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Chapter II

PRESSURE GROUPS AND TEA TRADE STRATEGIES OF INDIA AND SRI LANKA

1. Introduction

Tea is one of the most important primary commodities produced in South Asia. The South

Asian region accounts for 42 percent of the total black tea production in the world. It also

constitutes about 39 percent of total world exports and 38 percent of consumption. Tea

industry has a significant commercial importance for both India and Sri Lanka. The tea

exports fetched around Rs. 15,028 million for India and Rs. 8250 million for Sri Lanka in

1998.1 While Sri Lanka is the world's largest exporter of tea, India is the largest producer.

India is also the largest (653 mi. Kg in 2000) and Pakistan, the third largest (110 ml. Kg in

2001) consumer of tea in the world. Hence, the tea trade strategies of both India and Sri

Lanka have been formulated with regular intervention of their respective Governments.

However, the pressure groups in the form of planters' associations, traders' associations, . brokers, and foreign agency houses were the most influential actors in the tea trade during

the colonial period. After independence of India and Sri Lanka, the governments regulated

the tea trade and tried to restrict the influence of the pressure groups. These regulations

were in the form of various acts, legislations, and control orders. Sri Lankan Government

even nationalised the tea plantations in 1975.

1 Mahendra P. Lama "Integrating the Tea Sector in South Asia: New Opportunities in the Global Market." Sowh Asian Survey, 8.1 (200 l ): pp. 67-97.

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This Chapter argues that these pressure groups continued to exer1 significant influence on

the tea trade policies even after independence. Although. the pressure groups were less

dominant, they were active even during the nationalised phase of tea plantations in Sri

Lanka. In the 1990's, India embarked on a policy of economic liberalisation. During the

same time ( 1992), Sri Lanka began privatising its tea plantations as well. Under these

policies the private sector has begun to play a key role. In this kind of environment, the

pressure groups have become very influential. They have successfully lobbied with the

government to amend or to revoke various acts, regulations, and control orders operative in

the tea industry of India and Sri Lanka.

2. Pressure groups and Indian tea trade strategies

The Indian tea trade strategies are generally formulated on the basis of intense negotiations

·between the government and the private interests in the tea industry. The Consultative

Committee of Plantation Association (CCPA) represents the private interest in the tea

industry and it is composed of I 0 planters' associations. It is a forum for the tea planters to

discuss common problems. However, it is Indian Tea Association and United Planters'

Association, which are the two most .influential actors within CCPA (Fig 2.1 ). The CCPA

acts as a strong pressure group for the planters and regularly lobbies with the government

officials from Central Government like Ministry of Commerce and Ministry of Finance.

However, the focus of lobbying by the pressure groups has been the Tea Board of India, a

commodity board under the administrative control of the Ministry of Commerce,

Government of India (Error! Reference source not found.). The Tea Board acts as a

bridge between the decision makers and the pressure groups. The CCPA and other pressure

groups have institutionalised channel of access to the Tea Board, which is also responsible

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Figure 2. I). The Tea Board acts as a bridge between the decision makers and the

pressure groups. The CCP A and other pressure groups have institutionalised channel

of access to the Tea Board, which is also responsible for the implementation of the

government regulations and policies with regard to tea industry.

2.1 Tea Board of India

The Tea Board of India had its origin in the Indian Tea Market Expansion Board and

the Indian Tea Licensing Committee, the government regulatory bodies under the

British rule. After independence, a Central Tea Board was fonned on 1st August 1949

under the Central Tea Board Act, 1948 in place of Indian Tea Market Expansion

Board. The Tea Board took over the functions of the Central Tea Board and the Indian

Tea Licensing Committee under the Tea Act, 1953. The Tea Act aimed to centralize

control over the Indian Tea Industry, the cultivation of tea in India, export of tea and

to levy excise duty on tea produced in India. A Chairman, appointed by the

Government oflndia, heads the Tea Board India.

The Board also elects from among its members a Vice-Chairman who exercises such

of the powers and discharges such duties of the Chairman as may be delegated to him

by the Chairman.

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Figure 2. 1: Key actors behind the formulation of Indian tea trade strategies

II Indian Tea Trade Strategy II

L Consultative Committ~e of Plantation Assocoations [CCPA] I Central Govenunent I I State Govcmments I

Indian Tea Association (ITA] I Tea Board of India J -l State Finance 1\ linister I I J Suh-Comminccs ~ State Commerce Minister

f-- 3 Parliarncntaiy representatives r-2 representatives of O\\·llers of tea estates

1--- Assam Suh-Commilfcc r---6 Representatives of Tea Growing st<ttes

\--\Vest Bengal Sub-Committee t--5 employee rcprcscntaitvcs

r- 1-'inallt.:c. Insurance & Taxation Sub-Committee f--2 dealer rep1csentatives

t-- Supply Sub-Committee r---2 representatives of manufactnrers

I-- Pot1 Shipping & Transp011 Sub-Committee r---2 representative of consumers

1-- Expo11 Promotion & Marketing Sub-Committee . L..-2 representing other interests

I-- Technical Sub-Committee Ministry of Commerce I L.._ flood Sub-Committee

Sunna Valley Branch of Indian Tea Association - Union Commerce Minister

Assam Branch oflndian Tea Association -Minister of State for Commerce

Dooars Branch of Indian Tea Association Commerce Secreta!)'

Terai Branch of Indian Tea Association J Deputy Secretcuy, Assistant Sccreta1y

United Planters' Association ofSouthcm India [UPASIJ I Mini~hy of Finnncc I ~ Tea Association of India I

Assam Tea Planters' Association I t- Union Finance Minister t- Minister of State for Finance

Bhnratiyn Cha Pmishad I L- Finance Secretary

J

I I Deputy Secretary. Assistant Secreta!)'

Indian Tea planters' Association

I Darjccling Painters' Association I !---· Terai Indian Panters' Association I

I Nm1h Eastem Tea Association I Kangra Valley Small Tea Planters Association I

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Besides the Chairman and Vice Chaim1an, the Board represents vanous interest

groups of the tea industry. They are as following:

II 3 persons representing Parliament

• 2 persons representing owners of tea estates and gardens and growers of tea

• 6 persons representing the government of the principal tea-growing States

namely Assam, West Bengal, Tripura, Tamil Nadu, Kerala and Himachal

Pradesh

• 5 persons representing persons employed in tea estates and gardens

• 2 persons representing dealers including both exporters and internal traders

of tea

• 2 persons representing manufacturers of tea

• 2 persons representing consumers

• 2 persons representing other interests

2.2 Functions of the Tea Board

The Tea Act of 1953 specifically mentions the following functions of the Tea Board:

I. It shall be the duty of the Board to promote, by such measures as it thinks fit, the

development of the tea industry under the control of the Central Government. Some

of the important functions oflndian Tea Board are as following:

Table 2. 1: Various functions of Tea Board oflndia under Sub-Section (1) of the Tea Act

Domestic Marketing and Export Quality Control Workers Welfare

Promotion

Regulating the sale and export of Regulating the production Securing better working

tea. and extent of cultivation of conditions and the ..

provisions

tea. and improvement of amenities

and incentives for workers.

Promoting co-operative efforts Improving the quality of

among growers and manufacturers tea

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Domestic Marketing and Exp01·t Quality Control

Promotion

of tea.

Improving the marketing of tea m Undertaking assisting or

India and elsewhere. encouraging scientific,

teclmological, and

economic research and

maintaining or assisting in

the maintenance of

demonstration farms and

manufacturing stations.

Increasing the consumption of tea Assisting in the control of

in India and elsewhere and canying insects and other posts and

on propaganda for that purpose. diseases affecting tea.

Subscribing to the share Capital of Registering and licensing

or entering into any arrangement or of manufacturers, brokers,

other arrangement (whether by way tea waste dealers, and

of Partnership Joint venture or any persons engaged in the

other manner) with any other body/ business of blending tea.

Corporate for the purpose of

Promoting the, development of Tea

industry or for promotion and

marketing of tea in India or

elsewhere.

Collecting statistics from growers, Training in tea testing and

manufacturers, dealers, and such ,fixing grade standards of

other persons as maybe prescribed tea.

on any matter relating to the tea

industry; the publication of

statistics so collected or portions

thereof or extracts there from.

\Vorkers \Velfare

Source: Indta Tea, NatiOnal InformatiOn Centre, Tea Act <http://www.teamdia.org/teaAct.html> 12 Dec 2001.

II. The Board shall perform its functions under this section in accordance with and

subject to such rules as may be made by the Central Government

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111. The following departments perfonn the above-mentioned functions and activities of

the Tea Board:

• Secretariat: Administrative work and co-ordination of the activities of the various departments.

• Finance: Internal audit and maintenance of Board's accounts. • Development: Administration of financial assistance scheme and assistance

to the industry for procurement for distribution and movement of essential inputs.

• Research: Grant loans to research organizations and maintaining internal re3earch facilities.

• Licensing: Regulates production, exports, and implementation of the Tea Waste (Control) Order.

• Tea Promotion: Marketing of tea in India and increase of exports. • Statistics: Collection of statistical data and undertaking cost studies. • Labour \Velfare: Implementing various labour welfare measures in the tea

industry. • Law: Deals with various miscellaneous legal matters arising in functional

departments.

The powers and functions vested upon Tea Board by the government make it the most

important organisation with regard to tea trade policy making in India. Therefore,

most of the lobbying by the pressure groups is focused on the Tea Board. The Tea

Board also encourages representation from the private sector with regard to various

issues related to tea trade. This is evident from the institutionalised system of

interaction between the private interests and the Tea Board.

3. Consultative Committee of Plantation Associations (CCPA)

With the independence of India, many British tea estates were transferred to Indian

buyers. This led to the emergence of new groups of proprietors and increase in the

number of tea producers' associations.2 Ministers and government officials were liable

to find themselves receiving several delegations on the same subject. Therefore, the

government officials were very keen that the tea industry should form a federation of

2 Parcivai.Griffiths, The History of the Indian tea Industry, (London: Weidenfeld and Nicolson, 1967), pp. 536-37.

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tea producers. Most of the producers were also in favour of this idea since it would

have obviated the danger of conflicting representations from different organizations.

Yet, they had the fear that the smaller associations would be in a disadvantageous

position vis-a-vis the bigger associations if the voting rights were given on the basis of

production or acreage. At the same time, the bigger associations were apprehensive of

being outvoted on vital matters by the smaller associations if all the association were

given equal rights and status.

Furthermore, the individual associations were unwilling to accept limitations on their

right to approach the govenunent directly. However, most of the tea associations also

felt that they were unable to take unified action because of disagreements with regard

to the organizational matters. Finally, in 1956 a Consultative Committee of Tea

Producer Associations (CCTPA) was formed with the following members:

• The Indian Tea Association (IT A), Calcutta

• The United Planters' Association of Southern India (UP ASI)

• The Indian Tea Planters' Association, Jalpaiguri

• The Assam Tea Planters' Association, Jorhat

• The Bharatiya Cha Parishad, Calcutta

• The Sunna Valley Indian Tea Planters' Association, Calcutta

• The Terai Indian Planters' Association

• The Tripura Tea Association, Calcutta

The major objectives of the CCTP A were:

To discuss matters of common interest and to endeavour to arrive at uniform and unanimous views on rp1estion of policy, while leaving to

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individual associations complete freedom of action and being satisfied, where unanimity was unattainable, with an agreement to differ. 3

The basic objective of CCTPA was to jointly lobby with the decision makers on

behalf of the planters on major policy issues that were affecting the tea producers. The

first meeting of the CCTP A was held in 91h August 1956. It was agreed that the

committee would meet at regular intervals and whenever the need arose. It was agreed

that there would be no voting and IT A, Calcutta, would look after the secretarial work.

It was also decided that Chainnan of ITA would be ex-officio Chairman ofCCTPA. It

could be observed that a lot of planning was done before deciding the structure of

CCTP A. Since no formal' constitution or voting system was adopted in CCTP A, it was

possible for the larger and smaller tea planters' associations to cooperate in a single

forum at the same time continue to function autonomously. The formation of CCTP A

in 1956 highlights the endeavour of the tea planters' to avoid conflict and to fonn a

strong pressure group in order to lobby with the government in a united manner for

common interests.

In 1964, the constituent associations felt that the scope of the CCTP A should be

enlarged to cover other plantation crops, namely, coffee, rubber and spices and the

name of the organisation was consequently changed to Consultative Committee of

Plantation Association (CCP A). 4 The present membership of CCP A is as following:

• The Indian Tea Association, Calcutta • The United Planters' Association of Southern India •• Tea Association of India

·'Griffiths, n.3, p. 536-37.

4 India International Mi/lenium Tea Convention (CCPA, Calcutta, March 2000), p.3.

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• The Assam Tea Planters' Association, Jorhat • The Bharatiya Cha Parishad, Calcutta • The Indian Tea Planters' Association, Jalpaiguri • Da1jeeling Planters' Association • Terai Indian Planters' Association • North Eastern Tea Association • Kangra Valley Small Tea Planters' Association.

Although, with the fonnation of CCP A many other plantation industries were brought

into its gambit, yet as we can see from the list of the members the association was

overwhelmingly dominated by tea planters and hence, it remained essentially a

pressure group for the tea producers. While the individual proble!'ns of their members

have been left to the different associations to handle, on matters of common or

industry wide issues, the CCP A has been speaking authoritatively and in one voice on

matters of tea production, research, taxation, industrial relations, labour welfare, tea

. d 5 promotion an exports.

Most of the member associations of CCP A are small and were set up by the Indian tea

planters after independence. Some of the tea planters of Indian origin felt that the

smaller Indian tea plantations are not adequately represented in bigger associations

like IT A and UP AS I. 6 There was a gulf of difference and social segregation among

the entrepreneurs in the trade. The Indian planters' felt a strong desire to be identified

with their cwn social exclusiveness blended with heritage, nationalistic ethos, and

concern for safeguarding the legitimate interests of the Indian planters and ventilation

5 ibid.

6 Griffiths, n.3, p.534-3 7.

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of their grievances to the govemment machinery. 7 Hence, they fom1ed their own

associations. Brief profiles of some ofthese smaller associations are as follows:

3.1 Tea Association of India (TAl)

T AI owes its origin to some Indian entrepreneurs. These entrepreneurs fired by the

national spirit, entered the field of this industry, and developed the tea plantations. As

the number of Indian planters' had started rising rapidly, the need was felt to discuss

problems and exchange ideas among themselves. Thus, T AI was fmmed at a general

meeting of indigenous tea planters held on 2ih January 1956 with a view to promote

and protect their common interests and to promote trade and commerce in the domain

of tea industry. The T AI is now the second largest tea producers' association in North

India. T AI is also affiliated to the Indian Chamber of Commerce, Calcutta and

Federation oflndian Chamber of Commerce and Industry (FICCI).

3.2 The Indian Tea Planters' Association (ITPA)

The Indian tea planters' fonned ITP A in 1915 since they felt that they were not

adequately represented in the bigger tea planters' associations. With the establishment

ofiTP A, the bargaining power of the Indian planters' increased in a major way. It has

seen dramatic increase in its membership from 10 member tea estates in the beginning

to over 1 04 at present. ITP A has represented the interest of the planters' from West

Bengal as well as Assam and is the convenor of the CCP A, West Bengal branch.

7 India /nrernationa/ Millenium Tea ConFention, n.5, p.5.

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3.3 The Assam Tea Planters' Association (A TPA)

The A TP A was fonned in 23'd June 1933 at Dibrugarh, m response to a strong

movement 111 favour of fostering unity among the Indian tea planters. The A TP A

aimedto represent the Indian tea planters' with regard to the problems faced by them

like finance, sales, and transport. In the beginning, the association was known as

Assam Valley Indian Tea Planters' Association. The name of the association was

changed to Assam Tea Planters' Association (ATPA>"in 1947 after the independence

of India to cover the whole of Assam. At present A TP A represents around 200 tea

estates of various sizes and ownership.

3.4 The Bharatiya Cha Parishad (BCP)

The BCP fonned by the Indian tea planters' from Assam, Bengal, and Tripura. The

association was fonned on 16th September 1944 and was known as Assam Bengal

Indian Tea Planters' Association. It was renamed as Bharatiya Cha Parishad (BCP) in

March 1956. At present, the membership of BCP is confined to the Assam valley

only.

3.5 Terai Indian Planters' Association (TAPA)

TAP A was fonned in 1928, with only 28 member estates. It was formed because of a

friction between the Indian and British planters' in Terai Planters' association. The

Indian planters' felt that their interests were ignored and the British planters' were

getting preference in the Terai Planters' association. Hence, they decided to come out

of the association and formed Terai Indian Planters' Association.

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3.6 North Eastem Tea Association (NETA)

NETA was fonned by the smaller and medium planters' mainly located around

Golaghat district of Assam in July 1981. The focus of NET A from its inception has

been on the small and marginal tea estates. NET A was accorded the membership of

CCP A on 31st December 1992.

3. 7 Dmjeeling Planters' Association (DPA)

DP A was formed as early as in 1892. Unlike the other associations mentioned above,

DP A was not fonned to bring together the Indian planters. Therefore, it was not

surprising that DPA got affiliated to the Indian Tea Association (ITA), the bigger and

more resourceful tea planters' association in 1910. On 1st December 1951, under the

post Independence scenario, DP A in their last extraordinary meeting unanimously

decided to dissolve the association and transfer all its assets and liabilities to the newly

formed association called the Dmjeeling Branch of the Indian Tea Association

(DBIT A). However, some of the owners of Dmjeeling tea estates felt that although

IT A was fulfilling most of its requirements but it is necessary to highlight the issues

unique to Datjeeling like development, promotion, and protection of Darjeeling Tea.

Hence, they unanimously dissolved OBIT A and resurrected Datjeeling Planters'

Association (DPA) on 201h December 1983.8

The focus of DP A has been to promote the common interests of all persons engaged in

the cultivation and/or production and/or marketing and/or processing of Darjeeling

Tea. It also considers and discusses all matters related to growing, cultivation,

5 Datjecling Planters' Association, <http://WW\v.daijeelingtea.comldpa.htm> 5 February 2002.

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production, and marketing of Dmjeeling Tea and to enhance the contribution of the

Dmjeeling Tea Industry to the growth and development of the Indian Economy. 9

It could be seen that the above-mentioned members of CCP A are smaller regional

associations. These associations were fonned by the Indian planters' who felt that

associations having only Indian planters' as members will enhance their bargaining

power vis-a-vis British government. They are concerned with specific problems

related to their tea estates spread over a smaller geographical area. However, after

independence, there was a change in the attitude of the Indian tea planters'

associations towards IT A and UP AS I. They were keen to cooperate with each other.

This led to the fonnation of CCP A. These associations agreed to the greater role of

IT A and UP ASI, which have mainly dominated CCP A. Hence, the secretariat of

CCP A is located in the office of IT A and the Chainnan of IT A is ex -officio the

Chairman of CCP A. The President of UPASI is ex-officio Vice-Chairman of the

CCPA.

3.8 United Planters' Association of Southern India (UPASI)

UP ASI was founded in 1893 and is the apex organisation of the producers of tea,

coffee, rubber, and spices. The membership of association comprises small and large

propriety holdings as well as corporate bodies. The three state planters' associations

from Karnataka, Kerala and Tamil Nadu along with various district-planting

associations are affiliated to UP AS I.

9 Darjeeling Planters' Association, n. 9.

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During the period 1860 to 1870 the plantation industry had become important and

many district planters' associations were fonned in Wynaad, Coorg, North Mysore.

Travancore, the shevaroy hills, and Kolagheny hills of southem India. However, these

organisations were working independently and had no central organisation. The idea

of fonning a central organisation in order to lobby with the govenunent was

propounded by Digby T. Brett, Chaim1an of the North Mysore Planters' Association.

