It was in the last week of June, 2019, having completed the required formalities and eventually the admission of my son in BITS Pilani, with my wife beside me, I was in a conversation with a gentleman from Pune, who was the father of my son’s allotted hostel mate in the institute.
The gentleman introduced himself to me as a manager in Cipla, and both of us being professionally qualified and experienced in management, had our conversation mainly on industrial developments in Maharashtra and Assam.
Ready for a challenge? Click here to take our quiz and show off your knowledge!
The gentleman expressed some of his very pleasant experiences out of his few visits to Assam that he had made long back.
During the course of his conversation with me he enquired about Assam tea mentioning that by then he had taken the taste of the outputs of so many renowned CTC producers like Tata Tea, Warren Tea, McLeaod Russel and the tea estates under Assam Tea Corporation etc.
He did not forget to ask me how the tea industry was doing in Assam. That question put me into bewilderment as I started recalling how so many tea companies in Assam including Assam Tea Corporation were in the red.
Ready for a challenge? Click here to take our quiz and show off your knowledge!
Yes, most of the tea gardens, not only those which were under Assam Tea Corporation but also under other tea companies like Warren Tea, Tata Tea, McLeod Russel, and Andrew Yule etc. were once doing very well when Assam was very famous for CTC tea.
But profits of most of those companies started decelerating and the prosperity once they enjoyed also started eroding. Some of the tea gardens were sold out by even some renowned tea companies having found them not at all worth keeping.
The fate of Assam Tea Corporation is also beggars describable- except for few, most of its tea estates stopped production long ago and they are now standing with the skeletons of the factories and some of the bungalows that once were the residences of the managers and the assistant managers, etc.
In the meantime, some industrious youths showed their interest in tea plantation and opened their small tea gardens. But the real problems started for most of them from the stage of capital requirement, and they could not afford to construct their factories mainly due to heavy capital requirement.
The purchasers of the tea leaves also capitalized on their financial weakness and offered very low prices which were understood to have fallen far short of their operation costs impairing the positions of working capital. Eventually, while fate of some of them is hanging in the balance, some have decided to close down having incurred neck deep NPAs.
Tea industry caters to the need of employment very substantially for being extremely labour intensive and as such by and large, labour cost accounts for more than 50% of the total cost of production.
Importance of tea industry in Assam can be drawn from the fact that tea is commercially cultivated in 16 states in India, of which, Assam accounts for more than 50% of the total tea production in the country.
Moreover more than 17% of the workers in Assam are engaged in the tea industry which boasts of more than 850 tea estates along with the addition of hundreds of small tea gardens by some industrious youths as I have already mentioned, in the last couple of decades.
No doubt, well-being of the employees is a matter of very serious consideration but at the same time we should not turn our eyes away from the health of the tea companies as well. Those companies also face the pinches of price hike of so many of their required commodities for regular use.
Though the length of period required for replacement of the tea trees is quite long enough, replacement cost of the tea plants is absolutely unavoidable as such trees require a specific period for maturity of the leaves to be fit for plucking.
Fierce competition in the market is another unavoidable problem which the managements should always be vigilant of.
After all, the tea companies are not passing through a very smooth spell. A study of the performances of Tata Tea, Warren Tea and McLeod Russel, etc. reveals that while so many of those companies are already in the red, McLeod Russel is reported to be badly debt ridden, share value of Assam Co. speaks volume of its fundamentals, with division of the tea gardens of Warren Tea co. into two groups i.e. between the Ruias and the Goenkas, their operating profits were also negative a few years ago. Loss sustained by APPL, a Tata Tea enterprise is also not unknown.
To me, while professionally well competent managements must be accommodated by the tea companies, the government must also play its proactive role towards the industry. At present, Assam Tea Corporation is understood to have been left out with only 14 tea gardens in its fold.
ATC’s existing tea gardens are also in absolutely poor shape. I call upon the government of Assam to take expeditious steps to revamp those ailing tea gardens under Assam Tea Corporation.
For revamping those tea gardens, the government must ensure professional managements there, otherwise competition with the professional tea companies, will constrain them to run towards the tight spot once again.
What I have noticed is a lion’s part of the wages of the direct workers is daily rate with linkage of only a small portion of wages to piece-rate: leaving only very narrow room for increasing production and productivity satisfactorily with increase in wages.
Price hike of the output by a company faces two-pronged problems in the market.
Firstly, there is every likelihood that it may have to give away substantial parts of its domain to its competitor who can stay with less price revision or no revision.
Secondly, substitution by another beverage like coffee, etc. may do harm to its existing market because we have noticed that while once only a few companies were dealing in coffee, many new companies with comparatively less MRP are now available in the market.
True, being squeezed by increase in cost of living, the tea garden workers are demanding increase in their wages. There is every justification in that demand.
But according to me, unless at least the required sales volume for recovering the total increase in wages is achieved, a tea company will face challenge to its subsistence. For such recovery there are two options before a management- either to increase price of the product or to increase sales volume.
But a price hike is likely to invite the problems as I have already mentioned.
So, in consideration of the well-being of the tea industry in Assam, decisions need to be taken encompassing the interests of both the sides’ i.e. the employees and the employers, according to me, that only will be the most viable route. In this context, a mentionable instance is an experience that I had in Assam.
I was then in the regional management of a renowned company, and I can still recall how a discussion proceeding with an objective to arrive at a conciliated long-term settlement with unions representing the daily-rated and the piece-rated workers of that regional factory, was brought to the then Labour Minister of Assam, Phani Bhusan Choudhury, at the instance and insistence of the then local MLA.
But in the meeting, which was attended by few senior bureaucrats also, having heard the representatives of both the sides i.e. the management and unions representing the workers, to the satisfaction of both the management and unions, the then Labour Minister expressed confidence that both the sides were competent to arrive at a mutually acceptable production and productivity based settlement as expeditiously as possible considering the health and requirements of both the sides.
What happened thereafter was, having come back from that discussion, and as hoped by the Labour Minister, Assam, hardly within next few months, a conciliated settlement was arrived at, ensuring benefits to both the sides.
If the employees survive only then the companies would survive and vice versa.
Even though in my tenure of doing professional management, I never experienced production and productivity in the tea industry, but out of what I have observed, I do not see much room in rationalizing so many areas of its operation as of now to derive the benefits of rationalization, though the experts in that line are in a better position to comment.
Imperativeness of remedial measures to solve the grievances of the small tea growers deserves great priority.
The responsibility before the government is huge enough. To me, it must hold the scale even; and both the sides i.e. the employees as well as the management must work towards well-being of each other.
(Satyajit Kumar Sharmah Thakur is a Guwahati-based advocate).