivation in Tamil Nadu

39

Growth of Tea Gardens in Kerala

46

Tea Cultivation in Kerala

47

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

Tea Cultivation in West Bengal NOC Petition of Tea Growers in W. Bengal

5 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

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Sustainable Livelihood for Small Tea Growers through CSR

Abbreviations

6

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


Sustainable Livelihood for Small Tea Growers through CSR

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. 7


Sustainable Livelihood for Small Tea Growers through CSR 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 8


Sustainable Livelihood for Small Tea Growers through CSR 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. 9


Sustainable Livelihood for Small Tea Growers through CSR 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.

10


Sustainable Livelihood for Small Tea Growers through CSR

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 11


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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 13


Sustainable Livelihood for Small Tea Growers through CSR

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 teagrowers 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

14


Sustainable Livelihood for Small Tea Growers through CSR

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 15


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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. 17


Sustainable Livelihood for Small Tea Growers through CSR

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 18


Sustainable Livelihood for Small Tea Growers through CSR

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 19


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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 reposition 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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

Chapter 2

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

Figure 2.1 Tea Industry in India (figures are in Million kilograms) All-India Production 927.88 N. India – Production 700.9 (74.5%)

S. India – Production 227.8 (24.5%) Export 187.6 Export 94.9 (50.6%)

Domestic Consumption 757 Export 92.6 (49.4%)

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

24


Sustainable Livelihood for Small Tea Growers through CSR

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 (in mn. kgs)

Share 2005 (in %) (in mn. kgs)

Share (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

97

2.9

109

3.19

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

551.23

16.7

509.15

14.89

3310.35

100.0

3419.58

100.00

Vietnam Indonesia

Others Total

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


Sustainable Livelihood for Small Tea Growers through CSR

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

Source: Tea Statistics (2003), Tea Board of India and Tea Statistics (2005), J Thomas & Company Pvt. Ltd.

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 26


Sustainable Livelihood for Small Tea Growers through CSR

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 (in mn. kgs)

Share 2005 (in %) (in mn. kgs)

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

46.6

3.0

42.98

2.8

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

Malawi Zimbabwe

Share (in %)

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

Figure 2.3 Export of tea from India

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

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


Figure 2.4 Domestic Consum

Sustainable Livelihood for Small Tea Growers through CSR

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 quantity

2006 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 28


Sustainable Livelihood for Small Tea Growers through CSR

respectively 4 . The following table shows the pattern of domestic consumption in India. Figure 2.4 Domestic Consumption of Tea in India

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

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 fluctuates 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 29


Sustainable Livelihood for Small Tea Growers through CSR

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-Ă -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)

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

30


Sustainable Livelihood for Small Tea Growers through CSR

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, Figure 2.6 Per Capita Consumption of Tea in Various Countries in kilograms)

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. 31


Sustainable Livelihood for Small Tea Growers through CSR

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 Production Import Total supply Domestic consumption

1995

1996

754

780

1

1.25

1997 1998

1999

2000

2001

2002

874

824

846

854

826

2.61 8.93

9.99

13.43

16.58

22

755 781.25 812.61882.93

833.99

859.43

870.58

848

810

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

82.16140.09

149.08

148.51

Accumulated net tea stock28.3 69.55

164.09 126.09

Source: Shatadru Chattopadhayay, Productivity, Decent Work and the Tea Industry in Southern India, ILO, 2005.

32


Sustainable Livelihood for Small Tea Growers through CSR

Chapter 3

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 with Tea Board

Reported by Associations

Percentage 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 33


Sustainable Livelihood for Small Tea Growers through CSR

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 Region

Big Growers

No. of Estates

Area in Ha

Production

No. of Area Estates in Ha

Production

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


7277 (5.8)

58167 (46.1)

61985 (49.1)

5999 (4.8)

16 (0.0)

68000 (53.9)

100.0

Others

North India

TN

Kerala

Karnataka

South India

Total India

100.0

48050 (45.3)

83 (0.1)

4810 (4.5)

43157 (40.7)

58104 (54.7)

7355 (6.9)

9500 (8.9)

41249 (38.9)

Area

Small Growers

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

8398 (6.7)

42492 (33.7)

Nos

W.Bengal

Assam

Region

100.0

80965 (45.5)

232 (0.1)

1969 (1.1)

78764 (44.2)

9712 (54.5)

2108 (1.2)

32245 (18.1)

62770 (35.2)

Pdn.