Brett took initiative to call a conference in Bangalore on August 28111 1893. In that

conference, it was decided to fonn United Planters' Association of Southem India

(UPASI).

The membership was restricted to the District Planters' Association and there was no

provision for individual membership. However, the members felt that various

influential proprietors and finns from southern India should also be incorporated in

UPASI so that it can play major role with regard to policy making in the plantation

sector. Eventually, in 1936 it was decided to convert UP ASI into an association of

proprietors, finns and district associations, divided by products into sections. 10

UP ASI was reorganised in 194 7 after Indian independence when many Indian planters

joined the association." D.C. Kothari became the first Indian President of UPASI. 12

UPASI went through another reorganisation on March 26, 1955. The member

associations from Madras, Travancore-Cochin, Mysore and Coorg took over the

responsibility of dealing with labour related issues along with other general planting

10 Griftith, n.3, p544-55.

11 Like ITA in the Northern tea plantations, UPASI remained mainly a European association until India's independence.

12 S. Muthiah, A ?laming Century: The Firs/ Hundred Years o{The L 'niled Planlers' Ass,?Ciation ofSoulhern /ndiC! (Coonoor, I994), pp. 265-68.

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problems within their own geographical territmies. This made UPASI a coordinating

and advisory body only. 13

At present, an elected Executive Committee (EC) manages the affairs of the

association. This Committee accords representation to all crops, size-groups and

states. There are nominated members as well in the fom1 of representatives from state

planters' associations, legal advisers and co-opted members. The EC fonns various

independent committees to focus on one particular commodity. The present

committees are as follows:

• Tea

• Coffee

• Rubber

• Spices

• Labour Liaison

• Tea Technical

• Rubber Technical

• Taxation and Finance

The President, Vice President, and the immediate Past President are the trustees. They

oversee the working of the Secretariat, Research Institute and advice Executive

Committee on various aspects of functioning of UP AS I.

Over the years, UP ASI has become one of the largest organisation of the plantation

produces in India. Yet, the role of UP ASI with regard to policy making in the tea

industry has not been as prominent as that of Indian Tea Association (ITA). The

reason being that tea is not the sole focus of UPASI. It also takes active interest in the

13 Muthiah, n.l3, pp.270-71.

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affairs of other commodities like coffee, rubber, spices, and cardamom. 14 In fact, the

individual proprietors of coffee estates in Mysore and Coorg were the moving force

behind the fonnation ofthe UPASI. 15

Furthennore, individuals have always dominated UP ASI in contrast to IT A in which

big multinational companies acquired great influence at an early stage. The influential

members of UPASilike "C. Marsh, Congreve and J.J. Murphy looked at the United

Planters' Associations matters entirely from the proprietary planters' point of view and

suspected the big companies and Agency Houses"16 Most of the lobbying activities

were left to the sturdy individual proprietors, who could not play such dominant role

in formulating tea trade strategies as the well organised IT A. Even at present, these

equations have not changed and ITA continues to be the most influential pressure

group in the Indian tea industry.

4. Indian Tea Association (ITA)

ITA is the premier and the oldest organisation of tea producers in India. It has played a

major role in formulating policies and initiating action towards the development and

growth of the tea industry. ITA has 425 member gardens and represents over 60

percent of India's total tea production. 17 The ITA member gardens provide direct

employment to more than 400,000 people. Moreover, almost all the multinational and

national tea companies are members of IT A.

14 India is the third largest producer of rubber next only to Thailand and Indonesia, accounting for 9.1 per cent of the world output and most of these rubber plantations are members of UPASI.

15 Griffith, n.3, p.540-41.

16 Ibid.

17 India International Millennium Tea Convention, n.S, pp.S-6.

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4.1 Objectives of/TA

The major objectives of IT A could be summed up as following:

Table 2. 2 : The major objectives of IT A

Information Dissemination To promote consideration and discussion of all matters connected with or relating to the growing, cultivating, processing, production and marketing tea with a view to enhancing the contribution of the tea industry to the growth and development of the Indian economy

To promote mutual assistance on technical and industrial problems and to support all matters beneficial to the tea industry, the members of the Association and persons engaged in the cultivation and/or production of tea

To carry on and undertake solely or jointly with others surveys, researches and development works in relation to agriculture and/or cultivation, manufacture and marketing of tea and/or to the tea industry and/or in furtherance of any of the objects of the Association

To institute awards, scholarships and stipends and take other measures for the promotion of the advancement of scientific and technical education in tea technology

Lobbying To consider all questions connected with the cultivation, production and marketing of tea and take all such action as may be necessary for promoting the well-being and growth and development of the tea industry To represent to the Central Government, State Governments, institutions, public bodies, authorities, institutions and corporations in or outside India the views and interests of the tea industry and seek and obtain their interest in and assistance for the tea industry To take all steps by lawful means which may be necessary for promoting, supporting or opposing legislation or other measures affecting the tea industry and/or the members of the Association and/or persons engaged in the cultivation and/or production of tea To arrange meetings and gatherings of all descriptions to encourage the growth of the tea industry and/or for all or any of the above­mentioned objects or otherwise

Building Unanimity To promote the common interests of all persons concerned in the cultivation and/or production of tea in India

To express and give effect to the views, opinions and expressions of all persons concerned in the cultivation and/or production of tea

To co-operate with any other body or bodies having objects similar to all or any of the objects of the Association

To collect, analyse, interpret and circulate statistics and information of all kinds or of general interest to the member of the Association and/or persons engaged in the cultivation and/or production of tea and/or public concemmg the tea industry

Source: IT A Rules, Annual Report oflndian Tea Association (1998-99), Calcutta, 2000, pp.l34-35.

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4.2 Brief HistoiJ' of/TA

IT A was fonned with the initiative of A. Wilson of Jardine Skinner & Company and

D. Cruckshank of Begg, Dunlop & Company in a meeting held in Calcutta dming

May 1881. The main purpose behind the formation of IT A was to look in to and

resolve the problems faced by the British planters, like labour shortage and renewal of

agreements with the labourers. A.B. Inglis from Begg, Dunlop & Company laid down

the purpose of the association in a detailed manner. He said that united action amongst

the tea proprietors was lacking and the fonnation of IT A would bring about a certain

degree of concert and unity of action amongst the owners and managers of the tea

estates with regard to any grievances affecting tea interests. ITA would also look into

various legislations related to tea industry. Inglis added that IT A would take up the

typical problems faced by tea planters' of that time like communication with the tea

districts and various diseases affecting the tea plants. 18

By June 1881, the association was formally constituted and a general committee

consisting of nine firms was elected. IT A began functioning in a very professional

manner right from the time of its inception. It established a relationship with the

Bengal Chamber of Commerce (BCC) in order to benefit from the wider experience of

collective British business. The secretariat of ITA was also set up in the premises of

BCC in 1885 from where it continues to function even today.

ITA soon established District Committees comprising managers and superintendents

in Assam valley in order to be represented in those areas. However, the Assam valley

planters felt that only they could understand and assess the problems of Assam tea

18 Griffith, n.3, pp.513-15.

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gardens. This led to the fonnation of Assam Branch of Indian Tea Association

(ABITA) with a separate Chainnan and Secretary in 1889 as a branch of IT A,

Calcutta. Soon a South Sylhet Branch of IT A was also fonned. In 1901, a Sunna

Valley Branch of IT A was fonned comprising four and five district committees in

Sylhet and Cachar respectively. In 1908, Datjeeling Planters' Association (DPA) also

became affiliated to IT A and remained as its part till 1983 when it decided to resurrect

the DPA.

It should be noted that IT A from the very beginning had taken up the leadership role

and was representing most of the tea producing districts of Northern India. ITA played

an important part in expanding the tea market in India. It also set up a Tea Cess

Committee, which was financed by statutory cess, for the expansion of tea market in

India. 19

4.3 ITA and its Early Political Influence

The success of most of the pressure groups depends upon their accessibility to the

decision makers. ITA realised this from the very beginning and actively took interest

in the political affairs as long as it pertained to the tea industry. It was due to the

constant lobbying by ITA, a 'fepresentative of the planters' were allowed in the

Viceroy's Legislative Council under Indi~ Councils Act, 1892. ITA further

succeeded in getting two separate tea industry representatives in the new council

formed under Morley-Minto reforms in 1909. In 1919 under Montague Chelmsford

Reforms, a representation to the Indian legislative assembly was granted to the Assam

1 ~ These cess are still collected, however after independence the administration of these Cess has been taken over by the Government oflndia.

- 51 -

Europeans. These Europeans were tea planters. The responsibility for filling the

Assam European seat in Indian Legislative Assembly was taken up by the IT A.

Furthennore, E.S. Roffey, the Secretary of ABITA was appointed the Political

Secretary of the European Group in the Assam Legislature in 1929.20

The interest of IT A in the political affairs is quite discernible in the statement made by

its Chainnan in the annual meeting in 1936:

" ... [C]oncern with politics is not made necessary solely because of the particular legislation which has more recently enacted (Government of India Act, 1935), and which we have now got to understand, so that we can apply it, but for years past we, in common with very nearly any other industry, have relied upon that splendid body of civil servants, to mother and father our political interests. If under reformed constitution, we have all individually to take our due share of political responsibility, for one thing because those civilians will have neither the time nor the opportunity to do it for us, then it is surely for us, in all matters, including finance and the release of

. personnel, to bear our share of that responsibility."21

ITA's lobbying efforts were successful and under 1935 Act seven seats were reserved

for British planters' in the Assam Legislative Assembly. Apart from that, one seat was

reserved for the European Commerce and Industry, and one for Europeans in Assam

generally. In the Upper House of Assam, also there were two seats reserved for the

planters'. The Europeans legislatures were provided a permanent secretariat located in

Shillong, and were collectively known as European group. The IT A mainly financed

the expenses of the group. In Bengal, under the 1935 Act two seats in the Legislative

20 Griffith, n.3, pp 526-27.

21 Griffith, n.3, pp 526-27.

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Assembly were given to the ITA. In the Central Legislature, a single member

represented the Assam Europeans. Even that member was actively involved with the

affairs ofiTA 22 Although, ITA's direct representation in the government ceased with

India's independence, it continues to be the most influential pressure group with

representation in various government and non-government bodies associated with

policy making in the tea industry. The pattern of present day cooperation between IT A

and the Indian policy makers can be observed from the speech given by the Chainnan

of ITA in 1991. He said:

" In all our tasks the underlying assumption is that of an environment of close cooperation between industry and government. The tea industry has been particularly fortunate in having a responsive government in a position to appreciate the issues of concern to us and to frame appropriate policies to further the growth and development of this industry. Notwithstanding sporadic aberrations and conflicts of interest, cooperation between industry and government has also so far demonstrated ample resilience and maturity and it is this continued trust that will bring to fruition our further plans for growth. The Association believes in the validity and sanctity of partnership between industry and government, which alone can contribute to policies, which are balanced and realistic".23

4.4 Organisation of ITA

The proprietors, partnership ·companies (public or private), cooperatives, and

corporate bodies, engaged in the production or cultivation of tea are eligible for

membership of the ITA.24 The members are admitted by a majority of the General

Committee. It comprises of 20 representatives who are elected annually by the

22 ibid.

23 Speech by ITA Chainnan. "Annual General Body Meeting." Annual Report, Calcutta: ITA, 1991, pp. 214-15.

24 Rule ( 4) of IT A Rules, n.19, p.136.

-53 -

members of the association. General Committee is the most impOitant organ of IT A

(Figure 2. 2). It manages the business affairs and funds of the association.

Furthermore, 1 t elects the ChainnmP and the Vice-Chainnan of IT A. It may also

appoint an Additional Vice-Chairman. The General Committee appoints the Secretary

and other employees as well.

The Annual General Meetings and the Special General Meetings of IT A have major

implication for the policy making in the tea industry. The biggest planters along with

ministers as well as bureaucrats attend these meetings. The Chainnan presides over

these meetings and in his speech, he puts forward the tea industry's point of view on

various issues to the govenunent. The subscription of the members is based upon the

production of tea and is fixed by the General Committee.

This kind of subscription gives the bigger tea producers power to influence decisions

within IT A. For instance, each member of ITA is entitled to one vote for each

kilogram of tea on which subscription is levied.26 This as a result implies that big

plantation companies with larger number of votes will be able to influence all the

resolutions placed before any Annual General Meeting or any Special General

Meeting.

25 He becomes ex-oflicio Chainnan ofCCPA as well.

26 R11IP I?)) ITA Rul""' n In n 14?

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Figure 2. 2:0rganisational Structure of Indian Tea Association

General C omminee

Chaim1an

Vice Chainnan

Additional Vice-Chairman

Indian Tea .-\ssociation [ITA]

Sub-C onuninees

Assam Sub-Commiltl'C

West &,1gal Sub-Commrttee

Finance. Insurance & Taxation Sub-Commrttee

Supp~ Sub-Committee

Port Shipping & Transport Sub-Commrttee

Export Promotion & Marketing Sub-Committee

Technical Sub-Commrttee

Flood Sub-Committee

. Sunna Valley Branch oflndian Tea Association Assam Branch oflndian Tea Association Dooars Branch oflndian Tea Association Terai Branch oflndian Tea Association

Source: ITA Rules, Annual Report oflndian Tea Association (1998-99), Calcutta, 2000.

The dominance of IT A and CCP A by the multinational and big national tea companies

is also visible from profile of past Chairmen of IT A (Table 2. 3 ). It could be seen that

in last 20 years most often representatives from companies like Tata, Warren Tea,

Magor, Duncan and Goodricke have led IT A.

-55-

Table 2. 3: List of ITA Chairmen from 1981-2000

Year Name of the Chairman Co111pany

1981 Mr. V.P. Maithel Tezpur Tea Co. Ltd

1982 Mr. S.K. Mehera T ata-Finlay Ltd

1983 Mr. Arabinda Ray Warren Tea Ltd

1984 Mr. M. Ahmad Mcleod Russel (I) Ltd

1985 Mr. R.L. Rikhye Macneill & Magor Ltd

1986 Mr. R.L. Rikhye Macneill & Magor Ltd

1987 Mr. D. Atal Duncans Agro Indus. Ltd

1988-89 Mr. R.N. Deogun Tata Tea Ltd

1989-90 Mr. R.N. Deogun Tata Tea Ltd

1990-91 Mr. Narendra Kumar Scottish Assam (I) Ltd

1991-92 Mr. H.P. Barooah B & A Plantation & Indus. Ltd

1992-93 Mr. H.P. Barooah B & A Plantation & Indus. Ltd

1993-94 Mr. S.K. Bhasin Goodricke Group Ltd

1994-95 Mr. S.K. Bhasin Goodricke Group Ltd

1995-96 Mr. R.K. Krishna Kumar Tata Tea Ltd

1996-97 Mr. R.K. Krishna Kumar Tata Tea Ltd

1997-98 Mr. V.K. Goenka Warren Tea Ltd

1998-99 Mr. V.K. Goenka Warren Tea Ltd 1999-2000 Mr. R.S. Jhawar Eveready Industries Ltd Source: Annual Report, Indian Tea Association, Calcutta (Compiled from Various Issues, 1990-2000).

5. A profile of dominant multinational and big national tea companies in

CCPA

The tea prices and other trade policies are mainly influenced by the large corporations

in the world as they regulate most of the supply and demand. This is evident from the

fact that in the 1990's the glo?al tea market was extremely concentrated with 90

percent of the western trade was controlled by seven transnational companies and 85

percent of world production was sold by them. The World Bank Report (1997) points

out that the processing and distribution of tea in 1990 was mainly controlled by four

major British corporations, i.e. Unilever, Cadbury Schwepps, Allied Lyons (Now

under Tata Tea) and Twining. The UK domestic market is also dominated by these

multinationals (Figure 2. 3). In the 1990's the Unilever and Bell Tea Company

-56-

controlled 75 percent of the New Zealand's tea market, and Tetley along with

Unilever were the biggest sellers in Australia as well.27

Figure 2. 3: The dominance of transnational companies in the UK market (Worlds second largest importer in 1999)

6% 3% • Own Lebel

• Tetley

~Unile~r

Bl High-end premier brands

m Taylors

m1 Twinings

mOthers

Source: Hot Beverages Handbook, 2000, Qtd. in "The Tea Market-A Background Study" (Oxfam, UK, 2002), pp. 29-30.

In India the bulk of the tea production takes place in large estates, many of which are

owned wholly or in part by the multinational beverage companies?8 The small-tea

growers' own only four-percent of the total tea plantation area?9 These small growers

are mostly concentrated in Nilgiri Hills of Southern India and in parts of Assam.

The two biggest multinational tea companies represented in IT A are Hindustan Lever

with over 45 percent retail market share followed by Tata Tea, with an estimated

market share of 28 percent in the packet tea segment. Goodricke Group Ltd. is the

27 Ridwan Ali, Sri Lanka's Tea Industry (Colombo: World Bank Report, i'N7).

28 Frederick Clainnonte and John Cavanagh, "Merchants of Drink." Third World Network, ( 1988): pp. 36-38.

29 Sivrarn, B., Productivity Improvement and Labour Relations in the Tea Industry in South Asia (lLO Working - -

-57-

third most impm1ant multinational tea company in India. The rest of the market is

dominated by the Goenkas.30 The Goenkas manage and own big tea companies like

Duncan, Harrison-Malayalam and Warren Tea Ltd. The other leading national tea

companies are Birla owned Jayashree Tea and Assam Tea Company Ltd and

Khaitan's William Magor. 31

5.1 Hindustan Lever

Hindustan Lever Limited (HLL) is India's largest foods and beverages company. It

also holds leadership position in consumer goods, personal care products, and

speciality chemicals. It has around 36,000 employees, including 1300 managers all

over India. HLL is a subsidiary of the multinational Unilever Ltd, which holds 52

percent of the equity.32 Unilever is a 'Fortune 500' multinational, which sells over

I 000 Foods and Home and Personal Care brands through 300 subsidiary companies in

88 countries worldwide, with products on sale in another 70 countries. Unilever

dominates the world tea industry, spanning plantations, proces<::ing, and marketing.

The acquisition of Liptons in 1972 and Brooke Bond in 1984 effectively made

Unilever the world's largest buyer and distributor of tea. 33 At present, it handles 19

percent of world tea production and has around 16,000 hectares of tea plan~ations in

Kenya, Tanzania,, Malawi, and South Africa.34

30 G.P. Gocnka Group, S.P. Goenka Group, and R.P. Goenka Group.

31 India Infoline Sector Report on Tea <http://www.indiainfoline.com sect!teil/chO I.html> 20 Sep 200 I.

Jc The otliciJI website of the Hindustan Lever Ltd.< http://www.hll.c0m HLLI/businesscat.html> 6 Sep. 200 I.

·11 Unilevcr Tea <http://www.unilevcr.com/co/oc.html> 5 Oct. 2001.

"Ibid.

- 5~-

H LL has 15 tea estates and factories distributed between South India and Assam \\·ith

planted area of over 6800 hectares. The tea estates under HLL are witnessing

significant growth in tea production after a few years of low productivity (Figure 2. 4).

In the year 2000, the tea production in the HLL's plantations increased fi·om 97,088 to

107.209 tons, which is an increase by 10121 tons. Their tea gardens in Sou them India

registered an increase of over 6 percent in the year 2000 to achieve an all time record

average yield of 3419 kg per hectare (compared to an industry average in South India

of around 2400 kg).

Figure 2. 4: Total Production of tea by HLL in Indian (North and South) tea plantations.

