Ministry seeks bailout package for plantations

Ministry seeks bailout package for plantations
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First Published: Fri, Dec 05 2008. 10 12 PM IST

Helping hand: Minister of state for commerce Jairam Ramesh. Hemant Mishra / Mint
Helping hand: Minister of state for commerce Jairam Ramesh. Hemant Mishra / Mint
Updated: Fri, Dec 05 2008. 10 12 PM IST
Kochi: The ministry of commerce and industry has sought a Rs4,000 crore bailout package for the plantation sector—especially tea gardens—as part of the government sharing social infrastructure costs, currently being borne by the growers.
In a letter late last week to Vijay Kelkar, chairman of the 13th Finance Commission, Jairam Ramesh, minister of state for commerce and power, said the total social infrastructure investment is estimated to be around Rs8,000 crore in the next five years.
Helping hand: Minister of state for commerce Jairam Ramesh. Hemant Mishra / Mint
As far back as 2003, an inter-ministerial working group (IMWG) constituted by the ministry of labour, had mooted the idea of the government sharing some social costs such as building roads, schools, houses, hospitals and providing drinking water, among others. These investments account for the second largest portion of capital investment, and are currently borne entirely by the plantations.
The plantation industry in July had demanded the burden be shared by the government, and had requested the 13th Finance Commission to earmark Rs4,000 crore over five years to provide such services to the nearly 1.7 million estate workers in Assam, Tripura, West Bengal, Karnataka, Tamil Nadu and Kerala.
In his letter, Ramesh said it is an “extremely important issue relating to the competitiveness of the plantation crops economy covering tea, coffee, rubber and cardamom”. The plantation economy is labour-inten sive and there is a need to protect and promote its competitiveness, he added.
The Plantation Labour Act of 1951 makes investment in social infrastructure the responsibility of growers. IMWG had, in 2003, estimated the social costs to be around Rs7 per kg of tea produced. In his letter, Ramesh said that the current cost is anywhere between Rs8 and Rs14 per kg of tea, out of a total production cost of Rs65.
“These social costs are of course unavoidable and are essential. But in today’s day and age, this also imposes an additional burden on the growers, which adds to their production costs, especially in tea,” he said in the letter. “What was relevant in the 1950s is, in my opinion, no longer so now. The vast sums of money being spent on rural development schemes through panchayats (village councils) and other bodies bypass plantation areas simply because of the Plantation Labour Act, amending which, you will appreciate, is going to be a tortuous process.”
In its report IMWG had found that state governments did not see providing essential social services in plantation areas as their responsibility. To be fair, however, plantation owners were also to blame, having not invested enough in social infrastructure.
IMWG had recommended equal sharing of social costs between the government and the growers. This, Ramesh said, would induce plantation owners to make the needed investments.
David King, former president of the Association of Planters of Kerala, said that earlier, when uninhabited areas were cleared for plantations, social welfare was the responsibility of the estate owners. But the situation is now different and people from the entire region benefit from the schools, hospitals and roads.
In his letter, Ramesh said the Rs4,000 crore from the government can be either in the form of a grant-in-aid to respective government trade promotion bodies for tea, coffee, spices and rubber under the commerce department, or through a special grant-in-aid to state governments for the specific purpose of meeting social infrastructure costs.
In case the money is routed to the trade boards, they would work with the respective state governments, who could be the implementing agency. But if the money goes to the state governments, there would need to be a special “plantation area social infrastructure fund” in the state budgets into which the funds would flow, the letter said.
Ramesh also suggested an early recommendation in this regard and called for discussing the proposal in details involving the commerce ministry, the commodity boards and the finance commission.
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First Published: Fri, Dec 05 2008. 10 12 PM IST