100.0

398 (24.4)

16 (1.0)

154 (9.4)

228 (14.0)

1236 (75.6)

148 (9.1)

308 (18.8)

780 (47.7)

Nos

100.0

66664 (16.3)

2045 (0.5)

32157 (7.8)

32462 (7.9)

343014 (83.7)

9967 (2.4)

103613 (25.3)

229434 (56.0)

Area

Big Growers

100.0

125761 (19.0)

5601 (0.8)

55803 (8.5)

64357 (9.7)

534625 (81.0)

8292 (1.3)

155776 (23.6)

370557 (56.1)

Pdn.

(Figures in brackets show the percentage share against All India levels

Table 3.3 Share of Small Growers Among Different States in India

100.0

68398 (53.5)

32 (0.0)

6153 (4.8)

62213 (48.7)

59403 (46.5)

7425 (5.8)

8706 (6.8)

43272 (33.9)

Nos.

100.0

114714 (22.2)

2128 (0.4)

36967 (7.2)

75619 (14.7)

401118 (77.8)

17322 (3.4)

113113 (21.9)

270683 (52.5)

Area

Total

100.0

206726 (24.7)

5833 (0.7)

57772 (6.9)

143121 (17.1)

631748 (75.3)

10400 (1.2)

188021 (22.4)

433327 (51.7)

Pdn.

Sustainable Livelihood for Small Tea Growers through CSR

35


Sustainable Livelihood for Small Tea Growers through CSR

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 Assam

STGs Yield (Kg/Ha)

Tea Estates Yield (Kg/Ha)

1340

Darjeeling

1601 545

W. Bengal

3394

1770

Northern India

1670

1601

TN

1825

2203

409

1569

Karnataka

2800

2476

Southern India

1690

2004

All India

1680

1690

Sri Lanka

2300

1875

Kenya

1651

1933

Kerala

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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

Chapter 4

Economics of Small Tea Growers 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 38


Sustainable Livelihood for Small Tea Growers through CSR

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. Figure 4.1 Growth of Tea Gardens in Tamil Nadu

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

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 (up to 10.12 Ha)

Estate Tea Gardens (above 10.12 Ha) Actual

Nos.

Area

Kanyakumari

1

Tirunelveli

Nos.

Area

2

6

431

141

1

4

3

796

1692

Madurai

2

13

3

960

1318

Coimbatore

7

56

141

45

11678

26983

61974

43082

78623

171

18597

34223

Nilgiris

Prod. 000kgs.

Prod. 000kgs.

39


Sustainable Livelihood for Small Tea Growers through CSR

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 largescale 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


Sustainable Livelihood for Small Tea Growers through CSR 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

Nature of Production The average leaf production in small tea holdings of Nilgiris is 50006000 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 cooperative 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 coMajor problems in tea operative factory. They also get ‘made cultivation tea’ at lower rates than the local retail  Low prices market.11  Insufficient funding for proper

Most of the small growers share maintenance concerns about low price, insufficient  Low quality of the tea leaf funding and maintenance being some of  Lack of associations/networks 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. 41


Sustainable Livelihood for Small Tea Growers through CSR

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 A majority of the workers are migrants. They include migrants from Sri Lanka and villages in search of alternative jobs. other neighbouring districts of Tamil Nadu. At one time, labourers migrated to Currently a large portion of the labourers work in tea plantations both from are moving to nearby villages to find within the country and outside. alternative jobs in garment factories and While workers from outside the other small-scale industries. 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 42


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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 200500 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


Sustainable Livelihood for Small Tea Growers through CSR

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 Hydroelectric 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 largescale 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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

Table 4.2 Tea Cultivation in Kerala Small Tea Gardens (up to 10.12 Ha)

Estate Tea Gardens (above 10.12 Ha)

Actual Palghat

No.

Area

Prod

No.

Area

Prod.