115,000.00 Vi' C'l

::..: 110,000.00 "CC c ~ VI 105,000.00 = 0

of: 100,000.00

~ c

.5! 95,000.00 z = "CC 90,000.00 0 a: 85,000.00

1997 1998 1999 2000

Source: Hindustan Lever Ltd, 6 Oct 2001, <http://www.indiainfoline.com/comp/hile/pcOO.html>

The yield per hectare from the Assam gardens at 2433 kg is again among the best in

the Industry (compared to an all Assam Industry average of about 1800 kg). 35 Almost

all the tea produced at these plantations is now being used to support the HLL's

various packet tea brands. The leading HLL brands of packet tea are Brooke Bond Red

Label in the premium segment and Brooke Bond Al targeted at the lower end. Apart

from these brands HLL has several other brands like Lipton Yellow Label (the worlds

" Hindustan Lever Ltd, n. 33.

-59-

most popular tea brand), Green Label, Taaza and 3 Roses, Super Dust, Top Star, Rubr

Dust etc, positioned in different price segments.

5.2 Tata Tea Limited

The Tata Group is one of the biggest industrial houses in India with interests in

diverse businesses such as Steel, Automobiles, Tea, Hotels, Information Technology.

and Chemicals. Tata Tea has more than 50 tea estates in India.36 It was the first tea

company in India to set up processing and packing facilities at the tea estates itself.

Tata Tea's CTC factory at Kakajan in Assam processes nearly 0.1 mn kg of tea per

day. It also has a fully automated advanced tea factory at Madupatty in Murmar,

Kerala. The instant tea manufacturing facility for Exports, located at Munnar, is the

largest Instant Tea factory outside USA.37 Presently, Tata Tea is the leading tea

plantation company in India and the largest integrated tea producer in the world.

Tata Tea was incorporated in 1962 as Tata Finlay Ltd, and commenced business in

1963. Initially the company started with the instant tea factory at Munnar, Kerala and

blending! packaging unit at Bangalore. The Company had a technical and financial

collaboration with James Finlay & Co. Glasgow, UK. In 1976, it acquired the Indian

interests of James Finlay & Company along with its 7 associate sterling tea

companies.38 Tata also acquired the foreign holdings of James Finlay and Mcleod

-'6 India Infoline Sector Report on Tea, n.33.

37 Tata Tea Ltd, <http://www.tatatea.com/varied.html> 26 Sep. 2000.

'8 It was said that a consideration of about Rs I 15mn was paid through issue of equity shares (Rs! 9.8mn) and Rs.

95mn was retained as unsecured loans at 5% p.a. interest. (Tata Tea, http://www.indiainfoline.com/eomp/tate/mrtll.html, 20 Jan 2002.

Russell in December 1 9~2. Consequently, in 1983. the Company's name\\ as changed

to Tata Tea Ltd.

Tata Tea on March 31. 2000 acquired entire shareholding of world's second largest

branded tea company. Tetley Group Limited, for £271 mn. Tetley has a major

presence in many countries and primarily blends, packs and distributes tea products

(mainly in tea bags) in Canada, Australia, USA, and number of European countries

including Poland, UK, and in Russia. It is the largest selling tea brand in the UK and

in Canada. The Tetley Group is still a profit making company with good cash t1ow:' 9

The acquisition of Tetley has made the Tata Tea the second largest tea multinational

in the world. Tetley has six production centres - two in UK, two in USA, one in

Australia and one in India and all these centres have state-of-the ari technologies and

have latest facilities for tea bag packaging.

Tata tea has also witnessed a major growth in tea production (Figure 2. 5). It went up

from 71.1 mi. Kg in 1998 to 78.7 mi. Kg in 2000 to comedown at 73.4 mi. Kg in

2001. Most of the tea is sold in the packet fonn under various brand names of Tata.

Tata Tea's t1agship brand has a 12 percent market share. Other Tata Tea brands are

Kannan Demn, Chakra Gold, Gemini, Agni, and Ludy Cup. The Tata Tea's brands

have a dommant hold over the markets in Southem India.

''> Tuta Tel Ltd. Direeiors ·Report (Calcutta, 31st July. 2000).

- 61 -

Figure 2. 5: Total Production of tea (mi. Kg) by Tata Tea Ltd. in India.

80 Vi' 78 go, ::..:: c 76 ~ ~ 74 73.4 - 72 c 0

·;:: 70 <:o = '1:1 68 0 ..

0.. 66 1998 1999 2000 2001

Source: Tata Tea Ltd, <http:/iwww.tatatea.com/varied.html> 26 Sep. 2000.

5.3 The Williamson Magor Group

The Williamson Magor Group till its recent break up (April 2001) composed of three

major tea companies viz. Eveready Industries India Limited (EIIL), Bishnauth Tea

Company Limited (BTCL) and George Williamson (Assam) Ltd. It was one of the

largest tea production companies in the world, having 59 tea estates and producing 65

mi. Kg. of tea per year.40 The Williamson Magor group was jointly controlled by B.

M. Khaitan family of India along with the R.B. Magor family of U.K. The Magor

Group was established in 1868.

EIIL acquired its tea business following its merger with McLeod Russell Ltd. in 1996.

EIIL has also announced its merger with the Bishnauth Tea Company Limited

(BTCL), which have 15 tea estates in Assam, having an aggregate area of 8183

hectare under cultivation and giving aggregate output of about 18.5 million Kg. per

annum. The EIIL and BTCL have an ag!:,rregate output of 46 million kg of tea per

annum. The EIIL has become a key player in the value added packet tea segment. The

~0 DK Taknct. .. Parting pains: Let us just be E1ir to the Khaitans ... Financial Express, 5 May 200 I.

- 62-

EILL brands like Tez and Premium Gold are quite popular in India. It also sells

unbranded tea in bulk fonn.

In April 2001, there was a break up of the Magor Group following differences

between the Khaitan family and the Magor family. According to the new agreement,

the Khaitans will continue to own and run their tea gardens that have existed under the

bmmer of Bislmauth Tea Company and Mcleod Russel, which are now part of

Eveready Industries India Ltd. The Khaitans are now left with only 25 tea gardens.

The 'Williamson Tea' logo is also the registered property of the Khaitans.41 In the

new set up, the Magor Group has taken over the full ownership of George Williamson

Company and its 17 tea gardens in Assam having annual produce of 19.5 million

kilograms.42

5. 4 Goodricke Group Ltd

The Goodricke Group is the leading producer of Dmjeeling tea and the third largest

tea producer in India. The company owns 17 gardens spread over 9500 hectares. The

Goodricke Group is subsidiary of Lawrie Group Plantation Company (LGP) of United

Kingdom. LGP is one of the world's largest and most profitable tea producers.

Goodricke not only access LGP's global marketing and distribution network but also

the expertise of the parent's management team.

Goodricke was fanned in 1978 by taking over nine sick tea gardens in Darjeeling,

which were nursed back to health. At present, the company operates 12 gardens in

~ 1 Rediff Money Matters, ··Williamson Tea to take managerial control of George Williamson·· 21 April 2001< http://www.rcditfeom/moncy/200 I /apr/21 risc.htm>

~ 2 Rcditl' Money Matters, n. 42.

- 63-

Dooars, three in Da~jeeling and two in Assam.43 In Dmjeeling and the northeast,

Goodricke operates another 17 gardens through its group companies. The LGP is the

majority shareholder with a 74 percent stake in these tea gardens. LGP also have

overseas interests in trading, engineering, food and financial services business, apmt

from tea plantation activities in Malawi, Kenya, and Bangladesh.

Goodricke's gardens produce very high quality CTC and Orthodox teas. The total

production in the year 2000 was 16.78 ml. Kg. compared to 15.83 ml. Kg. in the

previous year. Initially Goodricke used to sell most of its tea in bulk fonn at the

auction market. However, presently Goodricke has an equal proportion of sales in the

bulk and packet tea segments, besides a significant presence in the export market.

Goodricke sells one of the costliest tea brands in the world known as Castleton Tea.44

Apart from this Goodricke also sells premium black tea under the brand name of

Badamtam, Thurbo and Premium Dmjeeling. The tea bags are sold under the brand

name of Fine Estate. The CTC tea is sold as Goodricke Tea in poly-pouches, cartons,

and pet jars.

5. 5 Assam Company Ltd

Assam Company Ltd. is a part of the UK based Duncan McNeill Group. The company

owns 28 tea estates in the North Eastern part of the country. Besides bulk tea, the

company sells packed tea under brands like Regular, Jumbo, Premium and tea bags

43 Tea estates- Goodricke Group in India < http://www.goodricke.com estates.htm> I 0 Oct. 200 I.

44 Castleton Tea recently surpassed its own previous world records b\ fetching R~:. 15,000 (around US$ 360) per kg at the Calcutta Auction.

- 64-

under the umbrella brand, Assam Gold. The company also has a large expm1 market in

Europe and is looking at expanding its presence in other countries.

"'Assam Tea Company was the first commercial tea company established in 1839 under

the Royal statute of the British Parliament. The company was set up as a subsidiary of

UK based Duncan Mcneill Group. The company went public in 1977 after being

amalgamated with five sterling tea companies- Assam Estates, Greenwood Tea Co.,

Salonah Tea Co., Thanai Tea Co. and Upper Assam Tea Co. and was renamed as

Assam Company (India) Ltd. The name of the company was changed to Assam Tea

Company Ltd. in 1989.45

The company owns 28 tea estates located at Doom Dooma, Moran, Panitola,

Dibrugarh, Nowgong and Jorhat, and spread over 7400 hectares and 17 tea

manufacturing factories.

5.6 Duncans Industries Limited

Duncans Industries Limited (OIL) is the third largest seller of branded tea in India

with a nine percent market share. OIL is an assisted flagship company of the G.P.

Goenka Group. The OIL was set up in the year 1859 by the name of Playfair Duncan

Company.46 In the year 1951, the Goenka family, a leading business enterprise of

India, took over the reins of Duncans. OIL is a highly diversified conglomerate with

20 operating companies and a work force of over 40,000 employees. The Duncan-

45 India Infoline Sector Repmt, .. Assam Company", <http://www.indiainfolinc.convcomp/assa.html> 20 Sept. 2001.

46 Duncan Goenka Group <http://www.duncans-tea.com/about.htm> l 2 October 200 I.

- 65-

Goenka Group has interests in Fertilizer, Tea, Paper, Cement, Chemical,

Petrochemicals, Synthetic fibres, Healthcare, Infonnation technology, and other fields.

DIL has 12 tea gardens in the Dooars, Terai and Darjeeling area of West Bengal with

a total area of about 7500 hectares under cultivation, giving an average annual output

of about 17.5 million kg.47 The company operates mainly in the value added packet

tea segment which accounts for 85 to 90 percent of the company sales while the

balance 10 to 15 percent is sold through auctions. OIL has set up a state of the art tea-

processing factory within its plantations in Dinajpur and Jalpaiguri districts of West

Bengal. The factory has the capacity of producing 1,800 tons of tea per annum.48 The

company also exports tea, mainly by purchasing it from auctions and blending/

packaging it. Exports constitute on an average about 3 percent of the company's total

tea sales and the company is a recognized Export House. The well-known brands of

the OIL are Double Diamond, Sargam, Pikup, No.1, ShaA.1i and Rzmglee Rungliot,

which together accounts for about 1 0 percent of the market share in packet tea

segment.

5. 7 Warren Tea Ltd.

Warren Tea is the flagship tea company of the S.P. Goenka Group. The company was

incorporated in 1977 for production and processing of tea. The company has thirteen

tea estates covering a total cultivable area of 6846.6 hectares, in upper Assam with the

production capacity of 16 mi. Kg. Moreover, the company has interest in the tea

business through another group-company, Darjeeling Plantation Industries Limited

47 Ibid.

48 West Beng<JI Industrial Development Corporation (WBIDC), 'What·s Happening in West Bengal ... <http://www.wbidc.com>, October II, 200 I

- 66-

(DPL), which has 6 gardens in Darjeeling covering a totnl cultivable area of 1445.1

hectares.

The company is one of the largest producer of Darjeeling variety of tea and DPL's

production of 0.8 million Kg. of black tea (1998-99) represents approximately 10

percent of the total production of Darjeeling tea during the year. DPL has facilities for

cultivation and processing of 0.8 million Kg. of tea per annum. DPL's production is

mainly sold through auctions at Kolkata and the company's tea, especially First Flush

tea enjoys considerable premium in the export market.

5.8 Jayashree Tea and Industries ltd.

Jayshree Tea & Industries Limited (JTI), belonging to the B K Birla group has

facilities for the cultivation and manufacture of premium quality tea at its tea estates at

Darjeeling, Islampur, Jalpaiguri and Dooars in West Bengal. JTI sells about 20

percent of its tea in packets and the balance as loose tea. The company's tea brands

Birla Tea -Shandaar, Jaandar and Sadabahar and Jayshree Tea - Sholayar have

become very popular and widely accepted in the areas where they are sold. Around 50

percent of its production is sold through agents and retailers, 40 percent through

auction houses and balance 10 percent is exported.49

6. Influence of Multinationals on National Policy Issues

It can be observed from the above analysis that India's top business corporations like

Tata's, Goenka's, Birla's, Khaitan's along with the HLL, are the dominant actors

within IT A and in the tea industry of India. Most of these multinational and big

49 West Bengal industrial Development Corporation, n. 49.

- 67 ~

national tea companies have their own estates along with trading, processing, and

blending facilities. Their ownership of both plantations and processing factories is

called horizontal integration. However, there is a vertical integration also as they

control transport companies, fertilizer companies, shipping agencies etc. Due to this

control of entire production process from tea shrubs to tea bags, these companies have

considerable influence on supply and demand and thereby on the tea trade policies.

One early example of the influence ofbig tea companies on Indian tea trade policy can

be seen from the action of the tvfNC's in the 1980's. During mid-1980's Indian tea

prices went up considerably because the former Soviet Union bought up large

quantities of tea, while consumption in India was increasing as well. The big

multinational tea companies were faced with severe losses, as they had to buy tea for

global market at a higher price. In retaliation, they decided to bring down the high

price by temporarily refraining from buying Indian tea, which gradually depressed the

price. During this period, Indian government attempted twice to get a grip on the

market by imposing export restrictions, thus trying to avoid shortages on the local

market. At the same time, it set a minimum export price with the aim of keeping

prices at a profitable level. The large tea companies then decided to collectively

withdraw from Indian market with the result that nothing could be exported at all. The

Indian government was thus forced to retreat and lift the measures again. 50

5° Fair Trade Organisations, '·Report of Dutch India Working Group on Tea Industry", 1994

< www. transfair.calfairtrade/fair66 7 .html> 6 Oct 200 I.

~ 68-

These big tea companies could afford to take such actions because of their high degree

of flexibility, their butler stocks, and their speculative transactions.51 Ihese

multinationals have been deliberately reducing the differences in the quality of tea.

That is the tea MNCs are buying tea wherever it is cheapest, blending them and

pushing them under their brand name. Except for some of the quality conscious

consumer countties, the consumer usually gets adapted to the branded tea sold by the

MNCs. Some of the blends were created after mixing tea of as many as 35 varieties.

For example the popular Tetley tea is a blend of supplies from 30 different countries

in the world, bought at all the auctions around the world. 52 Premier Brands, UK g:ets it

supply from 12 countries. Hence, none of the MNCs were dependent on any- one

particular source, and they could easily withdraw from India.

Although these multinational and big national tea companies are individually very

powerful pressure groups, yet most of the time they have tried to influence tea trade

policy in a collective manner through the influential pressure groups like IT A and

CCP A. Due to collective actions through ITA and CCPA, the big tea plantation

companies have been able to achieve a high degree of success. The only pressure

group, which has tried to oppose some of the policies of CCPA, is Calcutta Tea

Traders Association (CT A).

51 Ibid.

52 "The Tea Market-A Background Study .. (Oxfam-GB, 2002), pp. 30-3 I.

- 69-

7. Major Incidents of pressure group influence on Indian tea trade

strategies

The CCP A, for a long time, have sought changes in the various provisions of the Tea

Act, 1953. In 1991, the CCP A undertook a comprehensive exercise to review the

various provisions of Tea Act. The review by CCPA sought to withdraw various

Control Orders53 like Tea (Distribution & Export) Control Order, 1957, Tea

(Regulation of Export) licensing Order, 1984 and Tea (Marketing) Control Order,

1984.54

The Control Orders like Tea (Regulation of Export) licensing Order and Tea

(Marketing) Control Order were framed by the Ministry of Commerce in response to

the withdrawal of multinational tea companies in the 1980's from the Indian market.

The purpose of these regulations was to avoid shortages on the local market. At the

same time, it aimed to keep the prices at a profitable level.

CCP A has been successful in amending various provisions of these Control Orders

through extensive lobbying. The strategy followed by CCP A has been to present

evidences to the Tea Board officials in favour of amending the Tea Act and follow it

up with reminders, both written as well as verbal. These evidences were based on the

comprehensive review of the Tea Act earlier conducted by the Working Committee of

CCP A, mainly comprising of IT A General Committee members. The committee had

5·' Tea Control Orders: Since tea was put into the category of essential commodity, the Control Orders under the Tea

Act, gave the government power to control production, supply, distribution etc. of tea for maintaining or increasing supplies and for securing their equitable distribution and availability at fair prices.

54 Indian Tea Association. "Tea Act 1953: Related Orders." Annual Report, Calcutta: ITA, 1991. 70-72.

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observed that the "Control Orders have outlived their purpose and bore no relevance

in the climate ofliberalisation and decontrol."55

- In continuation with its lobbying efforts to amend the Tea Act, CCP A made a major

representation to the Ministry of Commerce in 1991. The representation worked in

favour of CCP A and the Ministry of Commerce to set up a Core Group in 1993 to

look into the issues related to Control Orders. It was set up under the Chaim1anship of

the Commerce Secretary with representation from the tea producers (CCPA) along

with the traders and brokers. On 5111 Dec 1994, the Core Group asked the Tea Board

for its viewpoint. Following this, the Tea Board also fonned a Working Group with

representatives from tea industry. The influence of CCP A and IT A in amending

various Tea Control Orders under the Tea Act has been analysed below in details.

7.1 Tea (Regulation of Export) Licensing Order, 1984

The Union Ministry of Commerce issued an order [No. S.O. I 08 (E)] dated 22nd Feb

1984 captioned the Tea (Regulation of Export Licensing) Order, 1984, which was

given effect to from i 11 March 1984. Under the said order, all exports (barring some

exemptions), were covered by a license and all contracts for bulk tea exports, with the

exception of tea purchased through auctions, would have to be submitted in a

specified manner for prior registration with the licensing authority (in the tea board).

The order also specified:

55 Indian Tea Association. "Tea Act 1953: Related Orders." Annual Report, Calcutta: IT A, 1994. 70-71.

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0 That all application of contracts would have to be accompanied by a Valuation Report of an independent broker.

0 That the Licensing Authority could appoint a 'Panel of Expe1is' to assist Tea Board in taking view on the contract.

This Order was promulgated by the Govemment of India in order to ensure adequate

availability of tea for domestic consumption and also to regulate tea expmis. The

CCP A strongly objected to these regulations as CCP A was composed of mainly big

tea companies who had high stakes in the tea expmi market. They actively lobbied

with the officials from the Tea Board and the Ministry of Commerce in order to repeal

various sections of the Tea Licensing Order.

The strategy adopted by CCP A was to firstly build consensus among its members on

the demerits of Tea Licensing Order. The process of consensus building among the

major actors in the Indian tea industry usually begins from the General Committee of

IT A. In the case of Tea Licensing Order also, the ITA General Committee

unanimously passed various resolutions from time to time. These resolutions were in

favour of amending the various provisions of the Tea Licensing Order. The next step

for the CCPA was to make representations to the Tea Board and the Ministry of

Commerce.

