The new law, the first step to rid the tea sector of its colonial and socialist past

The Tea (Promotion and Development) Bill, 2022, is intended to replace the 68-year-old Tea Act, 1953. The Ministry of Commerce, which is driving the bill, says the new legislation will remove provisions colonial era and socialist era provisions of government restrictions on industry.

Whether a simple change in the regulatory framework will help solve the industry’s problems is a debatable question. Of course, the urgent need to reform the sector is undeniable.

Consider this: Currently, anyone wanting to start growing tea needs government permission to plant tea! Making tea requires a separate license. Exports are controlled and there are quotas and allocations.

Colonial-era provisions include the government’s right to remove or destroy any tea planted “without permission”. Under the current law, the Center has the power to control the price of tea and can set a minimum or ceiling price as it wishes.

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

There are even more drastic provisions. As the tea sector was in steady decline in the 1970s, the government acquired powers to take over the management of any estate that had remained closed for more than three months without investigation. This was done under pressure from trade unions, during a phase in India’s economic history when nationalization was widely seen as the cure for the ills that afflict growth.

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

On the face of it, it worked well for India. India is now the second largest tea producer in the world, accounting for one-fifth of global production with an annual production of over 1.2 billion kg. It is also the world’s fourth largest exporter, behind China, Sri Lanka and Kenya.

But these numbers don’t give the full picture. Production stagnated for years as the quality of tea produced fell sharply as chronic underinvestment in plantations led to a steady decline in plant and leaf quality.

This also affects achievements, both domestically and for export. While India consumes a large portion – over 85% – of the tea it produces, most of it comes in the form of CTC and powdered tea, which uses lower quality leaves. In terms of export value, India lags far behind – Kenya’s tea exports, at $1.2 billion in 2021, were more than double that of India, while the top exporter earned more $2 billion, more than three times India’s total exports.

The problem is that all political interventions in the tea industry have failed to stem the deep rot that is plaguing the sector. From financial problems to acute infrastructural problems, including chronic power shortages and blackouts, massive labor issues that have led to an exodus of organized sector players from the plantation sector and the influx of speculative investors and land sharks, as well as gardens, rising transport costs and above all the dramatic impact of climate change have combined with the secular decline of the tea sector.

For starters, tea production is down – from almost 1.4 billion kg in 2019, it fell to 1.2 billion kg last year, thanks to the impact of climate change, the impact of pests and lower sales of green leaves which led to a number of growers abandoning production altogether.

Rising labor costs and state government interventions have actually gotten worse and not helped to solve the problem. The government of West Bengal, for example, is part of the tripartite wage agreement between workers, owners and government. Labor costs have quadrupled over the past decade, according to a study (Tea Industry at the Crossroads) by ASSOCHAM and ICRA. Last month, Tripura announced a welfare package for tea workers, including housing allowance, rations, health care and a minimum wage of 176 per day.

For this, the state government would spend 85 crores since Tripura has only 7,000 tea workers. But it has thrown neighboring West Bengal and Assam – with half a million and a million direct workers respectively – into turmoil, with similar demands being raised there that financially-troubled governments are unable to meet. respect.

The unions, for their part, point out that the draft law will only formalize the existing reality. They allege that thousands of acres have been planted without permission and the rise of stand-alone “purchased tea” factories, which source their leaves from small growers, who escape Plantation Act regulations and of the Tea Act.

It is also questionable whether simple legislative reform can solve deeper problems such as falling prices, lack of innovation and diversification, declining productivity and the impact of climate change.

Although the government’s belated reform efforts are well-intentioned, India may have long missed the tea bus.

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