28

21

70

5

831

2845

1

174

0

1

529

1467

Malapuram Trichur Trivandrum Quilon Eranakulam Kottayam Idukki Waynadu Kerala

1

3

5

962

320

89

138

14

1210

349

2

2

0

0

0

953

776

226

1

64

31

4857

3773

1498

99

22980

38709

69

97

175

28

5407

12082

5999

4810

1969

154

32157

55803

(Percentage of Total Tea Cultivation ) No.

Area

Prod

No.

Area

Prod.

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

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

Palghat

Eranakulam

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

47


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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 dailywage 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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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 wide- spread 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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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

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

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


Sustainable Livelihood for Small Tea Growers through CSR

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 Small Tea Gardens (up to 10.12 Hct.) No. Darjeeling

Area (in ha.)

Estate Tea Gardens (above to 10.12 Hct.)

Prod. 000kgs

No.

Area Prod. (in ha.) 000kgs 17463

0

0

0

85

2825

3000

11302

158

Terai (incl. West Dinajpur) 5573

6500

20943

65

West Bengal

9500

32245

Dooars(incl. Cooch Behar)

8398

9180

69792 113933 16358

32663

308 103613 155776

(Percentage of total tea cultivation ) No.

Area

Prod.

No.

Area

Prod.

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

Darjeeling

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


Sustainable Livelihood for Small Tea Growers through CSR

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 for N.O.C.

Total N.O.C issued up to 30-12-2005

Jalpaiguri

1960

620

Darjeeling

1947

865

Uttar Dinajpur

2005

249

129

49

Coochbehar

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


Sustainable Livelihood for Small Tea Growers through CSR

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 2000 2001 2002 2003 2004 2005

Average Price.Rs/Kg 6.02 7.11 5.89 5.30 7.71 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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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

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

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


Sustainable Livelihood for Small Tea Growers through CSR

Table 4.6: Tea cultivation in Assam Districts

Up to 10.12 Hectares

Above 10.12 Hectares

Actual Nos.

Area

Prod. 000kgs

Nos.

Area

Darrang

1446

853

1229

94

40840

74514

Goalpara

251

374

566

12

3149

5465

Kamrup

41

53

108

13

3401

4326

448

252

356

13

4541

8723

Dibrugarh

22590

25762

36012

244

67936

122994

Nowgong

341

253

334

23

7788

11362

16893 12809

15367

256

63953

99876

Lakhimpur

Sibsagar Cachar N.Cachar Karbi Anglong Assam

Prod. 000kgs

102

340

350

104

32435

45219

0

0

0

8

4071

4340

380

553

963

13

1320

1223

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

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

N. Cachar

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


Sustainable Livelihood for Small Tea Growers through CSR

and they have also focus to improve the development of the small growers.54

Continuous instruction on use of chemicals and knowledge about leaves is important. BLF should control the quality of Leaf with small growers TEAMFCO.

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 “Lack of knowledge of tea gardens. During this period, small growers face cultivation in small tea severe shortage of labour. Additionally small segments has negatively growers face a problem of shortage of skilled affected the productivity and quality of the tea leaves in the labour. Small growers in Assam also are region”- Tea Board 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 62


Sustainable Livelihood for Small Tea Growers through CSR

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 “Employment has increased due an increase in gardens. However employment the number of small tea gardens.” – Association in small tea gardens is not of Small Tea Growers. sustainable in terms of wage The generation of employment is not sustainable rates and working days. Workin terms of minimum wage and working days. ers are offered only min-mum Wage and working days are regulated only in peak season. Workers are forced to find jobs in wages and no other benefits other agricultural fields during the off-seasons. such as Gratuity, PF, etc. This pattern of employment by small tea gardens Additionally, steady employis not attractive to skilled labourers. ment is available only during 63


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

Chapter 5

Value Chain and Small Tea 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). 66


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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: 70


Sustainable Livelihood for Small Tea Growers through CSR  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 71


Sustainable Livelihood for Small Tea Growers through CSR

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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Sustainable Livelihood for Small Tea Growers through CSR

Chapter 6

Competitiveness of New Model of Production in Tea 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: 73


Sustainable Livelihood for Small Tea Growers through CSR

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 74


Sustainable Livelihood for Small Tea Growers through CSR  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

No. Prod. No. Prod. No. Prod. (mn. kg) (mn. kg) (mn. kg)