The CCPA contended that due to the 'complex processes' of present Tea Licensing

Order, the tea industry is facing problems in getting shipment licenses. Moreover, the

validity of the shipment licenses should be extended from 90 days to 120 days. They

also complained that the validity of registration with the licensing authority should not

be restricted to 90 days only. It should also be extended to 120 days.

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The success of the CCPA could be seen from the Tea Board's action of amending

various provisions of Tea Licensing Order. 56 The amendments were as following:

1. The refusal to register tor exports were now allowed to be conveyed within seven

days, which was previously 15 days.

2. The validity of the registration period was extended from 90 days to 120 days.

3. The validity of the shipment licenses was also extended to 120 days from previous

90 days.

The Tea Board further simplified the shipment licensing procedure in 1991 by doing

away with the provisions of separate approaches for shipment licensing and

registration of contracts. 57 These amendments were due to the regular representations

made by CCP A to the Ministry of Commerce. Eventually, CCP A was successful in

getting the Tea (Regulation of Export Licensing) Order, 1984 altogether repealed in

1993.58 The revocation of the legislation helped the exporters to obtain license for any

tea export and register expm1 contracts with the licensing authority, i.e. the Tea Board.

7.2 Tea (Marketing) Control Order (TMCO), 1984

In the early 1980's the demand for Indian tea shot up because of increase in domestic

consumption and large purchases by former Soviet Union. The government was keen

that the majority of Indian population should get tea at a cheaper rate and hence

wanted to regulate the activities of tea manufacturers, auction organisers, and brokers.

It also wanted them to maintain records of production, purchase, stocks exports, etc.

56 Tea Board of India . .Yotijicatio11 '."u. SO. 520 (£) 14 August 1991.

57 Tea Board of India. "Tea Board Circular." Circular Lel!er No.5 (}9J1LC/9 I II 028, 9 September 1991.

ss This Order was revoked by the Tea Baord of India. "Tea (Regulation of bpon Licensing) (RepeJI) Order."

Notification No: S 0. 875 (Ej I:-, \ov 1993.

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Hence, The Ministry of Commerce, Govemment of India issued the Tea (Marketing)

Control Order, I 984 (vide S.D. 313 E dated 19th April 1984) under the powers of

Section 30 of the Tea Act, 1953. The order was given in effect from 19th July 1984.

The salient features of the order were as follows:

I. All the manufacturers of tea were required to obtain a valid registration of the

licensing authority (i.e. Tea Board).

2. Organisers of public tea auctions required to obtain License from Tea Board.

3. Licensing Authority empowered to issue directions to manufacturers, auction

organisers, and brokers to maintain records of production, purchase, stocks

exports, etc.

4. Manufacturers required to sell a minimum of 70 percent of tea manufactured

through public tea auctions. In 1985, the Ministry of Commerce further increased

the percentage of obligatory sales under tea auctions in India to 75 percent.

Exemptions were granted to manufacturers owning a single garden with less than

I 00 hectares under cultivation. 59

The tea producers were highly affected by this order as they wanted to retain the

option of selling tea both privately as well as through auctions. The IT A played a

crucial role in repealing the TMCO. It lobbied with the Ministry of Commerce for 17

years and eventually was successful in convincing the decision makers to withdraw

the Control Order. Yet, in the beginning IT A did not demand the complete revocation

;•J Indian Tea Association. "Annual Report." Calcutta: ITA. 1991. p. 79

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of TMCO. Rather, it slowly built up its case against the Order. IT A used its offices as

well as the CCPA channels in order to lobby the wider section of decision makers.

The first step it took, immediately after the promulgation of the TMCO was to send a

comprehensive memorandum to the Ministry of Commerce in 1985. In the

memorandum, IT A pleaded for relaxations in the order, pointing out in particular the

problems arising in areas such as Cachar (Assam), which produces plainer varieties of

tea. IT A fommlated a detailed note on Cachar highlighting the factors, which

accentuated economic backwardness of the region. It stressed on the established

private channels of marketing and role of ex-garden sales in the resurgence of Cachar

tea industry. 60 Based on these facts the IT A demanded an exemption for Cachar

district. It could be observed again that as a method of lobbying, IT A firstly conducts

complete research on a particular policy issue it seeks to change. They follow it up

with various memorandums to the Ministry of Commerce and the Tea Board.

In 1986, it was transpired that the govemment was averse to making any relaxation in

the TMCO. This is visible from govemment's refusal to give concessions with regard

to Cachar tea industry. Yet, the IT A continued to lobby by taking up the issue of

TMCO with decision makers from various forums. In 1988, the Additional Secretary,

Commerce convened a meeting to assess whether the conditions had materially altered

which warrants modifications in the order. The meeting noted that while IT A in

particular and CCPA in general had sought to impress upon the adverse effect of the

i•O Indian Tea Association, n.61, pp. -,-80.

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order. 61 However, it was also noted that these representations had not been able to

convince government of the need to effect relaxations.

During 1989, ITA agam sent a representation to the Tea Board for obtaining

appropriate relaxations in the TMCO. This time they requested that expmis effected

through third parties or agents should be kept outside the 75 percent stipulation of

sales through auctions. Since the domestic prices of tea in 1989 were very high, IT A

offered to sell packet teas at an economy price in the 'national interest'. However, a

close look at the IT A policy will reveal that Clause 19 of TMCO provided for

exemptions for consumers packs directly marketed by producers. IT A stressed that a

large number of producers not having adequate infrastructure had to necessarily route

their economy offer through other parties. Therefore, IT A demanded exemption of

such packets from the provisions of the order. 62 In response to "such powerful

arguments, the Tea Board duly conveyed their agreement, in principle to the

arrangement.

However, the most of the prohibitive legislations covered under TMCO continued in

the early 1990's. The ITA and CCPA were slowly building up their case in support of

repealing TMCO. In 1991, the ITA demanded the Ministry of Commerce to

completely repeal the TMCO. It sent another comprehensive memorandum addressed

to the Commerce Minister seeking a thorough review and overhaul of the entire gamut

of controls on tea. Amongst other issues, IT A put forward the following anomalies in

TMCO in support of its reYocation:

r, 1 Indian T ca Association, n.6 I, p. 7'J.

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• The third party packaging and marketing has been denied under the TMCO.

• It was not possible for producers with several gardens to packet teas m a

Central Packaging Unit located outside their tea estates.

• Exports to London auction did not qualify as exempted category speit out

under Section 19 of the order (That is the tea sent to London auctions were

also counted as exports and were included in calculating 25 percent of

exempted tea sale under TMC0).63

The Chainnan of IT A while addressing the Annual General Body Meeting, 1992

spelled out ITA's position vis-a-vis TMCO in a very clear manner. He stated:

" In the context of free market economy, the Tea Marketing Control Order is an anachronism. A producer should be allowed to market his product in a way he wishes. This particular order in the Tea Act Stifles the seller's choice and forces him to sell according to an outdated enactment".64

It is visible that ITA was more assertive in 1990's than in the late 1980's. In 1991, the

Govemment of India initiated a policy of economic liberalisation. Under the

liberalised enviromnent, Govenunent of India sought greater cooperation from the

powerful pressure groups like ITA and CCP A. The Union Minister of State for

Commerce, P. Chidambaram, while addressing the annual General Body Meeting of

IT A in 1992 said:

"[T]he industry, govemment and the Tea Board will have to work together. .. hitherto the Tea Board has been looked as an expansion of govemment. I cannot accept this. I have told all Commodity Boards,

l·' Indian Tea Association. "Annual Rep011." I 992. pp.56-57.

6 ~ Ibid.

- 77-

and I wish to take the opportunity to tell you, the responsibility of running the Tea Board would have to be transferred from government to the industry. It (The Tea Board) has to learn to function in a corporate, collective, collegiate manner. An industry which is centuries old, an association (IT A) which celebrates its 110111 Annual General meeting, must be more forthcoming and must declare in confident tones that in a manner of few years the responsibility of running an managing the Tea Board will be taken over entirely by the industry and the Tea Board will become not an expansion of govemment, but an expansion of the industry. I look forward to the day when the Govemment of India can transfer the management of the Tea Board, Coffee Board, and other Boards to the industry."65

The speech by The Minister, P. Chidambaram highlights that the thrust of the

Iiberalised economic system has been on cooperation between the private interests and

the Govenunent of India. Under such circumstances, IT A has played even a greater

role in fonnulating tea trade policies. The Ministry of Commerce has embarked on a

policy to take regular suggestions from ITA, UPASI, as well as CCPA about all major

policy changes in the tea industry. The IT A succeeded in highlighting the difficulties

faced by the tea industry due to various provisions under Tea Act in general and

TMCO in particular. The Union Commerce Minister, Pranab Mukherjee almost

reiterated what the pressure groups had been saying. He said:

"Tea Act in present fonn contains a number of provisions which have become outdated and need to be changed/deleted in the liberalised economic environment. We have been giving thought to various changes that are needed in the Tea Act and have consulted various segments of tea industry. Action is in hand to undertake a comprehensive review of the Tea Act keeping in view the suggestion of the industry. "66

65 Indizm Tea Association, n.65, pp.l73-75.

66 lndian Tea Association. "Annual Rcpon." 1994. pp. 201-0.3.

- 78-

Subsequently, a third meeting of the Core Group was held under the Chainnanship of

Shti Tejendra Khanna, Commerce Secretary. It was agreed that the provisions of the

TMCO relating to compulsory sale of 75 percent of tea produced should be reviewed.

It was suggested that that this percentage should be brought down to a reasonable

level. However, these suggestions could not be implemented immediately because of

strong opposition in the meeting from the trade, auction centres represented by

Calcutta Tea Traders Association (CTA).67 The CTA argued that the century old tea

auction system would be severely affected if the TMCO is repealed and the planters'

are allowed selling tea through any method of their choice. In fact the issue of TMCO

was highly beneficial to big tea traders like Hindustan Levers Ltd. which is the biggest

buyer in the Indian tea auctions and also to the big tea brokers like J. Thomas and

company Ltd. and Canitt Moran and Co. Ltd. The CTA and the role ofthe brokers is

further analysed to assess their influence on TMCO in a detailed marmer.

7.3 The Tea Brokers

The plantation commodities like coffee and cocoa have a unifonn indicator for

detennining prices because of existence of international agreements among the

producers and traders. However, in the case of tea, pricing is dominated by the auction

system, whereby the price of tea from different estates is detennined on a day-to-day

basis, depending on the quality, supply and demand on the day. The tea auction

system brings the buyers and sellers together, to detennine the price through

67 Indian Tea Association, "Annual Rcpon." Calcutta: ITA, 1995. p.77

- 79-

interactive competitive bidding on the basis of prior assessment of quality of tea. 6 ~

Manufactured tea are dispatched from various gardens/ estates to the auction centres

for sale through the appointed brokers, on receipt of which, the warehouse keeper

sends an Ani val and 'Weiglunent Report' showing the date of ani val and other details

pertaining to the tea including any damage or short receipt from the ca1Tiers.

The tea is catalogued on the basis of their anival dates within the framework of the

respective Tea Trade Associations, the quantities are detem1ined according to the rate

of anivals at a particular auction centres. In North India, Brokers, catalogue teas in the

order of their mTival, and as soon as the closing date for the catalogues of each sale is

anived at, the sale is 'closed' and subsequent anivals are printed in the next sale in

some centre and in others, In South India the total quantity that is offered is taken up

for the sale. Registered buyers, representing both the domestic trade and exporters

receive samples of each lot of teas catalogued, which is nonnally distributed a week

ahead of each sale enabling the buyers to taste, infonn their principals and receive

their orders well in time for sale.69

The brokers taste and value the tea for sale and these valuations are released to the

traders. Guidelines for the price levels likely to be established when the tea is sold are

formulated on the basis of these valuations and last sale price. The date of auction

varies within the various centres of auctions in India. Different days are set aside for

separate auctions of leaf/dust orthodox/CTC teas respectively. On the specified days,

auctions commence in the moming and goes on till evening and each broker sells by

68 Mahendra P.Lama, n. I, p.75.

69 Tea Web. "Auction System." March 02, 2002 <http: 1,www.tem\·cb~\.com/html'auction.html>.

- 80-

rotation, while the buyers congregating in the auction hall, openly bidding and outbid

against each other to win the tea at the highest price they can afford. 70

The rate of sales in the auctions is at the rate of 2.5 to 3 lots71 per minute. There are

rules goveming the division of each lot among various buyers and the rate of bidding.

As soon as the tea is knocked down under the hammer, the sale becomes binding on

the buyer and seller alike. Delivery Orders of the teas purchased by the buyers are

then issued by brokers on 'prompt' payments made by the buyers as settlements

following the sale, which when presented, the buyers take delivery from the particular

warehouses and arrange for their dispatch to the consumer centres in India or abroad.

The sellers are simultaneously sent documents confinning sale of tea and the

payments made by buyers remitted to their Bank accounts.

The importance of brokers could be understood from the fact that more than 70

percent of Kenya's total tea, more than 90 percent of Sri Lanka's total tea and till

recently more than 60 percent of India's total tea is sold through auctions. 72 This is

primarily because the tea quality vary considerably even from the same factory and

region on a weekly or monthly basis. At auction, the buyers bid for various grades of

tea from a particular garden after tasting the tea and judging its value.

The auction system has been preferred by most of the countties producing tea as it is

believed to fetch the highest possible price based on supply and demand for tea and it

'0 ibid.

'1 Tea is sold in lots, with minimum amount tixed by the government to be ,;old in the auctions.

7: Maizels, Bacon, Ma\Totas, ··commodity Supply i'vlanagement by Producing Countrie': A Case Study of Tropical

Beverage Crops", Qtd. in 'The Tea Market: A Background Study"" (Oxbm-GB, 2002) p.25.

- 81 -

is a transparent trading tonn. The system of tea auctions which begun in the year 1 861

has become the integral part of selling tea in India as well.

However, there are many instances of powerful international brokers influencing the

price of tea. The UNCT AD Report of 1982 have pointed out that often the brokers,

big tea plantation companies and traders work in collision in selling and buying tea.

An analysis of the tea auctions would show that the fundamental principles of auctions

are not followed in the tea auctions {Table 2. 4).

In fact, in India lots above 35 packages and above are allowed to be shared by upto 4

buyers. It means if Buyer # 1 has put the winning bid for the particular lot, buyer # 2,

3 and 4 can also purchase the tea without bidding. In India, it has helped some buyers

to buy up entire tea without making a single winning bid, through sharing route. This

system has made the brokers as the most dominant player in the tea auctions.

Table 2. 4: Flawed rules of tea auctions

Basic Auction Principles Tea Auction Rules

Producers should be able to sell any quantity The tea are sold in minimum lot size and type of tea through the auction system

Buyer must put the wmnmg bid in the The lots can be divided among the buyers auctions to buy his tea

Buyer must be present in the auction room to Proxy bidding (Bidding for the others IS

buy his tea possible)

Source: Ferguson Conmuttee Report. "Study on Pnmary Marketing of Tea in India." Kolkata, A.F. Ferguson & Co., 2002, p. 7.

The tea brokers also play an important role in financing the tea estates and factories

---- __ • _11

- 82 -

additional leverage vis-a-vis the medium and small producers. However, even within

the brokers, there are only few tinns that dominate the tea trade.

J. Thomas & Co. Pvt. Ltd is the largest broker in the world, handling over 155 million

kg of tea a year, which is one-third of all tea auctioned in India. Canitt Moran and Co.

Ltd. is the world's second largest tea broker, handling 24 percent of all the tea

auctioned in India. These brokers have often linkages with big tea corporations like

HLL and Tata tea. For example, Caritt Moran also does the blending and packaging

operations on behalf of HLL. The linkages could be fmiher understood from the

pattem of buying by the big tea corporations in the auctions (

Figure 2. 6). Both Tata and HLLare the single largest buyers in the tea auctions.

Figure 2. 6: Share of buyers at the Guwahati auctions (1999)

Bazar Exporters 3% 27%

Other packtee 6%

18%

• Hindustan Le\€r • Tata Tea

11 Other packteers oo Bazar

13%

Hindustan Lever 33%

o Western India

m Exporters

Source.· 'The Tea Market-A Background Study" (Oxfam, UK. 2002), p. 27.

- 83 -

The tea brokers are organized under various associations and Calcutta Tea Traders

Association (CTA) is the biggest of them. CTA is a t1inity of buyers, sellers and

brokers 73 of tea in Calcutta, West Bengal. There are over 1300 members and these

three essential sections of the tea trade are equally represented in the 15 members

General Committee, which runs the Association. The CT A is the only licensed and

official organizer of the public tea auctions in Calcutta. CT A was fonned way back in

September 1886 with a view to provide the buyers, sellers and brokers of tea at the

Calcutta auctions a common forum to discuss their common problems. The primary

function of the CT A is to supervise the Calcutta tea trade in general and to superintend

and direct the auctions in particular. 74 In fact, from 1887, tea auctions in Calcutta were

conducted under the general jurisdiction of the Calcutta Tea Traders Association.

7.4 Tea Marketing Control Order and CTA

The CTA, unlike CCPA has been in favour of government legislations like Tea

(Marketing) Control Order, 1984. Therefore, in the face of CCPA's lobbying CTA

initiated a counter lobbying effort. The CTA's point of view on CTA can be further

observed from the statement of B. Chaliha of the Eastern Tea Brokers (ETB), who

said:

Business of tea brokers is dependent on the volume of tea traded through tea auction centres every year. Now, (if) the tea companies taking advantage of the amendment to the TMCO, 1984, choose to go for massive private selling of tea instead of routing the commodity through the auction centre, the brokers will be hit hard. 75

" A broker member of CTT A is an auctioneer of tea in the Calcutta Auction. A buyer member is a finn or company which buys tea in the Calcutta Auction and A seller member is a tea estate or tea factory whose tea are sold in the Calcutta Auction.

'4 Calcutta Tea Traders' Association. "Rules and Regulations." www.cttacal.org/default.asp. 10 April2001.

I) Nitin Gogoi. "TMCO amendment womes Guwahati tea brokers." 15 Feb 2001

<http://www.reditfcom/money 200 1/feb/15tea.htm>.

- 84-

Moreover, the brokers ttied to highlight the usefulness of the auction system. They

emphasized that there are risks involved in direct marketing of tea without engaging

broker fim1s. Arup Mahanta of Paramount Tea Marketing Company, Assam, said

"When tea is sold through brokers, the sellers, the tea companies get the payment from

the broker on the prompt date irrespective of whether the broker have succeeded in

finding a suitable buyer or not." So, the strategy of the brokers and traders was to

initiate a campaign, highlighting the advantages of auction system. On the basis of

these arguments, the brokers led by CTA were against the amendment ofTMCO.

The CT A is regularly consulted by the government at the level of Ministry of

Commerce as well as the Tea Board on issues related to tea trade. They used these

channels to put pressure on the government against TMCO.

7.5 The fight b~hveen the big tea traders and the big tea producers

While the big traders like HLL along with the big brokers like J. Thomas and

Company Ltd and Carritt Moran and Co. Ltd. were benefiting from the TMCO, big

producers like the Tata and Goenkas were affected by the TMCO. Tata tea which is

one of the biggest tea producers and sellers of tea in the country along with other

producers were keen to have the freedom to sell their tea in the open market. It can be

seen from the remark of R.K. Krishna Kumar, Vice Chainnan of Tata Tea and Past

President of IT A and CCP A. He stressed:

Average consumer was nowhere on the horizon of tea producers. In practice, there was a lot of difference between what the producers received at the tea auctions and what the consumers paid at the retail level. We analysed the situation at various points and realized that it will be foolish if we stick entirely to the tea auction route. So, we

- 85 -

decided to vault over the whole system and go directly to the consumer market. 7il

The ITA and CCPA lobbying against the TMCO got a boost by the decision of the

Ministry of Commerce vis-a-vis the Coffee Board. Earlier, the coffee growers, too,

were required to pool their produce with the Coffee Board. But with the onset of

liberalisation, it was relaxed in phases before the producers were given total freedom

in September 1996.77 This was viewed as a positive development by the tea industry

pressure groups like CCPA. The lobbying against the TMCO was further intensified.

