Dialogue July-September, 2010, Volume 12 No.1
Assam Tea Industry and its Crisis
Moon Moon Hussain
Sumee Dastidar Hazarika
Assam is blessed with a high potential for development of resource based and demand based industries. There are a number of industries in the state viz. Tea, Petroleum, Plywood, Paper, Fertilizer, Cement, Coal, Sericulture, Handloom and Handicraft, Cottage, Tourism, etc. However Assam could not flourish with its resources and accelerate the pace of industrialization as it is subject to a variety of problems. Shyness of capital due to high cost of production, security related vulnerability of the region, inadequate economic and basic infrastructural facilities, dearth of technical personnel, lack of entrepreneurial motivation on the part of local people and low level of central sector investment etc. are responsible for poor industrial development of the state. The tea industry of Assam is the single largest one of the state playing a dominant role in the economy of the state. It does not only contribute a bigger share in state income but also contribute substantially to the national exchequer every year in the shape of foreign exchange earnings through its exports. Assam tea is not yet officially recognized as a brand or variety of tea by the government due to bureaucratic red tape, depriving the beverage of an exclusive label. As such this industry suffers from an identity crisis in the world market in the absence of official recognition as a unique variety. Moreover, a considerable number of tea gardens of the state have gone sick over the period due to age old gardens, scanty rainfall, increasing trend in the cost of production, general fall in the price of tea, rise in the bed of Brahmaputra, frequent pest attacks, lack of infrastructure, modernization, lukewarm attitude of the tea planters to the tea garden labourers and inefficient management. The demand of Assam tea is already in recession due to better quality tea supplied by the countries like Sri Lanka, Cuba, Kenya and China. India’s tea market is facing yet another paradox which could be explained in terms of glaring gulf between the price received by producer and the price charged by dealers and retailers mainly because of unregulated market behaviour. This paper attempts to initiate a discussion on the various limitations and challenges faced by the tea industry of Assam and find out ways and means to overcome the crisis in order to keep alive its long-built image in the global market.
Of the agriculture-based industries, tea occupies an important place in Assam which is grown both in the Brahmaputra and Barak plains. Tinsukia, Dibrugarh, Sibsagar, Jorhat, Golaghat, Nagaon and Sonitpur are the districts where tea gardens are mostly found. Assam produces more than 50 % of the tea produced in India and about 1/6th of the tea produced in the world. Tea industry has contributed substantially to the economy of Assam. About 17 percent of the workers of Assam are engaged in the tea industry. Assam tea industry is India’s largest tea industry and second largest tea production region in the world after China. There are around 2500 small tea gardens and the total production of tea in Assam in 2009 was 500 million kgs, compared to the 487 million kgs produced by the State in 2008. In fact China and Assam are the only two regions in the world with native tea plants. The scientific name for the tea plant is Camellia sinensis. The Assam variety is known as Assamica.
The history of tea industry in Assam can be dated back to 1823 when Robert Bruce, an official of the British Empire discovered tea plants growing wild in upper Brahmaputra Valley. In 1838, the first Indian tea from Assam was sent to United Kingdom for public sale. This discovery ended China’s position as the world’s pre-eminent supplier of the beverage. The tea plant, however, was growing wild in the jungles of Assam long before the commercial production of tea started in India in the late 1830s. However tea produced in this northeast Indian state still suffers from an identity crisis in the world market in the absence of official recognition as a unique variety.
Guwahati Tea Auction Centre:-
In 1970, the Guwahati Tea Auction Centre was established for better marketing of the tea produced in the region. Today, it is the third largest auction center in the world after Colombo and Mombasa (which overtook Guwahati in 1994 with sales of 148 million kg.). It now auctions more than 150 million kg of tea valued at more than Rs 550.00 crores annually. Tea Board is the licensing authority and licenses for the new centres will be given as and when the industry or the Government comes forward with proposals.
Tea exports from the region:-
Indian tea experienced a diminishing trend, so far as its export was concerned, during 2009. Export of tea from the country decreased by 11.6 million kgs, that is, by 5.7 per cent, compared to 2008. In 2009, the country could export 191.5 million kgs of tea, compared to 203.1 million kgs it exported in the preceding year. Though there was a significant increase in the country’s tea export to Iraq in 2009, its tea export to the UK, Iran, UAE and Egypt witnessed a diminishing trend during the year.
