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The new law, the first step in ridding the tea sector of colonial, socialist past

Kenya’s tea exports at $1.2 billion in 2021 were more than double that of India’s, while the top exporter earned over $2 billion, more than three times India’s total exports. (Photo: Indranil Bhoumik)Premium
Kenya’s tea exports at $1.2 billion in 2021 were more than double that of India’s, while the top exporter earned over $2 billion, more than three times India’s total exports. (Photo: Indranil Bhoumik)

  • India's tea production has been stagnant for years, while there has been a sharp fall in the quality of tea produced, as chronic under-investment in plantations has led to a steady decline in plant and leaf quality

One hundred and eighty-two years after the Assam Tea Company first started commercial production of tea in India, the government is finally moving to amend the archaic Tea Act to try and drag the ailing sector from the nineteenth to the twenty-first century, with a prolonged socialist detour.

The draft Tea (Promotion and Development) Bill, 2022, is meant to replace the 68-year-old Tea Act, 1953. The commerce ministry, which is piloting the Bill, says the new legislation will remove colonial-era provisions and socialist-era governmental restrictions on the industry.

Whether a mere change of regulatory framework will help solve the woes of the industry, however, is a moot question. Of course, there is no gainsaying the pressing need for reforms in the sector.

Consider this: At present, anybody wishing to start growing tea needs the government’s permission to plant tea! Manufacturing tea requires a separate licence. Exports are controlled and there are quotas and allotments.

Colonial-era provisions include the government’s right to actually remove or destroy any tea planted “without permission". Under the current Act, the Centre has the power to control the price of tea and can fix a minimum or ceiling price as it chooses.

Under the Tea Cess Act, which dates back to 1903, the government levies a cess on all tea produced to fund the “promotion and marketing" of tea.

There are even more draconian provisions. As the tea sector went into a steady decline in the seventies, the government armed itself with powers to take over the management of any estate which remains closed for more than three months without investigation. This was done under pressure from labour unions, during a phase in India’s economic history when nationalisation was widely seen as the cure to the ills plaguing growth.

In fact, whether under colonial rulers or after independence, the central government has sought to maintain tight reins on tea, one of India’s most lucrative cash crops. Although growing tea is technically agriculture, which is a state subject, the Central Tea Board Act, passed shortly after independence in 1949, ensured that control over tea remained firmly in central hands.

On the face of it, this has worked out well for India. India today is the second-largest producer of tea in the world, accounting for a fifth of the world’s production with annual production in excess of 1.2 billion kgs. It is also the fourth biggest exporter, behind China, Sri Lanka and Kenya.

But these numbers do not tell the full picture. Production has been stagnant for years, while there has been a sharp fall in the quality of tea produced, as chronic under-investment in plantations has led to a steady decline in plant and leaf quality.

This also hits realisations, both in the domestic and export markets. While India consumes a bulk – over 85% – of the tea it produces, most of it is in the form of CTC and dust tea, which uses poorer quality leaves. In export value terms, India lags considerably – Kenya’s tea exports, at $1.2 billion in 2021, were more than double that of India’s, while the top exporter earned over $2 billion, more than three times India’s total exports.

The trouble is, that all the policy interventions in the tea industry have failed to stem the deep rot plaguing the sector. From financial troubles to acute infrastructure challenges, including chronic power shortages and outages, massive labour problems which have led to an exodus of organised sector players from the plantation sector and the influx of speculative investors and land sharks, as well as chronically underfunded, labour run gardens, rising transport costs and above all, the dramatic impact of climate change have all combined to the secular decline of the tea sector.

For starters, tea output is dropping – from nearly 1.4 billion kgs in 2019, it fell to 1.2 billion kgs last year, thanks to climate change impact, the impact of pests and falling realizations from green leaf sales which have led to a number of growers simply abandoning production.

Rising wage costs, and interventions by state governments, have actually worsened and not helped solve the problem. The West Bengal government, for instance, is a part of the tripartite wage deal between workers, owners and the government. Wage costs have quadrupled over the past decade, according to a study (Tea Industry at the Crossroads) carried out by ASSOCHAM and ICRA. Last month, Tripura announced a welfare scheme for tea workers, including housing subsidy, rations, healthcare and a minimum wage of 176 per day.

For this, the state government would spend 85 crore since Tripura has only 7,000 tea workers. But this has thrown neighbouring West Bengal and Assam – with half a million and a million direct workers, respectively – into turmoil, with similar demands being raised there which the financially stressed governments there are in no shape to deliver on.

Labour unions, on the other hand, point out that the proposed draft Bill will only formalise the existing reality. They allege that lakhs of hectares have been planted without permission, and to the rise of stand-alone ‘bought tea’ factories, which source leaf from small growers, who escape the regulatory provisions of the Plantation Act and the Tea Act.

It is also debatable whether mere legislative reform can address deeper problems such as falling prices, lack of innovation and diversification, falling productivity and climate change impact.

While the government’s belated reform efforts are well intended, India may have long since missed the bus in tea.

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