In 1998, the Chairman of ITA used his capacity as Vice-Chaim1an, Tea Board to

lobby against the TMCO. He repeatedly pressed for discussion on the issues related to

TMCO during the Board meetings of Tea Board. 78

The tea brokers on their part contended that in spite of the existence of TMCO the

producers in practice are selling very little tea through auctions. In this context,

Jayanta Kakoti, Secretary of the Guwahati Tea Auction Centre (GTAC) gave a very

interesting insight. He pointed out that even before the recent amendment to the

TMCO tea manufacturers in the state hardly used to route 75 percent of the produce

through the GT AC as per the requirement of the order. It can be seen that although the

state produces an average of 400 million kg of tea every year, the average volume of

'6 Mahendra P. Lama, n. I, pp. 76-77.

'' l!Tea sale unshackled as Govt atncnds tnarkcting order." Business Line 12 January 2001.

'3 Indian Tea Association. "Annual Report." Calcutta, 1999. p. 48.

- 86 -

tea traded in the GT AC every year stands around 150 million kg which is hardly 38

I t' d 79 per cent of the tota tea manu acture .

The Tea Board didn't take any action against such policies by the tea planters. In fact,

the CTA executive committee member Tapan Kumar Roy has accused the Tea Board

of toeing the line of the producers and sellers. Roy further emphasised that the Tea

Board keeps its eyes closed to the violation of Tea Marketing Control Order. 80

However, this reduction in the offerings in the tea auctions is also due to major shift

by the big companies to packet teas apart from direct exports. For example, Tata Tea

sells only about 10 ml kg. at the auctions. 81

The IT A and CCP A were successful in having one of its most influential members the

Tata Group Chairman, Ratan Tata and Bombay Dyeing's Nusli Wadia, as members to

Special Subject Group on Traditional Industries, constituted by the Prime Minister's

Council in April 2000. This opportunity was fully used by Tata. Among the

recommendations in the report, submitted to Prime Minister Atal Behari Vajpayee, are

abolition ofTea Board and repeal ofTea (Distribution & Export) Control Order, 1957,

Tea Marketing Control Order, 1984, Tea (Warehouses Licensing) Order, 1989 and

Tea (Waste) Control Order, 1959.82 It could be seen that the tea producers were using

every available opportunity to convince the decision makers and other stakeholders

that TMCO needs to be scrapped.

'9

Jayanta Kakoti, interview with Nitin Gogoi. n. 79.

~n Baren Bhatacharya,. "Tea Board revises sampling nonns tor auction buyers." The Financial Express. 3 July 2003.

sr P K Sen. "Interview" The Financial Express Calcutta: 20 July 1999.

81 Wadia, Nusli N , Tata, Ratan N . "Revival of Traditional lndustrie".'" Report of the Special Subject Group Prime Minister's Council on Trade & Industry, April2000.

- 87-

However, the recommendations of the Special Subject Group were met with severe

c1iticism from the CT A members. These tlndings were described as "thoughtiess and

short-sighted" by the CT A. xJ

In the years 1999-2000, a steep decline in tea production coupled with lower all India

auction pJices pushed the domestic tea industry to the walls. The average auction

prices fetched by the tea producers of South India fell from Rs. 68.79 per kg in 1998

toRs. 57.10/ kg in 1999, and further nose-dived toRs 44.64 in 2000. In 2001, the

price level hovered around Rs. 46.02/ kg. In 2002 the auction prices fu1iher slipped by

20 percent to Rs. 40.29/ kg. The northem tea gardens have not remained immune to

this trend of fall in tea pJices. From Rs. 80.22/ kg in 1998 it drastically came down to

Rs. 69.80/ kg in the year 2001. In the year 2002, the average tea prices have further

come down toRs. 57.25/ kg.

Such fall in tea prices w~re immensely beneficial to the tea traders as the retail prices

were not falling. However, those producers who are particularly dependent on

auctions were highly affected. It was emphasised by IT A that lower p1ices fetched at

auctions have seJiously affected cost of production by way of labour wages, higher

food grains subsidy and major import costs coupled with re-imposition of central

excise duty. It stressed that under such circumstances, the consequential delay in sales

through the auction system and the added cost of reprinting (catalogues) has adversely

affected cash flows.

''Sharp reaction among tea traders on Nusli-Ratan recommendations·· May 12, 2000 <http:l/www.netguruindia.com/news/May00/13Mav00.html>

- 88 -

The ITA also claimed that the intemal trade, which is govemed by the TMCO is an

anachronism in that the tea industry is on one hand being asked to gear up for free

trade and imports while being fattened on the other in intemal controls. IT A prudently

tied up the issues related to tea prices and economic liberalisation with the TMCO. It

is visible from the statement of IT A:

The forces of liberalisation are progressively intensifying and exposing the Indian tea to the volatilities of the intemational market and under the circumstances, there is a need for imparting some flexibility in the order by way of encouraging producer packers while arriving at the auction percentage stipulation. 84

On 12 January 2001, the Ministry of Commerce amended the Tea Marketing Control

Order, 1984, giving full freedom and option to the producers to sell their produce

through the auction centres, or through any other method of their choice. The Union

Commerce Minister, Murasoli Maran conceded that the amendment in TMCO is made

mainly due to the constant representations forwarded by the producers.85 This was

indeed a great success of CCP A, which lobbied for 17 years against various provisions

ofTMCO in the face of strong counter lobbying by the tea traders and brokers.

7.6 The Tea (Marketing) Control Order, 2003

Although the TMCO was amended in 2001 and the producers were allowed to sell tea

through any method of their choice, most of them continued to sell through the

auction route. One major reason behind it was that the small and medium tea growers

had no marketing mechanism to sell their tea directly. Moreover, in the case of private

84 Rakesh kumar Duhey. "Tea sector crisis calls f(,r repeal of marketing order." 23 Dec 1999 <http://www. tin an cia lex press. com/t'e/ daily. html>

85 Business Line, n.76.

- 89-

sales the producers have to wait tor a long duration for payments, whereas in the case

of auctions the payments are prompt.

However, there were lot of dissent among the producers about the continuous fall in

tea auction ptices. This was affecting in particular the 2,30,000 small growers who are

mainly situated in the Nilgiti District of Tamil Nadu and also in North Bengal. These

small growers are completely dependent on the auctions. The UP ASI and also CCP A

strongly advocated a re-look at the TMCO and make the tea traders and the brokers

accountable to the govemment. These views are strongly put forward by the UPASI

and ITA in the Tea Board. The Tea Board commissioned a study by global consultants

A.F. Ferguson and Company on "Primary Marketing of Tea in India" in 2002. The

report severely criticised the present auction system and asked for greater

accountability of the traders and brokers. Based on Ferguson Committee Report, the

Tea Board superseded the TMCO, 1984 and replaced it by TMCO, 2003. The TMCO

which came to existence in January 2003 aimed to regulate sale by public auctions and

streamline the distribution cham1els. It also aimed at removing the distortions and

malpractices which had crept into the tea auction system.

The order made it mandatory for all the tea manufacturers (estate factories, private

bought leaf factories and cooperatives) and the buyers to be registered with the tea

board (Clause 3 and 4). It also made it mandatory for the manufacturers and brokers to

maintain a monthly record of the sale and provide it to the Tea Board (Clause 8 and

20). However, one of the most crucial aspects of the order is the mandatory

disclosures by the buyers to the Tea Board about their purchases from the tea auctions

(Clause 22) and the provision of cancelling licence to the tea brokers and the

- 90-

manufacturers in case they are not following the prescribed rules as laid down by the

Tea Act (Clause 6 and 19).

This order was also a spin-off of the long campmgn by the producer groups

demanding the changes in various provisions of TMCO. They always contended that

while the producers are brought within the ambit of TMCO the traders and buyers

should also be regulated by the same order. However, the traders and the brokers

initiated a comprehensive campaign against the TMCO, 2003. The traders emphasised

that the TMCO is against their interest and they were not willing to provide all the

details of their tea trading activities to the government.86 The traders' main argument

was that key provisions in the TMCO relating to registration of buyers of tea and

submissions of accounts and returns by the buyers were beyond the scope of the Tea

Act.87

The tea brokers and traders began a campaign of stalling the tea auction through out

the country so that on the one hand the government is pressurized to discard the

changes in the TMCO and to pressurize the producers to support them on the other. In

January 2003 the traders and the buyers of tea from all over India came together and

fonned The National Tea Auction Buyers Association Co-ordination Committee in

order to jointly lobby with the government. The Coordination Committee announced

that all the six auction centres in the country will indefinitely abstain from carrying out

transactions till their "grievances are met".88

86 Business Line, (Chcnnai) 7 January 2003.

87 The Hindu (Chcnnai) 4 Febmary 2003.

88 Business Line (Chcnnai) 9 January 2003.

- 91 -

The Coordination Committee held number of press conferences and Inder Singhee,

convener of the committee, said all so1is of private sales, collection and delive1ies of

tea will come to a "complete halt from January 18, 2003". Presidents of the Guwahati

and Siliguri tea auction buyers association were also present at the press meet. Mr

Singhee said the three South India auction centres would also halt tea trading. The

Coimbatore tea buyers association made an announcement on the same day about

f I . h . 89 stoppage o sa e 111 t e auct10ns.

However, the traders lobby failed to pressurise the producers' groups as the order was

based on a sustained campaign by the producers and the transperancy in tea trading

was going to benefit the producers. The CCP A gave full support to the govemment on

TMCO, 2003. Bharat Bajoria, Chairman of Consultative Committee of Plantation

Association, in a press statement said that the TMCO 2003 would bring "greater

transparency to the primary marketing of tea" and will result in a "more efficient

auction system and better price discovery mechanism".90

The govemment also could sustain the pressure from the traders' lobby because of the

support it received from the CCP A. The Additional Secretary, LV. Saptharishi said:

If they (the brokers/ traders) want to strike let them strike. It will not affect tea sales. Producers have already welcomed the move and in any case transaction through auctions is just an option only. Private sales

91 -are going on smoothly.

\•J Business Line ( Chcnnai) 9 January 2003.

•i(J Business Line (Chcnnai) 9 .lanuarv 2003.

'JI ibid.

- 92-

Failing to pressurise the government the traders lobby took recourse to legal help.

They applied for a stay order in Madras High Court on January 28 and got a reprieve

for two weeks. However, the Central Government and the producers' lobby urged for

an early disposal of the case. On 3 February, the High Court rejected the arguments

advanced by counsel for the Tea Buyers' Association that key provisions in the order

relating to registration of buyers of tea and submissions of accounts and returns by the

buyers were beyond the scope of the Tea Act. The order further stated:

Section 30 of the Tea Act empowers the Centre either by general or by special order to regulate, by licences/permits, the production, storage, transport or distribution of tea or tea waste ... The Centre is well within its powers to issue orders and regulate the activities of growers, manufacturers, dealers (wholesale or retail), local sale or for export and control the persons engaged in production, supply and distribution of tea or tea waste. 92

Thus, in spite of being an influential pressure group the traders and brokers combine

could not successfully challenge the techniques of the producers. The govenunent was

more sympathetic to the producers because of the large nnmber of workforce (1.1

million) employed in the tea plantations. Moreover, better clout of CCPA with the

government worked in favour of the producers.

7. 7 Essential Commodity Act, 1955 (ECA)

Essential Commodity Act was enacted by the government in 1955 to ensure

availability of essential commodities to the consumers and to protect them from

exploitation by unscrupulous traders. The ECA gives powers to control production,

9c The Hindu (Chcnnai) 4 FebruarY 2003.

- 93-

supply, and distribution of essential commodities for maintaining or increasing

supplies and for secunng their equitable distiibution and availability at fair prices.

Using the powers under the Act, the central and state govemments have issued various

above-mentioned Control Orders regulating production/distribution/quality

aspects/movement of tea. The ECA ts being implemented by the State

Govemments/UT Administrations by availing of the delegated powers under the Act.

The Central Govemment regularly monitors the action taken by State

Govemments/UT Administrations to implement the provisions of the ECA.93 Some of

the commodities under ECA are given below (Table 2. 5):

Table 2. 5: List of Commodities Declared Essential Under ECA, 1955.

I. Cattle fodder, including oil cakes and other concentrates. 2. Coal, including coke and other deri\'ativcs. 3. Component parts and accessories of automobiles. 4. Cotton and woollen textiles. 5. Drugs. 6. Foodstuffs, including edible oilseeds and Oils. 7. Iron and Steel, including manufactured products of Iron & Steel. 8. Paper, including newsptint, paperboard, and strawboard. 9. Petroleum and Petroleum products. I 0. Raw Cotton, either ginned or unginned and cotton seeds. II. Raw Jute. 12. Jute textiles. 13. Fertilizers, whether inorganic, organic or mixed. 14. Cement 15. Textiles Machinery: (i) Knitting Machine

(ii) Spinning Machine

(iii) Lace Making Machine

(iv) Powerloom and

(v) Processing Machinety

16. Textiles made ti·om silk ii) wool

iii) man-made cellulosic spun fibre,

iv) man-made non- cellulosic spun tibre,

v) silk.

9·' Food Control Authority, Government of India, .. Essential Commodities Rcgui:ltion and Enforcement" 19 Scp

200 I <http://fcamin.nic.in/ecpbacts.htm>.

- 94-

17. Textiles made wl10lly or in part fi·omman-madc cellulosic and non-cellulosic spun fibre. I~- Textiles made wlwlly or in part fi·om cellulosic and rHm-ccllulosic filament yarn. 19. General lighting Sen icc Lamp>. 20. Household appliances such as ..:lectric irons. heater and the like. 21. Coconut husk (ra'' or rcttcd) 22. Electric Cables and wires. 23. Yam made wholly or in pari fwm any of the following materials, narncly:­

(i) cotton

ii) wool

iii) man-made cellulosic spun fibre.

iv) man-made non- cellulosic spun tibrc,

v) silk.

24. Man-made ccllult1sic and Non-cellulosic filament yam, Nylon Tyre Corell Fabric. 25. Exercise Books. 26. Insecticides, Fungicides, Wcedicidcs and the like. 27. Tea. 28. i) seeds of food crops and scc>ds ofti·uits and vegetables,

ii) seeds of cattle fodder and

iii) jute seeds.

29. Switches:

30. Onions

Source: Clause (a) of Section 2 of ECA, 1955, Food Control Authority, Government of India, "Essential Conm1odities Regulation and Enforcement", 19 September 200 I <http:/ /fcamin.nic. in/ecpbacts.htm>.

Tea was put under the list of essential commodities along with the above-mentioned

commodities as it was being consumed by at least ninety percent of the population in

the country.94 Even after liberalisation of Indian economy in the 1990's, tea continued

to be kept under the purview of ECA. The ECA provided with wide ranging powers to

the govenunent to regulate tea along with other essential commodities. The powers

under ECA are as following:

I. To regulate by licences, pennits or otherwise the production or manufacture of

any essential commodity;

9~ "Tea May Go Off Essential Commodities List." Business Standard. '\c\\ Delhi: 28 August 1998.

- 95 -

II. to bring under cultivation any waste or arable land, whether appUI1enant to a

building or not, for the growing thereon of food-crops generally or of specified

food-crops, and for otherwise maintaining or increasing the cultivation of

food-crops generally, or of specified food-crops;

III. control the price at which essential commodity may be bought or sold;

IV. to regulate by licences, pennits or otherwise the storage, transpot1,

distribution, disposal, acquisition use or consumption ot~ any essential

commodity;

V. prohibit the withholding from sale of any essential commodity ordinatily kept

for sale;

VI. Require any person holding in stock, or engaged in the production, or in the

business of buying or selling, of any essential commodity:

a. to sell the whole or a specified part of the quantity held in stock or

produced or received by him or,

b. in the case of any such commodity which is likely to be produced or

received by him, to sell the whole or a specified pat1 of such

commodity when produced or received by him, to the Central

Govemment or a State Govemment or to an officer or agent of such

govenunent or to a Corporation owned or controlled by such

govemment or to such other person or class of persons and in such

circumstances as may be specified in the order.

VII. for regulating or prohibiting any class of commercial or financial transactions

relating to foodstuffs or cotton textiles which, in the opinion of the authority

making the order, are, or, if unregulated, are likely to be, detrimental to the

public interest;

-, 96-

VIII. for collecting any infmmation or statistics with a view to regulating or

prohibiting any of the aforesaid matters;

IX. for requiring persons engaged in the production, supply or distribution of or

trade and commerce in, any essential commodity to maintain and produce for

inspection such books, accounts and records relating to their business and to

furnish such inforn1ation relating thereto, as may be specified in the order;

X. for any incidental and supplementary matters, including, in particular, the

entry, search or examination of premises, aircraft, vessels, vehicles or other

conveyances and animals, and the seizure by a person authorised to make such

entry, search or examination.95

The IT A and CCP A made numerous representations to the Ministry of Commerce.

They demanded that tea should be removed from the list under ECA. For ITA and

CCP A it was crucial because the removal of tea from ECA would effectively stand to

reason that the government should now be less concerned on a monitoring system

with regard to its marketing and distribution c~annels. This would have helped the

planters' to eventually question the rationale behind the existence of the TMCO under

the Tea Act, which accounts for the distribution system of the commodity. The IT A

and CCP A was hoping that the TMCO and other Control Orders would be relaxed if

tea is removed from the list of ECA.

Since tea was under the ECA, the price of selling and buying tea within India was

highly regulated. Moreover, from 1984 the tea planters, at the direction from Ministry

of Commerce, have been offering tea packets at concessional rates for the common-

95 The Essential Commodities Act, 1955, Article 3, Clause (2).

- 97-

man. This directive from the Ministry of Commerce first came in 1984 when tea

ptices increased significantly to Rs. 28.58 from Rs. 15.59 in 1982.96 The planters'

were directed to provide 10 million kg of tea at concessional rates. The CCPA

coordinated this supply of tea at concessional rates. The concessional tea from 1991

went by the name of 'Nivedan Tea'.

However, the CCP A was not happy with this arrangement. Though this arrangement

was tenned as voluntary but the planters' claimed that some amount of "gentle arm

twisting" from the govemment does takes place.97 They pointed out that Ministry of

Commerce in order to check tea prices, gives veiled threats of introducing export duty,

a ban on exports or a hundred percent mandatory auction. 98 The planters' cited

evidences like imposition of export duty in 1977 and ban on export of CTC teas in

1984, which led to the loss of UK market. Hence, the planters' were forced to offer tea

b 'd' d 99 at a su st tse rate.

The planters' were directed by the Ministry of Commerce to route their tea at

concessional rates through fair price shops, co-operatives and State marketing

federations. The tea planters' were facing problems regarding payments and demanded

suitable guarantees from the govemment. 100 The National Cooperative Consumer

Federation (NCCF) was the major government buyer from the planters. However,

after the onset of liberalisation in the 1990's, the CCPA got the opportunity to oppose

%Status Paper on Production, Exports, Sales, and consumption of Tea, IT A, Calcutta: 1996.

9- Vagecsh, N S. "Tea Leaves Foretell Good Future." Business Line. 12 April I 998.

QS Ibid.

