Posted by: Sujoy Das | January 19, 2012

Embattled Dooars tea estates scouting for buyers

Live Mint January 19th 2012

Embattled Dooars tea estates scouting for buyers

Some of the gardens in the region have already been shut as owners couldn’t pay wage arrears
Manish Basu
Kolkata: The owners of at least 40 tea estates in West Bengal’s Dooars region say they are looking for buyers because they are unable to cope with the increased cost of producing tea.
Some of the embattled gardens have already been shut because owners couldn’t pay wage arrears, according to the Indian Tea Association (ITA), an industry lobby.
Under pressure from political parties and the state administration, tea garden owners agreed to raise workers’ daily wage by `18 to `85 with effect from 1 April last year. The wage negotiations were concluded in November, and at least half the wage arrears were to be paid before 25 December. ITA says at least one-fifth of the Dooars’ 220-odd tea estates were unable to fully pay the first instalment of back wages by that deadline.

The state’s commerce and industries department-controlled West Bengal Tea Development Corp.(WBTDC) was also not able to pay the wage arrears within the deadline, said Ziaul Alam, secretary, Cha Bagan Majdoor Union, a plantation workers’ union affiliated to the Centre of Indian Trade Unions—the labour arm of the Communist Party of India (Marxist). WBTDC runs two gardens in the Dooars—Hila and Mahua.

On Friday, West Bengal commerce and industries minister Partha Chatterjee had said WBTDC was looking to induct partners to “revive” the five tea estates under its control—its other three estates are in Darjeeling. All of them, he admitted in a public speech, are currently losing money.
“We are regretting our decision to enter the tea business,” said Suresh Jain, who manages the Turturi tea estate for a Kolkata-based diversified group. It acquired Turturi along with another garden in 2007 and had “invested heavily” in reviving them, according to Jain.
But they had to be shut recently because wage arrears couldn’t be paid and workers refused to work unless dues were cleared. The increase in wages has resulted in production costs going up by around `14 a kg, according to estate owners. Making matters worse for them, the average auction price of tea produced in the Dooars region remained almost unchanged in 2011 at `104 a kg—it was `103 in 2010. “This (the wage hike) is an indirect way of forcing gardens in the Dooars to shut,” said D. Gupta, managing director of Indong Tea Co. Pvt. Ltd, which is looking to sell its eponymous garden.
Buyers are hard to come by given the situation at ailing gardens such as Turturi and Indong. ITA fears that by March, when the next instalment of back wages is to be paid, some 70 gardens could be forced to shut, putting at least 50,000 jobs at risk. Gardens in the Dooars, which collectively produce 145 million kg of tea a year, employ around 200,000 people.
At least 30% of the gardens in the Dooars are facing “serious cash flow” problems because of the wage increase, according to Arijit Raha, ITA’s additional secretary. The financial stress is likely to result in lockouts and “fire sale of assets” over the next six to eight months, Raha added. The most vulnerable are the small growers, who own one or two gardens.
Labour leader Alam, though, said the gardens that are facing financial difficulty are ones that are “intrinsically weak”, and that the recent “wage hike had nothing to do with their condition”. Some 30 gardens in the Dooars and 137 across the country were shut in the early 2000s, putting 25,000 people out of work, when tea prices plunged and companies defaulted on bank loans, Alam said.
“The writing on the wall is clear: small producers like us won’t survive this cost structure,” said Alok Chamaria, managing director, Phaskowa Tea Plantations Ltd, which produces 250,000 kg of tea a year. The state government didn’t consider the so-called social costs of running a plantation, said Indong’s Gupta. Tea producers are required under law to provide accommodation, subsidized food grains, health care and educational facilities to workers.
“The state government has done nothing to share the social costs,” said Naresh Agarwal, director, Dooars Plantations and Industries Ltd, another single-garden owner. “So it has no right to force wage hikes at will.”
Even large tea producers such as Goodricke Group Ltd are worried. Managing director A.N. Singh said the company’s net profit for the year till December was likely to be substantially lower than that in 2010 and that the current year was going to be “even more challenging”. The company closes annual accounts in December. The industry must figure out a way to raise prices to stay afloat, Singh said.
manish.b@livemint.com
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