Companies engaged in exporting Assam tea:
Some of the companies engaged in exporting of Assam tea that includes flavoured Assam tea, green Assam tea, herbal Assam tea and black Assam tea are Sudip and Co. (Mumbai), Dohutia Tea Co. (Tinsukia), Latha Arun Organics Pvt. Ltd. (Coimbatore), Vishwas Food Products (Chennai), Godfrey Phillips India Ltd. (New Delhi), Indian Growers (Sivsagar), Smriti Tea Co. Pvt. Ltd. (Sivsagar), Green Gold (Assam) Pvt. Ltd. (Guwahati) etc.
R& D Centres in the region:-
Tocklai Experimental Station at Jorhat – the oldest and largest tea R&D Centre of its kind is managed and operated under the guidance of Tea Research Association (TRA). Research on all aspects of tea cultivation and processing is carried out at this Station which is the oldest and the largest research station of its kind in the world. Tocklai provides service functions like soil analysis, testing of agrochemical, identification of pests and disease samples, supply of elite planting materials etc. besides publication of Research journal, Annual Scientific Reports, Occasional Scientific Papers, Bulletins, Leaflets etc.
Significance of the study:
The tea industry of Assam is the dominant industrial sector of the state playing an imperative role in the economy of Assam. It has been contributing substantially to the state income and to the national exchequer every year in the shape of foreign exchange earnings through its exports. However, this industry is facing some problems resulting into increase in the cost of production, fall in the prices, inefficient management, deterioration in the tea quality, etc. This study has been conducted to analyze the various perspectives leading to these impediments.
Objectives of the study:
The main objectives of the study are as follows:
l To have an overview of tea industry of Assam.
l To study the impediments leading to the crisis of tea industry of Assam.
l To analyze the means to overcome the crisis.
The study is conducted through the collection of primary and secondary data. The primary data are collected through interview with the various personnel from Lankashi Tea Estate Pvt. Ltd. (Tinsukia), Woka Tea Estate (Golaghat) and Rajahalli Tea Ltd. (Duliajan). And the secondary data are collected from newspaper, reports, handouts, and journals. In addition to this, relevant materials are also collected through the internet as well.
Impediments leading to the crisis of Tea Industry in Assam:
l It may be noted here that the sudden rise in the number of tea gardens of Assam and its area under tea (to around three lakh hectares), particularly since the latter half of 1990’s was due to the unemployed youths taking to small scale tea production as their profession. There are around 2500 small tea gardens in Assam today adding to the State’s total production by more than 50 million kg. This is certainly a welcome change. But, since they grow in small scale, they cannot go for factory manufacturing and, hence, have to sell out only green leaves to the large estates which often subject them to exploitation.
l A considerable number of teagardens of the State have gone sick over the period due to lack of infrastructure, modernization and efficient management. The Assam Tea Corporation, a state- level public sector enterprise, for example, is not functioning at all. Though Assam tea is still earning around 50 per cent of the foreign exchange earned by India’s tea industry, its demand is already in recession due to better quality-tea supplied by countries like Sri Lanka, Cuba, China, Kenya etc at comparatively lower prices.
l The problem of storing premium quality tea post manufacture had been largely unsolved and unattended, as tea after processing during transportation and storage over time tend to absorb moisture from the atmosphere and as a result detoriate in quality.
l Unfavorable weather conditions for tea plantations owing to scanty rainfall have badly affected the Tea industry of Assam. The biggest problem faced by the industry is that all the water sources have dried up, leading to insufficient water for spraying (which is a very costly process) and inducing to collect water from outside for the spraying.
l India’s tea market is facing yet another paradox which could be explained in terms of glaring gulf between the price received by producer and the price charged by dealers and retailers. The common consumer in the market is confused of the fact that while the producers are facing the crisis created by a market glut and decline of prices, often voiced by the corporates, the benefit of low price does not come to the common consumers. The reason perhaps lies in non-conformity with regulated market behavior of producers among whom many are found to be selling out their produce directly without routing it through auction centres.
l Pests attack is another negative encountered by the Tea Industry. Along with the mosquito bug, a disease called the bacterial black spot has also hit scores of plantations in eastern Assam. There are chemicals to control the pests, but then most big gardens, especially those gardens that export teas, avoid using such sprays due to fear of pesticide residual content as western and European countries are very choosy about teas with pesticide residues.
l While all the agricultural products are entitled for the central transport subsidy in the North Eastern states, this subsidy is denied for the tea. Extending this subsidy to tea industry will facilitate in bringing down the cost of production and make the product cost competitive in the export market.