99 This was however, strongly refuted by the Tea Board Chainnan, S.S. Ahuja.

100 Indian Tea Association, n.65, pp. 60-61.

- 98 -

the ECA under which they were offering tea at concessional rates. In a meeting held in

the Tea Board between the CCP A and the government, the planters' demanded that

selling and buying of tea should be left to the open market mechanism. They also

added that the organisations like NCCF should operate in the tea auctions rather than

receiving tea at concessional rates.

Furthennore, the CCP A in a representation to the Ministry of Commerce claimed that

the planters' are regularly "harassed" by the officials from Civil Supplies and

Consumer Affairs Ministry. 101 Under the ECA, even a District Supply Officer could

ask a planter for tea stocks and prices. The CCP A officials regularly contacted the

Ministry of Commerce officials including the Commerce Minister and Commerce

Secretary.

The CCP A and IT A have relatively easy access to the Ministry Commerce. This is

visible from the fact that although the ECA comes under the aegis of Ministry of

Consumers Affairs, Food, and Public Distribution, yet the CCPA sent most of its

representations/ memorandums to the Ministry of Commerce. It could be observed

that through these representations CCP A and IT A built up pressure on Ministry of

Commerce and succeeded in removing tea from the ECA list. On 19 August 1998, the

Ministry of Consumer Affairs removed tea from the list of ECA. 102 The Civil Supplies

and Consumer Affairs Secretary, N.N. Mookherjee said, "we had asked various

101 Business Standard, n.94.

IOc Goswami, Nandini . "Tea no more under the ambit of Essential Commodities Act." 24 Oct 19911. <www.expressindia.com/fe/daily/19980824/23655504p.html>

- 99-

ministries to review the number of items in the essential commodities list. The

C . h . fi h I" "I 03 ommerce Mimstry as wntten to us to remove tea rom t e 1st

7.8 Import of Tea from Sri Lanka

The issue of importing tea fi·om Sri Lanka generated major opposition from the

pressure groups like IT A and CCP A. Tea was among the two thousand freely

importable items from the South Asian countries under the Indo-Sri Lanka Free Trade

Agreement, 1998. However, the planters' managed to put quantitative and non-tariff

restrictions on tea. This was a great success of unified lobbying by the Indian tea

industry through pressure groups like IT A and CCP A. They forced the government to

change its policies vis-a-vis tea import in the region. This shows the influence of the

pressure groups on the tea trade policies. The issue of tea import and pressure group

lobbying has many dimensions, which have been discussed below.

7.8.1 Domestic Demand and Tea Imports

The domestic consumption of tea in India has been growing very rapidly (Fig. 5).

When the global tea market is shrinking due to competition from other beverages, the

Indian annual tea consumption has been increasing by an average of 2.75 percent per

annum during 1986-2000 (Figure 2. 7). However, during the same period the average

annual growth oflndian tea production has been only 1.68 percent (Figure 2. 7).

103 Business Standard, n.94.

- I 00-

Figure 2. 7: Estimate of Tea Consumption in India, 1986-2000 (In MI. Kg.)

c: 0 ;:; a. E :;,

"' c: 0 0

700 1

566 600 583 597

562 580 ... ,..-

545 ~~'"""""' 512 ~,.... -.... --. 1,'

500 475 492 _..--

443 45s,.......P,..- ,- . , 77 r;'1

400 ;~~: :! ·~

300 <~:· f( ~~··

:.!

I . 1 ..

653

615 ~,_;;;-

I, '·'.

I:; ,

. L.:; I< I'

.:: 1<' h ,:~ ·;,~ [i

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: Status Paper on Production, Exports, Sales, and consumption of Tea, IT A, Calcutta: 1996.

While addressing the IT A members in 1991, P. Chidambaram, Union Minister of

State for Commerce pointed out that although India's tea production is increasing but

the consumption is increasing at a greater proportion. This as a result leaves a smaller

proportion of the increase in production for exports. 104 The government was very keen

to increase exports but at the same time, it wanted the enough tea left for domestic

consumption. Chidambaram gave the government viewpoint on this issue, which are

as following:

•:• There must be a strong domestic consumption base and only from such a base, one can build on exports

•:• The growth in domestic consumption is due to increase in population and rising standard of living.

•:• Domestic consumer must be able to buy tea or coffee at affordable prices

•:• After providing a quantity of this product for the domestic market at affordable prices, industry must use or set apart a portion of its produce for export.

104 Indian Tea Association, n. 65, pp. 172-73.

- I 0 I -

•:• It is possible to meet the demands of the domestic consumption base without sacrificing the objective towards export.

Chidambaram further elaborated that the tea industry has to increase production to

1000 mi. Kg. by the year 2000 in order to meet the above mentioned objective of the

government. However, CCP A has been reluctant to increase the tea production in a

major way. The reason behind this position is that iflesser tea is there in the market, it

will create a tightened availability scenario, resulting into increase in the tea prices. 105

It is visible from the production-Consumption graph (Fig. 6) that although growth in

consumption of tea has not shown any negative trend (except in the year 1995) but

average annual production percentage in relation to consumption percentage has gone

down frequently.

Figure 2. 8: The Annual Growth in Production and Consumption 1985-2000 (in Percentage)

lO

!---+-Production(%) ~Consumptbn {%!]

Sources: Computed from Status Paper on Production, Exports, Sales and consumption of Tea, (Based on liM- Calcutta Study on Tea Consumption Patterns-1995) IT A, Calcutta: 1996; Tea Digest, Tea Board of India, Calcutta, 1998.

1'1

' ··Tea Strains." Business Line. 27 Oct. 200 I.

- I 02-

7.8.2 Research in Support of Tea Imports

The Ministry of Commerce conducted various studies in order to understand the tea

consumption pattern in India. The Tea Board contracted the Indian Institute of

Management Calcutta, which undertook three studies on the trend of domestic

consumption of tea in India. The first study was conducted in 1984, then in 1995 and

then in 1999. During the study of 1984, liM estimated the ammal increase of per

capita consumption of tea at 9 grams per head per year based on the state level

consumption of data of National Sample Survey Organisation (NSSO) for the year

1972-73 and 1977-78. The analysis revealed that the total domestic tea consumption

has been growing very rapidly (Table.4). The subsequent study conducted by the liM

Calcutta in 1999 using the state level data ofNSSO for the year 1987-88 and 1993-94

revealed estimated total annual consumption of tea in India at 653 ml. Kg. during the

year 2000. Although, they corrected their earlier projected demand but even the

corrected study revealed major growth in domestic consumption (Table 2. 6). The

study also revealed that packet tea constitutes about 40 percent of the total tea market

and is estimated to grow at a cumulative ammalised growth rate of 5 percent.

Table 2. 6: Total Domestic Consumption Growth as Estimated by liM (Calcutta)

Year liM Calcutta Study, 1984 liM Calcutta Study, 1999

1995 595 562 1996 613 580 1997 632 597 1998 652 615 1999 672 633 2000 692 653

Source: Chaim1an, Tea Board of India. "Interview." August <http :1 /www. tendertimes.com/tenderpages/aug2000/ ezinet. htm>

2000,

- 103 -

In 1994, the Tea Board constituted a Core Committee with representatives from both

tea industry as well as government in order to look into the issues related to

production, consumption, and export of tea. The Core Committee submitted a report

Doubling Indian Tea Exports by the year 2000. The Core Committee's report

suggested that India should import tea in order to (a} bridge the supply-demand gap of

India and (b) release high value teas for export. 1 06 Hence, in 1994, the Tea Board and

Ministry of Commerce were keen to pennit 100 percent Expmi Oriented Units (EOU)

to export tea in bulk fonn in extension of the present admissibility of export in value

added fonn. They were also planning to give fi'ee hand to EOU' s for export of tea

even if it required imports. 107

7.8.3 The Reaction of the Planters Group

The pressure groups like CCP A and IT A has strongly opposed tea import policy of the

government. The planters' adopted various lobbying strategies in order to block tea

imports. The IT A sent a detailed memorandum to the Commerce Minister setting out

its objections on the following considerations:

1. The contention that tea may be available at lower pnce would be a

misrepresentation of facts.

11. The tea at cheaper price would be highly fibrous and stalky which were not

being generated by the Indian industry.

106 Indian Tea Association, Annual Repons, Calcutta, 1996, pp. 70-71.

107 Indian Tea Association, n. 68, pp.74-75.

- I 04-

m. The Doom·s, Cachar, South Indian tea were good blending materials and

imports would militate against the interests of those vulnerable segments.

IV. Imports would end up merely replacing the Indian tea component in exports

conferring no benefit by way of additional export volume.

v. The proposal to dilute the value-addition norm would not be in India's overall

interest.

VI. It was apprehended that the restriction on sales in Domestic Tariff Area (DTA)

could be diluted, in time, to allow dumping of low priced teas in the domestic

market to the detriment of the Indian tea industry's growth and

1 108 deve opment.

It can be noted that during 1994, the government was facing a lot of opposition to its

policy of liberalisation from the opposition parties and the IT A attempted to put

pressure on the government. The Chairman of IT A while addressing the Annual

Assemble meeting stated:

With the policy of free-market economy ... has come the s9ectre of import of tea into this country. A small section has supported the idea-a much bigger section has opposed, and opposed it strongly, my

. . b . . h d 109 associatiOn emg 111 t e secon group.

He lambasted the theory that India needs to import tea in order to keep enough tea for

domestic consumption. Using previous experiences and data he pointed out:

Our view on the matter is that the supporters of this move relied only on today's statistical position, saying that if domestic consumption keeps on increasing at a rate higher than production, there will not be enough tea left for export. F AO (Food and Agriculture Organization)

108 Indian Tea Association, n.68, pp. 74-75.

109 Indian Tea Association, n.68. p. 192.

- I 05-

also had this argument as early as 1972. Twenty-three years have gone by, and we still produce enough tea for the domestic market as well as the export market. 110

To put further pressure on government IT A and CCP A, the lobbying was not confined

to sending memorandums to the Ministry of Commerce and the Tea Board or to meet

the concemed ministers and the bureaucrats. The CCP A and IT A also used the media

in order to put pressure on the govenunent. In December 1995, the CCPA organized a

major press conference, where it reiterated that free imports and expansion of the

Indian tea production base would be at total divergence and therefore, not in the

national interest. The following points were highlighted in the media:

• Tea industry should remain alive to its obligation to increase production and productivity.

• The industry should not be remised of its task to expand the export market.

• There would always be sufficient quantities of plainer/common teas to adequately serve the domestic consumer. 111

The General Committee of IT A further deliberated upon this matter and it was felt that

the tea industry must evolve a broad strategy to deal with the threat of imports. Thus,

the CCP A was able to create unanimity among the tea planters' in their opposition to

tea imports. In the next stage, the planters' tried to contradict the various research

studies conducted by the govenunent. The IT A criticised the study Doubling Indian

Tea Exports by the year 2000 conducted by the Core Committee formed by the Tea

Board. The IT A claimed that the report contained several "fallacies and inadequately

110 Ibid.

111 Indian Tea Association, n. 98, pp. 70-71.

- 106-

developed arguments". 112 The ITA and CCPA 's strong views against the contents of

this report were officially communicated to the Tea Board. The influence of the IT A

could be observed from the fact that those planters', who were pat1 of the Core

Committee and initially supported the report, disassociated themselves from the report

stating that it has sought to be finalised without their consent. 113 The ITA convinced

the planters' that import of tea would be detrimental to their interests.

Lately, ITA has also challenged the source of data, its timing, coverage, and objectives

of the studies on domestic consumption conducted by the JIM Calcutta. It claimed that

the tea industry lacks appropriate mapping of the consumption level and the studies

earlier undertaken were always either outdated or devoid of market realities. 114 IT A

contended that the liM Calcutta study of 1984 relied only on the NSSO historical data

and no prevailing market survey data was taken into consideration. They further

claimed that estimates put forward by the IIM-C were always questionable to the tea

industry because simple arithmetic equations do not give exact estimates of

production, exports, and consumption on a year-to-year or cumulative basis. 115

ITA again questioned the study conducted by liM Calcutta for Tea Board in 1999. It

contended that the recent liM -C study has been again based on disaggregated state

level data from the NSSO 501h round survey which corresponds to July 1993 to June

1994. ITA also pointed out that IIMC has made its observations on the basis of 1993-

112 Indian Tea Association, n. 98, p. 70.

113 Sujit Patra, Indian Tea Association, fnten•iell' ll'ith the alllhur, Calcutta, 26 Sept. 2000.

114 Indian Tea Association. "Indian Tea Sccnmio 200 I: A Status Paper." Calcutta: IT A, 200 I, pp. 21-23.

115 Ibid.

- 107-

94 data while comparing with that of 1987-88. It stated that the data is outdated and

therefore the relevance of the data is questionable in the present complex scenario in

the beverage market.

IT A presented results from its own study in order to effectively build a case against

tea imports. It commissioned ORG-MARG, a renowned market survey agency in

1995 for an all India level qualitative study on tea consumption. The objective of the

study was to initiate a generic promotion of India tea campaign. It should be noted

that 110 quantitative assessment was done as part of the study. ORG-MARG survey

stated that the rate of growth in tea consumption has declined since 1996. 116 ORG-

MARG, which regularly monitors packet tea sales through its retail store audit

program, stated that total consumption of packed tea, taking into account both the

rural and urban markets, was 236.73 mi. kg dropping marginally by 1.21 percent from

237.94 mi. kg in 1999. Thus, ITA backed up its lobbying effort with evidences based

on research.

However, Article XI of the General Agreement on Tariffs and Trade (GATT) 1994

provides that no prohibitions or restrictions (other than duties i.e., tariffs) whether

made through quotas, import or export licenses or other measures shall be maintained

by any member of the WT0. 117 It also requires member nations to reduce import duty

116 "ITA Raises Questions on IIMC Survey." Business Line. 2 August 200 I.

117 The Uruguay Round of Multilateral Trnde Negotiations concluded on 15 December 1993 and the Final Act 11as

signed by member countries at a meeting in Marrakesh, Morocco, in April 1994 leading to the establishment of the World Trade Organisation (WTO). While GATT ( 1947) covered only trade in goods, WTO co1·ers several new areas such as services, investment, and intellectual property 1ights. Even in the area of goods, agticulture and textiles, which were outside the ambit ofGA TT, were brought into the fold of multilateral trade negotiations. The basic principle underlying these Agreements was to have an open trading system based on multilaterally agreed rules. The WTO Agreement incorporates some 29 individual texts- covering subjects ranging ti·om agriculture to textiles & clothing; services, rules of origin and intellectual property rights. FUJihcnnore, there are more than 25

- I 08-

by 24 percent from the existing rates by the year 2005. 118 Therefore, Indian

govemment was under pressure to open up the market for commodities like tea. In

May 1997, Indian govemment presented a plan in Committee on Balance of Payments

Restrictions for elimination of these restrictions on imports over a period of 9 years.

However, at the end it could only achieve a phase-out period of 6 years starting from

1997. 119 The Govemment of India has also been predisposed towards a free trade

regime in South Asian region. This was another reason for the inclination of Ministry

of Commerce to import tea from South Asia.

7.8.4 India-Sri Lanka Free Trade Agreement and Tea Import

The South Asian Association for Regional Cooperation (SAARC), the regional block

of South Asian countries was formed in 1985. The purpose of SAARC was to

accelerate the pace of economic and social development, promote national and

collective self-reliance, and further the cause of peace, progress, and stability in South

Asia. Although there was not much movement towards economic cooperation

immediately after the formation of SAARC, the 1990's witnessed major progress in

the economic front.

The South Asian Preferential Trading Arrangement (SAPTA) became operational in

December 1995 following its ratification by all SAARC countries. A modest

beginning was made in the First Round of SAPT A Negotiations with concessions

exchanged on 484 tariff lines (under the new hannonised System of classification at 6-

digit level) for intra SAARC trade. The Second Round of Trade Negotiations under

ministerial declarations, decisions. and understandings, which specify various obligations and commitments for

WTO members.

118 Mahendra P Lama, n. I. p. 77.

119 Minist1y of Commerce. "India &the WTO: Issues of Current lmpo1iance - An Overview." 12 March I 999,

<http://commin.nic.in/doc/wtojull.hnn>

- I 09-

SAPTA, which concluded in November 1996, was more substantial with I 975 tariff

lines covered. The cumulative total concessions offered country wise are: India: 91 I,

Bangladesh: 206, Pakistan: 386, Sri Lanka: 102, Nepal: 377, Bhutan: 47 and

Maldives: 5. The Third Round of Trade Negotiations concluded on 23rd November

1998. A total of 3456 tariff lines were covered under concessional tariffs with India

offering more than half the concessions.

In spite of these positive developments, the intra-regional trade among SAARC

countries has not developed significantly {Table 2. 7). The slow progress has been

attributed to the political problems of India and Pakistan. This is visible from the

remark made by a Nepali diplomat in 1998 at the 1 01h SAARC summit, Colombo. He

stated:

Unless there is a dramatic change in relations between India and Pakistan, SAFT A is unlikely to be in place. At this rate, neither India nor Pakistan will be ready for abolition of trade barriers ... I don't see anything happening unless the two countries decide to bury the hatchet. 120

Table 2. 7: Intra-Regional Trade in 2002 (In Billion US $)

Regional Blocks 1980' 1990 2002

European Union 52.4 63.4 71.9

NAFTA 31.5 37.3 55.6

A SEAN 33.8 38.4 22.5

SAARC 3.2 3.0 4.6

Source: Compiled from the data maintained by SCCI , <www.saarc-net.org> March 2002 and l\1L Direction of Trade Statistics, 1999.

120 The Times of India, (Bombay) 14 June 1998.

- 11 0 -

Indian govemment has been very keen to move from SAPT A to South Asian Free

Trade Area (SAFT A). In the I 0111 SAARC Summit, Indian Prime Minister Atal Bihari

Vajpayee stated:

We must reaffinn our commitment to the goal of SAFT A by the year 2001 and take steps to make this goal a reality. For this purpose, I propose that we begin immediate negotiations on a separate SAFT A Treaty, which will spell out in detail the schedules for freeing trade, including elimination of discriminatory trade practices, lifting of non­tariff barriers and tariff reductions. This would provide a predictable and transparent road map for achieving SAFT A and lend greater credibility and weight to our Association. We should aim to conclude this Treaty and have it in place by the year 2001. 121

Thus, it could be seen that there was a sense of urgency among the Indian decision

makers to move towards SAFT A. However, it was also felt that it would be very

difficult to convince Pakistan to enter into the SAFT A agreement. "The Pakistani

position (has been) that Indo-Pakistan relations cannot improve until the Kashmir

issue is resolved, (and) ... any encouragement of trade would be seen as a sell-out and

tantamount to repudiating the goveming national interest". 122 However, the charge

that India's bilateral trade strategy is aimed at isolating Pakistan is denied. One of the

officials in the Indian delegate. at the Colombo Summit pointed out, "there is no

deliberate move to isolate any country, but we are in a huny. When the whole world is

for free trade, we catmot wait endlessly for things to happen in our region." 123 Under

these circumstances, India was open to the idea of bilateral free trade agreements.

lei "PM Atal Bihari Vajpayee's address at the inaugural session of the lOth SARRC summit held in Colombo on 28 July 1998 <www.indiancmbassy.org/spccial/cabinet/Primeminister/pm(sarrc-colombo).htm>

122 Monika. Bhanot, "Challenges to Regional Cooperation in South Asia: A New Perspective." Online Journal of Peace and Conflict Resolution, August 1999 <www.trinstitute.org/ojpcr/banhothtm>

121 "India-Lanka Sign Accord on Free Trade." The Times of India, 29 December 1998.

- 11 ,1 -

India already has Free Trade Agreements with Nepal and Bhutan, and it offered to

conclude bilateral free trade agreement with Sri Lanka as well during the 1998

SAARC Summit.