Assam

119 43.0 139 53.29

West Bengal Others

44 24.6

56 33.44

2004 No.

Prod. (mn. kg)

151

65.32

162

77.6

69

37.74

79

49.59

9

3.04

4

0.5

4

1.67

8

2.78

North India 163

67.5

199

88.4

228

105.8

155 65.6 159

67.43

182

75.9

185

80.72

TN Kerala

250 130.23

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

331 135.2

371

157

India

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. 75


Sustainable Livelihood for Small Tea Growers through CSR

Table 6.3 Price Realization of Various Factories in Guwahati Region

Co-operatives

BLFs

Estates

Price in Rs/Kg. Arunachal Assam Valley

44.45 57.32

Cachar

54.70

64.43

41.37

47.54

Nagaland Tripura

60.65

63.54 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. Figure 6.1 Price difference at Auction 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. 76


Sustainable Livelihood for Small Tea Growers through CSR

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. 77


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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 Various Stages 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 81


Sustainable Livelihood for Small Tea Growers through CSR

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 82


Sustainable Livelihood for Small Tea Growers through CSR

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. 83


Sustainable Livelihood for Small Tea Growers through CSR

Table 6.4 Beneficiaries of Subsidy from Tea Board Region

Number of beneficiaries

Total STGs

% of STGs

Assam

311

42492

0.73

W.Bengal

166

8398

1.98

48018

68000

70.61

S. India

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. 84


Sustainable Livelihood for Small Tea Growers through CSR

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 Harvesting and Pruning Harvesting interval in days

Existing Practices

18-21(extended interval)

No Plucking 18 to 20 rounds rounds in a year ( less)

QUP Technologies Recommended

Achievement in Quality centres areas run by SHGs

Rush period: 8 to 10 Lean period: 10-12

10-12 Rush period 13-12 lien period

30.32 rounds

28 rounds

Pruning interval

Ranging from 8 to 10 years

Pruning height

Generally low 18-24 inches 18 to 20 inches height below (medium/light pruning) 10 inches (low pruning)

Tipping height At 16-18 inches

4-5 year pruning cycle

5 years

At 28 inches fromground level

At 28 inches from ground level

Yield increase per ha of green 6250 leaf(Kgs)/ year

10,000

9,000

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 UPASI85


Sustainable Livelihood for Small Tea Growers through CSR

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. “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.

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.”

86


Sustainable Livelihood for Small Tea Growers through CSR

Chapter 7

Corporate Social Responsibility and Small Tea Growers 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 87


Sustainable Livelihood for Small Tea Growers through CSR

points in industry. This gives the opportunity and the space for wideranging 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. Table 7.1 CSR Standards, Codes and Practices Social

Economic Monetary flows to the public sector

Health and safety of employees

Employment and human resource

Labour standards and working conditions

Development Procurement and supply chain management

Corruption and bribery

Technology transfer andintellectual property rights

Social impact assessment and Management

Human rights Violence and conflict Community and stakeholder engagement (non-commercial) Charitable giving Social/community investment Social reporting and management systems

Environment

Corporate Governance

Environmentally safe production,products and services

Rights and treatment of Shareholder

Resource and energy efficiency

Principles Information disclosure and reporting

Environmental impact assessment and management Environmental reporting and Management systems

Governance policies and business

Responsibilities of the Board Customer/end-user care

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 88


Sustainable Livelihood for Small Tea Growers through CSR

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 or business benefits for small grower. Barriers

Broader benefits of CSR, eg. Lifelong learning community development Drivers

Lack of technology, expertise, training and investment necessary to make improvements

Supply chain pressure from TNC codes of conduct and demand certification

Few CSR initiatives oriented towards growers

Shifting markets, the need to align production towards changing consumer preferences, internationalisation of standards

Little understanding of business case. Supply chain initiatives rarely extend beyond first level suppliers

Local pressure from regulation, public policy and civil society

More pressing need to upgrade technology management and marketing

Strategic business case benefits

Price competition and limited consumer pressure Source: Shatadru Chattopadhayay (2006)

89


Sustainable Livelihood for Small Tea Growers through CSR

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. 90


Sustainable Livelihood for Small Tea Growers through CSR

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 the Small 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. Figure 7.3 CSR and Welfare Matrix 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

