Tata Global Beverages Ltd (TGBL) has already sold its stakes in tea and coffee businesses in Sri Lanka, Russia and China. Now, it is looking to exit from Assam at a time when the tea industry is expecting prices to firm up.
What could be the reasons for so much of desperation?
Reason 1 : Amalgamated Plantations Private Ltd (APPL), which is a subsidiary of the Tata Group, is under pressure due to high cost of production.
Reason 2 : Payment of minimum wages to plantation workers over and above other benefits provided under the Plantations Labour Act has made the cost of production of tea much higher.
Reason 3 : APPL is stressed because of the cost advantage of unorganized sector producers who do not have to comply with minimum wages to plantation workers. APPL is unable to compete with the producers of bought-leaf factories.
Reason 4 : APPL incurred loss of Rs 85 crore during the last three years. In 2016-17, it incurred a loss of Rs 49 crore.
Reason 5 : APPL invested in several diversification projects. It commissioned the Amalgamated Spice Park, the largest spice-processing plant in the northeast on July 29, 2015 at Kaliabor in Nagaon district. In comparison to the investment, the return was very less.
Reason 6 : International Finance Corporation (IFC), a World Bank arm which had invested in APPL, may sell its 30 million shares, and may walk out. It had the option to do so at the end of April last year, but did not exercise it.
Reason 7 : Decision to convert Hathikuli Tea Estate (close to Kaziranga National Park) to fully organic resulted in huge loss as production of tea came down drastically.
Reason 8 : Huge investment in renovation and up-gradation of two factories- Hatigorh and Letekujan resulted in huge interest component. APPL was finding it difficult to repay the loan.
Reason 9: APPL has some bleeder tea estates in north bank of Brahmaputra. Quality of tea in the tea gardens is poor and the yield is also low. Despite several attempts, APPL could not dispose the gardens.
Reason 10 : A report by the Columbia Law School’s Human Rights Institute had alleged that APPL’s workers were paid less than £2 per day and were forced to reside in inhumane conditions surrounded by cesspools. The report portrayed the APPL in poor light across the globe.