This offer was immediately accepted by Sri Lanka. The President of Sri Lanka and the

Prime Minister of India in New Delhi signed the Free Trade Agreement (FT A) on 28th

December 1998 during the State visit of the fonner to India. Under the agreement,

India offered to lift quantitative restrictions on 2000 commodities for import from Sri

Lanka. All items of tea as classified in the ITC (HS). classification of exports and

imports items 1997-2002 was included in this list for free import into India. 124 Tea is

one of the biggest export commodities of Sri Lanka and India is the biggest tea market

(in tenns of consumption) in the world. Hence, there was considerable pressure from

Sri Lankan Govenunent to include tea in the FT A. Moreover, the trade between India

and Sri Lanka has been growing significantly in the 1990's. Yet, the balance of trade

has remained heavily in favour oflndia (Table 2. 8).

Table 2. 8: India-Sri Lanka Bilateral Trade Figures, 1986-1999 (In Million US $)

Year Imports from India Exports to India Total Trade Deficit ~~~~---- ~----------

1986 55 8 47 1987 61 5 49 1988 71 15 56

1989 57 8 98 1990 118 20 56 1991 217 13 204

1992 302 II 291 1993 345 20 325 1994 404 24 380

1995 470 32 438 -~·---·----~·- ---------·-

1'4 Indian Tea Association. "Annual Report." Calcutta: 1999. pp. 47-49.

- 112-

Year Imports fmm India Exports to India Total Trade Deficit

1996 564 43 521

1997 559 44 515

1998 539 38 501

1999 510 47 463

Source: "India- Sri Lanka Relations." 16 March 2002 <http://meadev.nic.in/foreign/sl.htm>

Therefore, India was under pressure to give concessions to the Sri Lanka on those

commodities, which Sri Lanka can export substantially. The following statement by

the Commerce Secretary, P.P. Prabhu speaking at the Annual Conference of UPASI

corroborated this position of the Indian government:

1. There was a sound "economic rationale" behind the unilateral gesture from

India. The country and its exporters must prepare for WTO commitments. By

the year 2003, all the quantitative restrictions must be removed and only a

tariff regime could remain in place. Even ihe tariffs will be considerably lower

than today.

11. The concessions to the SAARC Countries are "dress rehearsals" for the

process of globalisation that had been set in motion with the establishment of

WTO.

111. India has enjoyed substantial trade surplus with neighbouring countries,

notable Sri Lanka and Bangladesh. Their exports are hardly I 0-15 percent of

Indian exports. So, they want better access to India through removal of non-

trade barriers such as quantitative restrictions. 125

125 V. Jayanth, "Planters Against Unilateral Concessions to SAARC Partners." The Hindu Chennai: 20 Scp. 1998.

- 113 -

These circumstances were really challenging for the pressure groups like CCP A and

IT A. The pressure groups lobbied at different levels to block the inclusion of tea from

the list of commodities given concessions under FT A. The CCP A Chaim1an Vinay

Goenka who is also the Chainnan of Warren Tea as well sent a representation to the

Prime Minister of India. In his representation, he pointed out the adverse impact of

lifting the imp01i curbs on tea and sought his intervention in favour of the Indian

planters. He requested the PM to remove tea from the list of freely importable items.

On behalf of CCP A, he pleaded that if exclusion of tea from the list or imposition of

quantitative restrictions on imports is not feasible, then the customs duty should be

appropriately raised to ensure a level playing field for the Indian tea industry. 126

Goenka in his letter on behalf of CCP A substantiated his pleadings for exclusion of

tea from the FT A with the arguments as following:

a. India has set high quality standards in tea production above the intemational

standard of ISO 3 720. Countries such as Bangladesh have set no standards for

their tea. The planters' claimed that the low quality tea would diminish the

high quality standards set by the Indian tea industry. It was further pointed out

in this context that as much as 0.7 percent of Indian tea is destroyed as tea

waste.

b. The low import duty will lead to a price advantage for the Sri Lankan and

Bangladeshi tea over Indian tea. The regions particularly affected will be

Dooars, Terai, Cachar and Southem India, which produces some amount of

orthodox tea like Sri Lanka. Moreover, the CCP A claimed that these regions

126 ''Tea Industry Protests Free Import Offer to SAAARC" Business Line, Calcutta, ! 9 August 1998.

- 114-

are pariicularly \Ulnerable to the demand compression. They cited examples

from the past when in the over supply situations prices have plunged to

disastrously low levels. They claimed that it might again happen with tea

imports, jeopardising the viability and growth of tea industry in these areas.

c. It was also apprehended that if high grown orthodox tea of Sri Lanka and

Nepal are imported, they could be blended with the premium Darjeeling tea.

This will dilute the quality and price of Darjeeling tea.

d. Tea imports will result in decline in price level, leading to lower

fi b 'l' 127 pro 1ta 1 tty.

The last argument was a very strong one. It gave a hint to the PM that the tea import

may affect the jobs of more than one million people directly employed in tea industry

of India. 128 The CCPA followed up the representation to the PM with representation

to the Ministry of Commerce and the Tea Board. The CCPA tenned the decision to

include tea in the list of commodities under FTA as a political one and negated

fundamental principle oflevel playing field. 129

The CCPA also used the media very carefully. Immediately after the signing of the

FT A agreement, many press conferences were organised by CCP A and IT A. The

headlines in various newspapers like "Tea Industry in Crisis", "Sri Lankan Tea

127 ·Tea Industry Protests Free Import Offer to SAAARC' Business Line, Calcutta, 19 August 1998.

128 "TU Meet Seeks Scrapping of Sops for Lankan Tea." The Hindu. Madras: 23 August 2000.

129 Raghu Krishnan, "Stonn in the SAARC Tea Cup." The Economic Times. 19 Sep. 1998.

- 115 -

Coming", "Tea Prices Falling" were meant to pressurise the govemment. 130 This

helped in creating a fear in the mind of the small planters and also the consumers.

The CCP A was able to align various pressure groups in the tea industry and convince

them about the adverse effect of tea imports from Sri Lanka. CCP A not only created

unanimity among the tea planters' from North and South but also succeeded in getting

the support of trade unions in the tea industry. A large section of plantation workers

under the fold of the Indian national Plantation Workers' Federation (INPWF)

affiliated to Indian National Trade Union Congress (INTUC) opposed the decision of

the govemment to import tea from Sri Lanka.

Three top functionaries of INPWF, the adviser P.L. Subbiah, the President M.S.

Khandait and the Joint General Secretary Alok Chakravorty, who are members of the

Tea Board, criticised the decision of importing tea at the Tea Board meeting. They

also issued a threat to the govemment that if the tea imports are not stopped, INPWP

would organize demonstrations at the tea plantations. They also sought the support of

the Chief Ministers of tea growing states to pursue this issue with the Central

Govemment. The arguments advanced by INPWF were exactly on the lines of those

put forward by CCP A. 131

The success of CCP A by enlarging the campaign against tea imports by including the

trade unions is visible from the pressure put by the State Govemments' on the Centre.

The West Bengal Chief Minister, Jyoti Basu in letter sent to Ptime Minister of India

uo Qtd. in Fair Trade lntcmational. "Tea Industry Ill Crisis."" 16 October 1999 <www. transfair.ca/ fairtradc/fair66 7 .html>

131 '"Plantation Workers Join Cry Against Free Tea imports."" Busine:1·s Line. Calcutta, 24 Sep. 1998.

- 116-

urged that tea should be excluded from list of zero-duty importable items from Sri

Lanka. He pointed out:

Centres decision of free imports of tea from SAARC countries to India had come as a shock to our tea industry ... should this really happen, Indian tea industry would be plunged in to a serious crisis. Among all traditional industries, tea played a key role in the economy by generating employment directly to over a million workers and earning foreign exchange. I strongly feel that the country can not afford to have these advantages eroded by granting concessions to other SAARC countries. Alternatively, the customs duty on imported tea may be raised to ensure competitiveness in the tea industry in tenns of price. 132

The support from the trade unions to the CCP A demands shows how carefully CCP A

enlarged the issue, which was essentially between the Ministry of Commerce and the

CCP A. They convinced the trade unions that cheaper imports would result in fall in

prices, and this will affect the labour groups in tenns of bonus, wages etc. to great

extent. CCP A already had political access, resources and now with the support of

labour groups, CCP A got the numbers in their side. The tea industry labour forces in

India are more than one million in numbers and therefore their mobilization had a

political implication in tenns of votes as well. Moreover, the threat of the labour

groups to organize demonstrations put major pressure on the Central Government.

The trade unions also lobbied with the State Govenunents of the tea producing states.

The CCP A also sent its representation to the State Governments opposing the policy

of tea imports.

112 Financial Express, 8 Februaty 1999.

- 117 - '

The effect of such intense lobbying forced the Central Govemment to change its

position vis-a-vis tea impm1s. The Union Commerce Minister, Ramaktishna Hegde

held a long meeting with Vinay Goenka during December 1998. It was decided that

the Commerce ministry would take the following steps to safeguard the interests of

the planters.

1. To ensure that the imported tea is in "prime condition", it may be stipulated

that tea exported to India confonns to ISO 3720 nonns, which are being

strictly adhered to by the Indian tea companies.

2. Import of tea waste, which also figures in the list of 2000 importable items,

will be disallowed. 133

Although these concessions fell far short of what the CCP A demanded but the effect

of lobbying by the CCP A was indeed visible from the statement of the Commerce

Minister. The lobbying from the CCP A forced the Central Government to re-negotiate

the issues related to tea import. Finally, the India -Sri Lanka Free Trade Accord was

implemented in April 2000. Tea was put into the negative list (Annexure D (i) of the

FT A). As a result, the imports of tea from Sri Lanka to India on a preferential basis

were subjected to an annual maximum quota of up to 15 million Kg. on a fixed tariff

concession of 50 percent. That means Sri Lankan tea were given a concessions of 50

percent over the tariff concessions (15%) already given to SAARC countries subject

to an annual quota of 15 million kgs (Table 2. 9).

1." "Hcgc.le to Consic.ler Steps to Protect Tea lndustiy." Business Line. Calcutta, 22 August 1998.

- 118 -

It is visible that the CCPA could successfully force the Central Govemment to change

its position and put these quantitative restrictions on tea. A top executive of Tea Board

claimed, "this U-tum was a result of massive political pressure put on Vajpayees's

coalition govemment by three main tea growing states (West Bengal, Kerala and

Tamil Nadu)." 134 This has been indeed a big U-tum since even in March 1999, the

Indian Govemment was not ready to put tea under negative list.

Table 2. 9: India-Sri Lanka Free Trade: 50 percent (fixed) tariff concession for tea

HSCode Product Description

090210 Green tea - wholly of Sri Lanka Origin in packings not exceeding 3 kg. net

090220 Green tea, whether or not flavoured, nes

090230 Black tea ... - wholly of Sri Lanka origin 111 immediate packing of a content < 3 kg.

090240 Other black tea .. - wholly of Sri Lanka origin black tea

210120 Extracts, essences and concentrates of tea or mate ... - instant tea

Source: Indo-Lanka Free Trade Agreement, 2000, Annexure D (1).

This is visible from the statement of India's envoy in Colombo, Shiv Shankar Menon

who announced that Sri Lankan tea and rubber would not be included in India's

negative list. 135 It shows the strategy of CCPA to lobby with the State Govemments in

order to put pressure on the Central Govemrnent worked in its favour.

The next strategy employed by the planters' was to highlight the plight of the tea

industry of Southem India. The Vice President of UP ASI, M.H. Ashraff welcomed the

134 Amal Jayasinghe. "S1i Lankan Tea Pany Sour Afier Indian U-tum on Tariff.'' Indian Express, 8 March l 999.

135 ibid.

- 119-

restrictions put on import of Sri Lankan tea. He told the media that free import of tea

from Sri Lanka would have had a disastrous effect on the plantations in South India.

The cost of production due to high labour wage is extremely high in south and hence it

will lead to the t1ooding of cheap tea from Sri Lanka into the country. This will

undennine the viability of South Indian tea. 136

During the period of 1998-2000, the tea prices in Southern India witnessed drastic fall

in the prices (Table 2. 1 0). The UP ASI and CCP A immediately sought intervention of

the Minister of Commerce and Industry, Murasoli Maran. UP ASI sent a four-page

letter to Maran. The content of the letter was made available to the press as well. In

the letter, UP ASI sought promotional support for exports, abolition of excise duties on

bulk tea, besides giving adequate tariff protection by increasing the basic import duty

on tea to at least 35 percent. 137

Table 2. 10: Average Auction Prices in South and North India 1998-00 (In Rs.)

Auction Centres 2002 2001 2000 1999 1998 Difference

+I- (2002-2001)

Kolkata 61.22 76.36 81.09 88.60 87.83 -15.14

Guwahati 55.09 68.68 68.80 80.54 78.76 -13.59

Siliguri 54.13 63.41 61.16 72.56 74.66 -9.28

North India 57.25 69.80 70.34 80.58 80.22 - 12.55

Cochin 48.13 52.21 51.33 62.03 73.31 - 4.08

Coonoor 36.85 41.47 38.98 53.34 65.06 - 4.62

Coimbatore 41.2 44.98 43.35 57.26 68.74 - 3.78

South India 42.13 46.02 44.64 57.10 68.79 - 3.89

136 PTI. "lntluslly Hails Move to Place Tea in a Negative List." The Financial Express. 6 March 1999.

137 UNI. "UPASI Favours Suspension of Tea lmpons Over Concems of Declining Prices." The Financial Express. 20 April 2000.

- 120-

Auction Centres 2002 2001 2000 1999 1998

All India 51.6 61.66 61.71 72.80 76.43

Difference

+I- (2002-2001)

- 10.06

Souru::: Indian Tea Association. "Indian Tea Scenario 2002: A Status Paper." Kolkata: ITA, 2002, p.13.

The CCP A and UP ASI in their representation to the Commerce Minister attributed

this fall in tea prices to the import of Sri Lankan tea. They also pointed out in their

representation that "the basic duty being 15 percent, even without any concession, Sri

Lanka tea was being imported"138 They also contended that only some portion of this

is done officially, with the rest of the tea imported through unauthorised channels.

UP ASI claimed that, "there is no plausible reason, other than considerable quantities

of imports entering the domestic market, to explain the substantial fall in prices in our

country despite production being 70 ml. Kg. lower." 139

UP ASI also sent a representation to the Commerce Secretary, P .P. Prabhu. They

sought the help of Commerce Secretary to ban tea imports from Sri Lanka under

current circumstances. The planters' tried to use some of loopholes in the FTA. It

demanded a complete ban on Sri Lankan tea on the basis of Article VIII (1) of

safeguard measures. The provision states:

If any product, which is the subject of preferential treatment under this Agreement, is imported into the territory of a Contracting Party in such a manner or in such quantities as to cause or threaten to cause, serious injury in the importing Contracting Party, the importing Contracting Party may, with prior consultations except in critical circumstances, suspend provisionally without discrimination the preferential treatment

d d 140 accor e under the Agreement.

138 Anupama Air, "lndust1y Flays Tea Import Agreement." The Financial Express. 13 Feb. 2000.

119 Ibid.

140 Qtd. in Mahendra P Lama. n. I, pp. 85-86.

- 121 -

These arguments by the pressure groups have been extensively highlighted in the

media. As a result, the point of view of the pressure groups received wide publicity

and put major pressure on the decision makers. However, there are many studies,

which coritradicted the CCP A, and UP ASI stand that the prices were falling due to

cheaper tea imports from Sri Lanka. The South _Indian tea industry is heavily

dependent on tea exports as more than 50 percent of the 210 ml Kg. tea produced is

exported. 141 Most of these exports are to Russia or CIS counhies. Hence, most

important reason for the drop in prices has been sharp drop in imports by Russia and

the CIS. The exports to CIS declined because of political tunnoil and severe economic

crisis. 142 Moreover, around this time, the Kargil war took place in India and there are

suggestions that tea through legal, and illegal channels could not go to Pakistan. 143 As

a result excess tea was available in the domestic market which the big tea companies

did not pick up as they were looking quality tea rather than bulk supplies.

Moreover, the average tea price of Sri Lankan tea is more expensive than South Indian

tea (Figure 2. 9). The Sri Lankan tea prices are definitely lower than the North Indian

tea prices. However, they are much more expensive than the South Indian tea although

they produce roughly the similar variety of tea. Therefore, it is not possible for the Sri

Lankan tea to price out the South Indian tea.

1 ~ 1 M_H_ Ashraff Qtd_ in Anupama Airy. "New UP ASI Chief Lays Emphasis on Boosting Tea Sector Expo11s." The Financial Express, 22 Sept. 1999.

142 Mahendra P Lama., n. I, p. 86.

1 ~ 3 Ibid.

- 122-

Figure 2. 9: Annual Average Tea Prices in US$ (1991-2000)

2.5

2

1.5

0.5

0+-----.-----~----~----~----~----~-----,-----r-----,-----,

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

I-+ -Colombo~ 'Calcutta Cochin I

Source: Data provided by Tea Promotion Bureau, Tea Board of Sri Lanka, Colombo, Nov. 2001

The question of Sri Lankan substandard tea flooding Indian market is debatable. The

import of tea into India is subject to Indian Laws. Section 5 of Prevention of Food

Adulteration Act (PF A) stipulates that no person can import tea which is not in

confonnity with the specifications laid down under the said Act. Apart from such

provisions, Tea Board requested the office of Director General of Foreign Trade for

amendment to different provisions of Import-Export Policy and Procedure for

enforcement of quality standard of Import of tea into India. Moreover, at present Port

Health Organisations attached to different Indian ports are analysing imported teas

before its release from the port areas. The specifications for tea under PF A are more or

less similar to the international standard namely ISO 3720. 144 This has been reiterated

144 N.K. Das, Chainnan, Tea Board of India. /11/ervieH· to tendertimes.com. 07 August 2000, <http://www.tcndcrtimes.com/tendcrpagcs/aug2000/ezinet.htm>

- 123 -

by the Sti Lankan Tea Board Chairman, C.P. Ratwatte who said, "We will not dump

cheap tea into India. We will export nothing less than tea complying with ISO

standards."145 It has to be noted that more than 80 percent of the tea imported into

India is being re-exported and a very little is left for domestic market. 146 Therefore,

the effect of the· Sti Lankan tea import on the domestic tea prices is questionable.

It is the tea import from Sri Lanka, which has been targeted by the pressure groups

more often than any other country. Yet, the data gives a very different picture (Table

2. II). It is not Sri Lanka but Indonesia, which has dominated the Indian tea markets.

Yet, very rarely one comes across any comments from CCP A on steadily increasing

tea imports from Indonesia or Kenya. At the same time in every second briefing of

CCP A, IT A, or UP ASI the threat from Sri Lankan tea has been mentioned. This

selective opposition of the pressure groups has been mainly due to traditional

competition between the Indian and Sri Lankan tea industry.

Table 2. 11: Country wise tea imports into India

Country 1998 1999 2000 2001

Olin a 0.12 0.26 0.24

Indonesia 4.22 3.14 4.39 7.46

Kenya 0.44 1.25 1.33 2.21

Iran n.a. 0.48 0.93 0.06

Sri Lanka 0.31 2.77 2.09 0.8

UAE n.a. 0.09 0.42

1 ~ 5 "Lankan Envoy Allays Fears on Tea Front." Business Line. Madras: 08 May 200 I.

1 ~ 6 K.S. David, Additional Vice-Chainnan of the Indian Tea Association. "Interview." Business Line, Madras: 22

January 2002.