Water Supply

Delusional CSR

Situationat at Garden

Impact on Producer

Impact on labour

Impact at Garden

Insufficient water supply

Reduce running expenditure

Epidemic diseases

Low total productivity

Sufficient Water

Additional expenditure

No waterHigh borne productivity

CSR in Tea Garden

Welfare

Productivity

Profit

Source: formulated from field work

91


Sustainable Livelihood for Small Tea Growers through CSR

The following figure demonstrates the three broad areas under which CSR works, though each aspect of CSR has many indicators. 7.4 Process of CSR in Small Tea Sector Child Care

Enhance the Productivity of mother

Increase the labour Productivity

Economical High Margin for Small Tea Growers

Quality, move on value chain

Competitiveness

Sustainability of production, Productivity and Profit, Move up in value chain

Environment Health Safety Ecological Balance and Biodiversity

Reduce the Risk getting affected disease

Increase the productivity and production, profit

Competitiveness in national and international Market ,

Environmental Sustainability

Source: Formulated based on field work

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.

92


Sustainable Livelihood for Small Tea Growers through CSR Table 7.5 Perspectives of Stakeholders on CSR and Tea Industry in India Stakeholders Workers at Small Tea Gardens

Small Growers/ Other tea producers

Trade Union

Perspectives Not part of it, not addressing labour issues, especially 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 growers 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 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 NGOs

PLA already exist, whether CSR add the /Statutory Board/ 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

93


Sustainable Livelihood for Small Tea Growers through CSR

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. Base Codes

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

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.

Working hours are not excessive No discrimination is practiced Regular employment is provided

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

No harsh or inhumane treatment is allowed

Source: Shatadru Chattopadhyay (2006)

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 94


Sustainable Livelihood for Small Tea Growers through CSR

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. 95


Sustainable Livelihood for Small Tea Growers through CSR

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 96


Sustainable Livelihood for Small Tea Growers through CSR

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: 97


Sustainable Livelihood for Small Tea Growers through CSR  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 98


Sustainable Livelihood for Small Tea Growers through CSR

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. Box 7.1 Trade Initiatives 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.

99


Sustainable Livelihood for Small Tea Growers through CSR 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.

100


Sustainable Livelihood for Small Tea Growers through CSR 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.

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 101


Sustainable Livelihood for Small Tea Growers through CSR

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 102


Sustainable Livelihood for Small Tea Growers through CSR  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 103


Sustainable Livelihood for Small Tea Growers through CSR

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. 104


Sustainable Livelihood for Small Tea Growers through CSR

Table 7.8 Price realization of green leaf of TEAMAFCO Fine (in %) From

Effective Rate(In Rs. P)

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 105


Sustainable Livelihood for Small Tea Growers through CSR

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 106


Sustainable Livelihood for Small Tea Growers through CSR

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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Sustainable Livelihood for Small Tea Growers through CSR

Chapter 8

Challenges and Competence of Small Tea Segments Policy Options 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. 108


Sustainable Livelihood for Small Tea Growers through CSR

Characteristics and Challenges of major Stakeholders of 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 109


Sustainable Livelihood for Small Tea Growers through CSR

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 PREVALENT CHARACTERISTICS 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 110


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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 111


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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 112


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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. Recommendations /feasible intervention options  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.

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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.


Sustainable Livelihood for Small Tea Growers through CSR  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 PREVALENT CHARACTERISTICS 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 115


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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. Potential Outcome/Risks on tea industry 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 116


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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. Recommendations /feasible intervention options  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 117


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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 PREVALENT CHARACTERISTICS 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 upcountry 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


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Potential Outcome/Risks on tea industry 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. Recommendations /feasible intervention options  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 PREVALENT CHARACTERISTICS 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 teadrinking (teashops) outlets at different regions and even in tea-producing 119


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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 Potential Outcome/Risks on tea industry 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. Recommendations /feasible intervention options  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


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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


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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 inter vention 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

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Notes Chapter 1: Introdction 1

Indian Tea Association: Indian Tea Scenario (Kolkata, 2002).

2

Chambers, 1993:11., Chambers, R. 1993, Challenging the Professions: Frontiers for Rural Development. London: Intermediary Technology Publications.