l In Assam, reported numbers of small growers are more than 40,000 but only 2,927 growers have been registered with the Tea Board. Most growers do not possess proper land documents. They are not in a position to avail any financial assistance from Tea Board or from banks/financial institutions. There is a need to regularize the land ownership for facilitating the development of the small holdings in the State.
l There is a need to set up co-operative tea processing factories, especially mini factories which are being developed. Small growers are not able to get remunerative price for their green leaf as it gets damaged during the transit to the factories located in far off places.
l Assam produces around 500 million kilograms of tea every year on an average but the region consumes only around ten percent of it and the rest is sent outside. But the transportation bottleneck is a major hurdle faced by the industry in sending tea to rest of the country and abroad. Even though tea sent through the Inland Container Depot (ICD), Amingaon, is sent by road but with the transportation cost increasing every day, it is becoming difficult for the smaller tea companies to meet the expenses. Most of the smaller tea companies are also not in a position to send out tea through railways.
Suggestions to overcome the crisis :
l The tea industry should get modernized with a change in technique of plantation, improvement of infrastructure, encouragement to the electronic tea auction and managerial excellence.
l Proposal to set up a separate small grower Development wing within Tea Board.
l Arranging training programmes through Tea Research Association and Assam Agricultural University.
l Setting up of nurseries through State Govt. agencies for supplying planting materials to the small tea growers.
l Advisory services through field visits on practical aspects of cultivation and providing soil analytical service.
l Arranging study tours to visit various tea growing areas in India as well as to countries such as Kenya and Sri Lanka.
l Financing Self – Help Groups for construction of leaf sheds, procurement of transport vehicles, weighing scales, plastic crates, plucking bags for leaf handling etc.
l Replantation/rejuvenation holds the key to long term competitiveness of the Indian tea industry given the high age profile of tea bushes. Around 2,12,000 hectares which fall into the vulnerable category of low yielding areas is to be targeted for replantation /rejuvenation.
l Production may be the door to economic growth of Assam but marketing is the key to removing economic deadlock. Also to be competitive in the world market the only way will be the strong marketing bond and marketing is the only weapon for Assam to enable to effictively face the problems of tea industry.
l Training for plantation managers, supervisory staff and workers through the Indian Institute of Plantation Management, National Productivity Council and other institutions.
l Labour Welfare measures such as drinking water – creation of water point source (with hand pump and platform), proper sanitation and educational stipend for the wards of workers for pursuing higher studies should be undertaken.
l Measures should also be taken for extending Capital Grant for extension of school buildings, hostels, medical facilities, purchase of medical equipments and support to sports activities.
l Part of the burden of meeting the health requirements of tea workers should be borne by the state government. Housing subsidy for construction of new houses for workers should be reintroduced and the Indira Awas Yojana scheme should be extended to tea worker lines.
l Green leaf cess should be temporarily withdrawn.
l Entry tax on tea related equipment and machinery not available in Assam should be withdrawn.
l Registration charges on transfer of gardens should be temporarily waived to ensure that no more gardens close down.
l Short term executive programmes (STEPS) for plantation and recruitment of competent and qualified managerial staff are of key importance.
Assam tea has to carry out, what is called ‘niche marketing’ i.e. it must establish a distinct identity of its own. We should be able to build a distinct “Assam Tea” brand. Such an effort at the national level would be prohibitively expensive but building up a Assam brand is essential. What is required is a detailed analysis of the market, evolvement of a strategy and a business plan, plus an in-depth study of the supply chain. The tea industry is very reluctant to recruit management graduates and most of the companies look for ‘social background’ of the candidate in recruiting tea executives. As such, various management programmes should be initiated by the industry as well as by the Government to develop the capabilities of the tea executives. The Assam government is now planning to grade tea factories to determine their quality, to be monitored by an independent certification agency. With the increase of wages of tea plucking workers of the Brahmaputra valley since February 2010, the decision which was arrived at a meeting between representatives of the tea industry from Indian Tea Association (ITA), Tea Association of India (TAI), Bharatiya Chah Parishad (BCP), Assam Tea Planters’ Association (ATPA) and North Eastern Tea Association (NETA) and Assam Chah Mazdoor Sangha (ACMS) in Dibrugarh in Upper Assam, is expected to improve the efficiency and reduce absenteeism amongst the permanent workers.
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