Chapter 2: Indian Tea Industry: Pattern and Growth 1

Source: Ministry of Commerce and Industry, 2005

2

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

3

www.indiateaportal.com

4

Tea Statistics, (2003), Tea Board of India, Kolkata.

5

NSSO 55th report, as quoted in A. F. Ferguson & Co. (March, 2002) Report on Primary Marketing of Tea in India, Tea Board, GOI. 6

Ibid.

7

Saji (2005), Indian Tea Industry: Value Chain and Domestic Market.

8

see details in http://www.indiainfoline.com/sect/teil/ch06.html

9

Tea Statistics (2003), Tea Board of India, Kolkatta.

10

The 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.

11

Per capita consumption is average consumption per head of total population in Kilogram.

12

D. 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 India 1

Tea Act for Registration, Tea Board of India, Kolkata.

2

Steps taken by Tea Board for small Growers Development, Compiled report, Tea Board (2006), Kolkata. 3

Smallholder 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.

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http://tcdc.undp.org/sie/experiences/vol1/Tea%20leaves.pdf.

5

B Sivaram (2000) Productivity Improvement and Labour Relations in the Tea Industry in South Asia, ILO.

6

Tea Statistics 2002-03, Tea Board of India, Kolkata.

7

B Sivaram (2000) Productivity Improvement and Labour Relations in the Tea Industry in South Asia, ILO .

8

Ibid.

9

Smallholder 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.

10

Tea Statistics 2002-03, Tea Board of India, Kolkata.

Chapter 4: Economics of Small Tea Growers in India 1

K. N. Reddy and N.S. Balaji Rao http://www.sasnet.lu.se/tribalbalaji.pdf,

2

The name, Badaga, is derived from ‘Vadagar’ means ‘north’, i.e., people from north, i.e., Karnataka.

3

The 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.

4

http://www.geocities.com/TheTropics/Cabana/3841/badaga.html

5

Census of India,( 2001), provisional.

6

Discussion with small tea growers and Brokers, Coonoor

7

Discussion with Small Tea Growers in Coonoor.

8

Ibid.

9

Calculated from data collected from the interview with small tea growers from Coonoor.

10

Interview with the member of co-operative tea factory in Coonoor.

11

The rate is Rs. 60 per Kg, and the local market the tea rate is Rs. 80-120 depends on the quality. 12

Literature and awareness of using knives for leaf collection and so on, UPASI, Coonoor

13

Ibid.

14

These 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.

15

Interview with female temporary workers in small tea gardens in Coonoor.

16

Tea Statistics (2003) Tea Board of India, Kolkatta.

17

Uma Devi, Plantation Economy,

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Ibid.

19

Usha T V (2002) Plantation and crisis in Tea industry in Kerala.

20

19 per cent of the population (Census, 1991)

21

11.62 per cent of the total cropped area of the Idukki district, Kerala (Kerala Economic Review 2005)

22

Discussion with tea cultivators, Peerumade Kerala.

23

Interview with small tea growers in Peerumade, Idukki district, Kerala.

24

Ibid.

25

This 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.

26

Discussion 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. 28

Ibid.

29

Interview with small Tea Growers at Peerumade.

30

Shatadru Chattopadhayay (2005), Productivity & Decent Work in the Tea Industry in India. A Consultative Report by ILO, March 2005.

31

Focused group discussion with small tea growers in Peerumade.

32

See details in Shatadru Chattopadhayay (2005), Productivity & Decent Work in the Tea Industry in India. A Consultative Report by ILO, March 2005

33

District Economic Profile, www.keralagov.in

34

Interviews with migrant workers, some of them were earlier casual workers in small tea gardens in Pambabnar.

35

Interview with small tea growers in Peermade

36

Discussion 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

38

Interview with workers from small tea gardens in Pambanar, Idukki District, Kerala

39

Interview with one of the trade union leaders in Kerala.

40

See 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.

41

Jeta Sankritayan, Productivity, Decent Work And The Tea Industry In North Eastern IndiaPlantation Labour In The West Bengal Tea Industry, ILO, 2005

42

Indian Tea Association, Annual Report, 1985

43

Jeta, 2005

44

Jeta 2005

45

Jeta Sankrityayana (2005), Plantation Labour in the West Bengal Tea Industry in Productivity

125


Sustainable Livelihood for Small Tea Growers through CSR & Decent Work in the Tea Industry in India. A Consultative Report by ILO, March 2005. 46

Discussion with small tea cultivators North Bengal.

47

Discussion with BLF owners in North Bengal.

48

Ibid.

49

Discussion with West Bengal Small Growers Association members.

50

Discussion with Association members.

51

Though 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. 52

Nutritional 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. 53

Discussion with officials at Tea Board, Regional Office, Guwahati

54

TEAMFCO, 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

55

As pointed from the Officials, Tea Board, Guwahati

56

Interview with committee member of Association of small tea growers, Assam

57

Discussion with resource persons, Tea Board, Guwahati.

58

Detailed discussion of SHG in Assam has included in separate session below.

59

Techno-Economic Survey of Small Tea Growers in Assam ( 1994), Tea Board, Kolkata.

60

Problem of Small Tea Gardens: A case study of Dibrugarh District, Assam. Partha Ganguli (2000). 61

Ibid.

62

Interview with one of the workers.

Chapter 5: Value Chain and Small Tea Growers 1

John 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.

2

Wilkinson 1995, Quoted from John Humphrey and Huber Schmitz (2000).

3

The 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

4

Saji (2005). Indian Tea Industry: Value Chain and Domestic Market.

5

The formal description of key stakeholders, see http://commerce.nic.in/Proposed%20eauction.pdf and detailed discussion of other stakeholders are included in the discussion of

126


Sustainable Livelihood for Small Tea Growers through CSR developing the argument of value chain in small tea growers in concerned sessions. 7

Saji (2005), Indian Tea industry: Value Chain and Domestic Market

8

Ibid.

9

See 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 10

Saji (2005), Indian Tea Industry: Value Chain and Domestic Market.

11

Discussion with Auctioneers in Cochin.

12

It is not official but depends on the personal relationship with buyers and brokers to promote the business. Discussion with brokers from Coonoor.

13

Ibid.

14

Tea Board, see details of Tea Board and its function

15

see the details of how MNC dominates the tea market in India, Shatadru (2006). International workshop of tea industry in India., Darjeeling

16

see the details of how MNC dominates the tea market in India, Shatadru Chattopadhyay (2006). International workshop of tea industry in India., Darjeeling

17

Ibid.

18

Methodology for value chain analysis.

Chapter 6: Competitiveness of New Model in Tea Sector 1

Ashim Roy, “Labour File�, May-June 2003

2

Source: Tea Board of India, 2003

3

Auction price, Various Auction Centres Report

4

Discussion with Resource Persons from Tea Board, Guwahati and BLF Owners in Assam.

5

Weekly Market Report( 2006)Tea Auction Centre, Coonoor.

6

Tea Digest, CTTA, Kolkatta.

7

See details of function of auction system and price mechanism in A F Ferguson & Co. (2002) and Saji (2005). 8

Discussion with Brokers in India.

9

See Saji (2005) for further discussion in tea auction and quality of tea.

10

V. Ramaswamy, A strong role for tea auctioneers http://www.thehindubusinessline.com/ 2003/09/22/stories/2003092200010900.htm 11

Saji (2005), Indian Tea Industry: Value Chain and Market.

12

Discussion with brokers in Coonoor. It is not official but depends on the personal relationship with buyers and brokers to promote the business.

13

See details of crisis in Indian tea industry, for instance, Shatadru (2005 & 2006) and CEC (2003).

14

A 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

15

A 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


Sustainable Livelihood for Small Tea Growers through CSR 16

See details in Saji (2005).

17

Discussion with various brokers and buyers in India.

18

Discussion with brokers.

19

Many brokers disagrees this process. They claim that if auction prices become higher their profits will increase. However, this needs to be addressed separately. 20 Nalllasangam, 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. 21

Discussion with Brokers at Coonoor and Guwahati.

22

Plenty of adulterated tea Mathrubhoomi, (Malayalm Daily), July 14, 2006.

23

Ibid.

24

See the details of role of national and regional packeters in domestic tea market in India, Saji (2005) and A Ferguson (2001) 25

The preferences of the retailers are based on their margin, benefits and other facilities. See Saji (2005) for details of retail market. 26

Impact Report, Quality Upgradation Programme in Small Tea Sector, Nilgiris, Tea Board & Upasi-Krishi Vigyan Kendra, Coonoor, The Nilgiris, February, 05, 2004 27

For instance, Nerittu valangale vangi misritamakki ela edukkunna thottangalkku nalkunnathukondu kittunna nanmakalum labhavum (Malayalam), Tea Board & UPASI-KVK, Quality Up-gradation Programme, October, 2003. 28

Quality Upgradation Programme in Small Sector ( September, 2003) Tea Board & UPASIKVK, The Nilgiris. 29

Techno-Economic and Socio-Economic Survey of Kerala Tea Industry (1994), Tea Board, Kolkata.

Chapter 7: Corporate Social Responsibility and Small Tea Growers 1

Ibid.

2

Strong C, 1997

3

Smith C N, 1990

4

Minton, A. and Rose, R; 1997 and Robert J. C, 2004

5

Friedman, M 1970

6

Schwartz, M S & Carroll, A B 2003

7

Discussion with some of the brokers and buyers, Kolkata.

8

Shatadru Chattopadhyay (2006).

9

Ibid.

10

Donaldson, T & Preston, E L. 1995

11

Harrison. J G & Freeman, R E. 1999

12

The 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


Sustainable Livelihood for Small Tea Growers through CSR 13

As quoted in Shatadru Chattopadhayay and Pramod John (2007), ‘Bitter Beans’ The Coffee Crisis and its impact in India’ Partners in Change, New Delhi.

14

Ibid.

15

Shatadru C and Pramod J (2007)

16

See details in Shatadru Chattopadhayay and Pramod John (2007), ‘Bitter Beans’ The Coffee Crisis and its impact in India’ Partners in Change, New Delhi.

17

Shatadru Chattopadhyay (2005).

18

Minton and Rose, 1997

19

Barbara 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 20

Ibid.

21

Kevin Bright et. al (2005), Consumer Responses to Corporate Social Responsibility in Middlebury, Vermont

22

Barbara 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.

23

Ipsos 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)

25

MORI, September 2000, quoted from Barbara Flies et. al, (2007)

26

Alter Eco France, March 2000, quoted from Barbara Flies et. al, (2007)

27

Barbara Flies et. al, (2007).

28

Franziska 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.

29

Discussion with Buyers, Kolkata.

30

Saji (2005), Indian Tea Industry: Value Chain and Market.

31

See Uniliver.com

32

see details of CSR of Tata Tea in www.tatatea.com

33

Beyond Corporate Social Responsibility: The Scope for Corporate Investment in Community Driven Development, Report No. 37379-GLB, December 21, 2006, World Bank.

34

Unilever Environmental and Social Report 2005; www.unilever.com and Hindustan Lever; www.hll.com

35

PDS- note on PDS.

36

Proposal 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.

37

Quality Up-gradation Project for Tea- in Small Sector, Supported by Tea Board & PDS, Peerumade, Kerala.

38

Discussion with PDS resource person.

129


Sustainable Livelihood for Small Tea Growers through CSR 39 See details of this trading initiatives in http://www.justchangeindia.com and http:// www.adivasi.net 40

http://www.feasta.org/documents/review2/thekaekara2.htm

41

Discussion with resources person, TEAMFACO office, Dibrugarh.

42

Discussion with Resource person from GTTA, Auction centre, Guwahati.

43

Discussion with resource person from TEAMAFCO, Dibrugarh.

44

Discussion with Director, Tea Board of India. Kolkata.

45

See 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. 46

Ibid.

47

Discussion with Director, Tea Board of India, Kolkata.

48

One 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. 49

As 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. 50

It 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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR

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


Sustainable Livelihood for Small Tea Growers through CSR


Sustainable Livelihood for Small Tea Growers through CSR

Chai time: sustainable livelihood for small tea growers through CSR  

Small tea growers in India are economically and socially vulnerable as they are mostly marginal farmers, Dalits or from tribal communities.

Chai time: sustainable livelihood for small tea growers through CSR  

Small tea growers in India are economically and socially vulnerable as they are mostly marginal farmers, Dalits or from tribal communities.

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