- 124-

Vietnam n.a. 0.36 2.72 5.29

Source: Compiled from Indian Tea Association. "Indian Tea Scenario 2002: A Status Paper." Calcutta: IT A, 2002, p.l6 and Indian Tea Association. "Indian Tea Scenario 200 I: A Status Paper." Kolkata: ITA, 2001, p. 20.

The producers' groups substantiated their arguments on the basis of a special report on

the tea indushy prepared by Duff and Phelps Credit Rating (DCR). The report

mentioned that opening of the tea sector would lead to cheap imports from Sri Lanka,

Indonesia, and Kenya. Given the relatively lower tax rates and lower production costs

in the exporting countries, the imports would depress prices and drive out Indian tea

147 from domestic market.

The CCP A also tied up the issue of tea imports with the negative impact of WTO

agreement. This was done in order to pressurise with the support of trade unions. A

two days national conference of the trade unions in plantation industry was held in

Kochi, Kerala during August 2000. It was attended by almost all the national trade

unions like CITU, INTUC, HMS, AITUC etc. representing a spectrum of political

ideologies. This was said to be first of its kind in independent India where all the trade

unions with different ideologies held a joint conclave. 148

The conference was organised essentially to oppose the FT A between India and Sri

Lanka. It was noted in the conference that the tea industry has been badly hit by the

FT A, which allowed 15 million Kg. of tea from Sri Lanka at the import duty of 7.5

percent. The interesting aspect of this conference was that the CCPA representatives

1•

7 Amiti Sen. "Reposition Tea Products to Confront Global Challenges Says Dutr and Phelps." The Financial Express. New Delhi: 31 July 2000.

1•

8 "TU Meet Seeks Scrapping of Sops for Lankan Tea." The Hindu, l'vladras: 23 August 2000.

- 125 ~

attended this conference. The President of the INTUC, G. Sanjiva Reddy told the

media that it is the beginning of the joint struggle to save the plantation industry. 149

It was also decided to submit a joint memorandum to the Prime Minister and other

concemed Ministers demanding the withdrawal of the provision allowing Sti Lanka to

export tea to India at 50 percent of the total duty. The trade unions threatened with a

dharna (protest march) in front of the parliament before the beginning of the budget

session.

At the same time, in July 2000, the small tea planters' of Nilgiri District of Tamil

Nadu initiated violent protests against the fall in tea prices. They resorted to blocking

road traffic for days in Nilgiri District affecting the tourism and business in the area.

The protest was so severe that all the opposition political parties in Tamil Nadu like

Tamil Mannila Congress (TMC) and AIADMK took up the issue with the State as

well as Central Government. The TMC district president also resorted to 'fast unto

death' before being arrested. The TMC attributed the sorry state of domestic tea prices

to the import of Sri Lankan tea. 150 Around the same time (August 2000) similar

roadblocks by All Assam Small Tea Growers Association, the apex body of 25,000

small tea growers in Assam was also reported. 151

This again highlights how CCP A could widen the issue of tea import, which was

essentially between them and the Ministry of Commerce. They succeeded in co-opting

149 Ibid.

150 "Nilgiris Tense, Tea Growers Lathichargcd, 500 Arrested." The Financial Express, Bombay: 28 July 2000.

151 Hussain S Zarir, "TI10usands of Tea Garden Workers Arrested 111 Assam." 29 August 2000: <h ttp://news. ind ianfo.com/tea. htm I>

- 126-

various pressure !:,'Toups with varied interests within the tea industry in support of their

position. From this position of strength, the CCPA demanded increase in the standard

rate of customs duty on tea imports to 3 5 percent, plus surcharge. The CCP A

members made many representations to the Ministry of Commerce and Ministry of

Finance. They argued that customs duty in all major tea producing countries range

between 30 to 40 percent and India was the only country with a low duty rate of 15

percent. Even Sri Lanka has import duty of 35 percent and Bangladesh 40 percent. 152

Eventually, the Finance Ministry increased the customs duty on tea to 35 percent

while moving the Finance Bill in April 2000. Initially the Finance Ministry didn't

have any proposal to increase the custom duty but it happened due to subsequent

representations (both direct and indirect) by the CCP A members. 153

However, the planters' continued to send representations to the Ministry of Commerce

and the Ministry of Finance. The CCP A contended that under WTO provisions from

March 31, 2001, the quantitative restrictions on the remaining basic tea items would

be removed. This could lead to greater import volumes that would cut into the

domestic market, especially at a time when prices have not been remunerative for

some time. 154 Hence, the CCP A demanded to raise the customs duty to I 00 per cent, a

little closer to the WTO-assigned bound rate of 150 per cent. In the budget proposals

152 Amiti Sen. "Hike in Tea import Duty to Check Fall in Domestic Prices." The Financial £.\press. New Delhi: 04 May 2000.

153 Ibid.

15 ~ Reshma Krishnan. "A Weak Cuppa." Business Line, Madras: 0 I March 200 I.

- 127-

of February 200 I, the Finance Minister raised the import duty from 35 per cent to 70

per cent. This hike has been attributed to the constant lobbying by the planters. 155

Although, the 70 percent hike in the customs duty fell short of what the CCP A was

demanding, the Ministry of Finance in the next Budget Proposal of February 2002

increased the customs duty to I 00 percent. This was indeed a great success of the

lobbying efforts by the CCP A. It created this pressure on the government slowly and

through various channels. Subsequently it could influence the government to increase

the customs duty to their desired level.

It has to be noted that although the customs duty has been raised the tea imported from

Sri Lanka continues to attract only 7.5 percent duty owing to the bilateral FTA.

However, the CCP A has been successful in putting various non-tariff baniers (NTBs)

against the Sri Lankan tea exports. The Sri Lankan exporters were allowed to operate

from only two Indian ports, Calcutta and Kochi. The Sri Lankan exporters have

repeatedly pleaded for additional port facilities particularly the Chennai and Bombay

ports. The reason behind this policy is that Calcutta port is the centre for North Indian

tea and Kochi is the centre for South Indian tea. Under these circumstances, it is very

difficult for Sri Lankan tea to compete with Indian tea. Thus, the planters' through

CCP A could play a dominant role vis-a-vis the issue of tea imports from Sri Lanka.

155 Raadia Mukadmn. 11Custo1n Duty Hike To Discourage Tea And Coffee IJnport." 12 March 2001: <www.expresshotelicrandcaterer.com/200 I 0312/news4.htm>

- 128-

7.9 Indian Tea Exports

In India, the tea exports are intrinsically related to tea imports. The falling tea expmts

and growing domestic consumption has been the main reason behind importing tea

from Sri Lanka. CCPA has actively lobbied with the Indian Govemment in order to

increase expm1s. However, at the same time they have opposed imports. Since, tea

expmts is an important foreign exchange eamer for India, the govenunent most often

has been supportive of the demands made by the pressure groups. Yet, the government

has sought the availability of tea in adequate quantity for domestic consumption as

well.

7.9.1 CCPA and Cooperation with Sri Lankan Tea lndust1y

The Sri Lankan and Indian tea industries have always competed against each other for

the export markets. However, there are efforts by both the countries as early as in

1968 to have a unified strategy. Both India and Sri Lanka was keen to jointly address

the issues like over production and exports. 156 This kind of cooperation was prompted

by the emergence of African countries as major players in the global tea trade. After

nationalisation most of the MNCs like shifted its base from Sri Lanka to Kenya and

other African countries. These MNC:; brought new planting technology with them,

which resulted in to massive increase in the volume of tea produced in Kenya. Hence,

Kenya was not ready to sign any agreement under which they might have to reduce

production. In order to check the dominance of these new actors in the tea trade an

156 M. Malayya, An Economic Analysis a( Indian Tea !ndus!IJ' and Public Policy (Dharwar: Karanata University,

1972), pp. 176-177.

- 129-

Indo-Sri Lankan tea consmtium was mooted in 1968. It was agreed to have the

following institutional mechanism for the consortium:

1. It was decided to establish two separate national compames under the

domestic laws of both the counhies.

11. It was also mooted that the major shareholders of these national companies

should be the growers and the government of India and Sri Lanka. It was also

proposed that tea merchants and exporters might also be allowed to participate

in the share capital.

111. The Board of Directors of the nationalised company were to consist of

nationals of the respective countries, who should be representatives of only tea

growers and the governments.

tv. The authorised capital of the two companies was allowed to be Rs. 50 million

each.

v. It was decided that the consortium should be a joint management company, the

President and the Vice President of the consortium being elected from the

Chainnen of the two companies.

v1. Tea Board of India and the Ceylon Tea Propaganda Board were to conduct

necessary surveys and detennine areas of operation. 157

However, this proposal could not succeed because after nationalisation of the Sri

Lankan tea industry in 1975, the proposal of joint consortium of Indian and Sri

Lankan tea industry was not implemented. After nationalisation Sri Lankan

157 M. Malayya, n. 156

- 130-

Govemment was also aiming at increasing production for expo11 purposes. Hence,

they were not ready to engage with Indian tea companies with the apprehension that

the tea production may have to be curtailed. Yet, it was one of the earlier attempts of

the tea industries of independent India and Sri Lanka to cooperate for mutual gain.

There have been many more attempts in the recent times to forge a closer relation

between the tea industries of the two countries. In September 1992, it was felt by the

tea planters' of India and Sri Lanka that a producer's forum of the SAARC countries

could be fonned to safeguard matters of mutual interest. 158 The CCP A urged the

Indian Govemment to facilitate the fonnation of a tea council, which will function

within the framework of SAAR C. On its part, CCP A held long discussions with the

S1i Lankan delegations urging them to form a tea association during August 1998.

Eventually, during May 1999, CCP A succeeded in convening a meeting of the top tea

producing countries of South Asia. The delegates formed a Tea Association of South

Asia (TASA) and ratified the main objectives of the association. These included:

•

•

•

•

•

To provide an intemational forum to safeguard the short, medium and long term interests of tea producing and trading activities within the member countries.

To provide a fonnal organisation for the tea producing and trading interests in South Asian countries, to deliberate and evolve collective solutions for the short-tenn and long-term problems affecting them.

To provide technological co-operation and sharing of technology and expertise amongst the member countries in the fields of research, production, processing, packaging and marketing of tea.

To facilitate access within South Asian countries for teas produced in the member countries and to work for increasing consumption of tea both within this region and outside through generic promotion.

To establish a common stand among members vis-a-vis other regional and

15' Indian Tea Association, n.69, p.75.

- 131 -

global bodies.

• To ensure implementation of ISO 3720 at point in sale. 159

With the fonnation ofT ASA, CCPA managed to get an umbrella organisation to look

into the issues like cheaper imports from Sri Lanka, Bangladesh, and Nepal. It also

gave CCPA the option of including Pakistan's tea traders in the association at a future

date. 160

Moreover, the Indian Government after liberalisation has shown keen interest for

cooperation between the tea industries of the two countries. While visiting Colombo

in September 1998, Indian Commerce Minister, R.K. Hegde proposed joint marketing

of tea at the international market. He said, "While we are exploring the possibility of

bilateral trade and international trade, we should also on the basis mutual agreement

explore the possibility of joint marketing." 161 He further pointed out, "Sri Lanka

produces excellent tea ... India also produces excellent tea. This is an area where we

should avoid getting into suicidal competition." 162 In the later part of the same year,

the path breaking India-Sri Lanka FT A was signed. Yet, it is due to traditional

competition, the tea industry of India and Sri Lanka could not forge a common

strategy for the global market.

7.9.2 CCPA and Competition with Sri Lankan Tea Industry

159 Nandini Goswami. "SAARC Nations Fonn Forum for Tea Trade." The Financial Express, Bombay: 13 May 1999.

160 Although, Pakistani delegation was not present at the meeting. yet the country's tea traders whole-heartedly supported the cause of the forum. They tclt that such an as5ociation would enabie them to leverage its requirements from the tea producers.

161 "India Sri Lanka Should Jointly ,\1arkct Tea: Minister." The Financial Express, Bombay: I 0 August 1998.

162 Ibid.

- 132-

The Indian tea industry in general and its Southern segment in particular has always

viewed Sri Lanka as a 'severe competitor' and a big threat. 163 In 1987, the tea expm1s

from South India came down to 34 million kg from 66 million kg in 1984. 164 Even at

that time, the cause of dwindling tea exports was attributed to Sri Lankan tea industry.

The then Union Minister of State for Home, P. Chidambaram stated," Colombo fixes

the price after knowing the Kochi price, and literally we have been priced out of the

intemational markets." 165

The Indian planters' feel that in the recent years Sri Lanka has adopted various tactics

to woo away Russian importers from Indian auctions. It has extended huge long-term

credit at easy rates to Russia, which India cannot provide. All most all of India's tea

expmis have gone to the C.I.S countries including Russia, U.A.E, and UK (Table 2.

12).

Table 2. 12: The Major Importers of Indian Tea (In MI. Kg.)

Destination 1995 1996 1997 1998 1999 2000 2001

-~~-·--"···---·--·-·-··----------·-·····-······------------- ------··········- -·· ...................... , ... ________________ ,. __ ..... ----------United Kingdom 21.1 24.5 26 21.3 18 20.1 15.90

CI.S 81.5 51 95.6 94.6 102.8 95.43 83.41

U.AE 13.4 21.6 20.9 23 17.3 21.2 21.65

·-"~~-----

Source: Tea Statistics, 11 Sep. 2002 <www.teauction.com/statistics/expcountry.asp>

163 P .S. Sundar, "Sri Lankan Tea Industry: partner or Competitor~" Business Line, Madras: 16 Sep. 1998.

164 Ibid.

165 P.S. Sundar, n.163.

- 133 -

Simultaneously, Sri Lankan major export market is C.I.S and the countries in Middle

East. Moreover, every year their exports are growing to these countries (Table 2. 13)

and it is felt that this growth is at the cost oflndian exports.

It should be noted that Sri Lanka's production has increased from 179 million kg in

1992 to 306 million kg in the year 2000. At the same time, India's production has

increased at very low rate from 732 million kg in 1992 to 823 million kg in the year

2000. 166 The 1998-2000 has observed less buying by Russia due to its economic

problems.

Table 2. 13: Sri Lankan Direction of Exports (In MI. Kg.)

Destination 1995 1996 1997 1998 1999 2000

United Kingdom 12.88 9.19 9.81 10.60 10.17

C.I.S. 40.37 38.22 50.47 41.09 47.74 56.64

Iran 5.89 10.02 6.18 5.48 9.67 12.48

Saudi Arabia 2.45 8.80 8.64 11.12 9.81 11.42

Middle East (other) 36.33 6.16 28.18 31.88 62.89 67.62

·--~""v_,_...._,~~ --H~~ ~--~·~--------m~-~_,,_ ____ , ,.~'"'-~-··

Source: Tea Statistics, 11 Sep. 20001 <www.teauction.com/statistics/expcountry.asp>

As a result, the Sri Lankan tea industry has been in trouble as owing to negligible

domestic consumption it is over dependent on exports. This excess tea made the prices

in the Colombo tea auction to come down by 46 percent. The CCP A felt that owing to

Sri Lanka's higher production and lack of export market, it wants to send its excess

166 Indian Tea Association. "Indian Tea Scena1io 200 I: A Status Paper." Calcutta: ITA, 200 I, p. 30.

- 134-

tea to Indian market through FTA. Hence, the cooperation between Indian and S1i

Lankan tea industry has not been a great success.

In fact, the Indian tea industry has been apprehensive to face competition from the Sri

Lankan tea. Since, in the past most of India's tea exports was destined for assured

market of Soviet Union and the rest was meant for the domestic market, the emphasis

has been on quantity and not quality. The focus of Indian tea industry has been on

loose tea rather than value added tea. D.P. Maheshwari, the Chainnan of the Planters'

Association of Tamil Nadu admitted that it was because of the absence of i1movation

and value addition that the value-wise share of tea has been much lower in India. 167

The Chainnan of CCP A opposed the cooperation between tea industries under the

framework of SAAR C. He said:

The SAARC forum offers many possibilities as regional economic trade block and should thrive on the principles of equity and reciprocity among the nations constituting it. While it is expected that India as a senior partner, will have to take a lead in initiating a freer trade environment within the SAARC structure, it is only equitable that the forum is also utilised to find a home for India's product within the

. 168 regiOn.

The CCP A holds that the issue of tea trade should not be dealt bilaterally between

India and Sri Lanka. It can be meaningful only if Pakistan could be included in such a

167 "Tea Industry Must go for Innovation- PAT Chief" The Financial Express, Bombay: 06 November 2000.

168 Chainnan's address to the General Committee of Indian T~a Association. Annual Repon. Calcutta, 1999-00. p. 147.

- 135 -

regional grouping. Pakistan is the world's third largest importer of tea ( 140 mi. Kg)

but sources 70 percent of this from African countries. 169

7. 9.3 Pressure Groups and Tea Exports to Pakistan

Pakistan has been importing tea mainly from Kenya at a much higher price than it

would have from within the region. There are research studies which have shown that

unit price realisation of Indian tea (Based on 1985 data) exported to Pakistan worked

out to $2.42 per kg as compared to Kenya's $3.35, Indonesia's $2.98, Sri Lanka's

$2.90 and Bangladesh's $2.46. 170 In 1985, Pakistan could have saved $46 million on

in total tea imports of 67.8 million kg if it would have imported the tea from India. 171

However, India has never been a major tea exporter to Pakistan. One of the major

factors behind India's meagre tea exports has been high import duty at 45 percent ad

valorem, sales tax 12.5 percent and income tax 5 percent across all kinds of tea

imports in Pakistan. In addition to this there are octroi, bank charges etc. The total

clearing expenses stand at 80 percent on C&F value. 172 Pakistan has not given any

reliefunder SAPTA to the South Asian countries.

Secondly, more than 70 percent of the market is dominated by Pakistan Lever

Brothers, a part of transnational Unilever. Unilever has a major stake at Kenyan tea

169 ibid.

170 V. R. Panchmukhi, M. P. Lama, ct al. Economic Cooperation in SAARC Region: Potential, Constrai111s and Policies (New Delhi: Interest Publication, 1990); Also sec, Mahendra P Lama, Prima1y Commodities: Decline in Apparent Consumption by the De1·e/oped Countries (New Delhi: Research and Infonnation System for the Non­Aligned and Other developing Countries, 1987).

171 ibid.

172 Mahendra P Lama,.n. I, pp. 72-73.

- 136-

plantations from where most of Pakistan's tea impm1s come from. Therefore, it acts as

a powerful pressure group in Pakistan against tea imports from South Asia. 173

Thirdly, trade and politics has always linked together by India and Pakistan in South

Asia. It has been found that most often 'Kashmir problem' has been sighted by

Pakistani traders as the biggest deterrent against major tea imports from India. 1 7~

However, the tea imports of Pakistan from other South Asian countries like Sri Lanka

is very low as well. Therefore, it is doubtful whether Kashmir issue have acted against

the tea trade between the two countries.

The tea producers in India became highly interested on Pakistani tea market after the

break down of Soviet Union and subsequent fall in exports to that country. The CCPA

sent many representations to the Ministry of Commerce, urging the Commerce

Minister and the bureaucrats to take up the issue of tea trade with their Pakistani

counterpart. CCP A has been keen that Pakistan should give concessions for tea

imports from India under the SAPT A framework. IT A mooted in 199 5 that an Indian

tea delegation led by the highest functionaries in government could assist towards a

fresh presentation of credentials and revival of trade prospects. However, due to

political reasons this suggestion did not find favour with the Government of India. 175

Yet, the IT A and the CCP A continued to send representations to the Tea Board and

Ministry of Commerce. The CCPA infonned the government that Pakistan's per capita

173 Mahendra P Lama. n. I, p. 74.

174 ibid.

175 Indian Tea Association. Annual Report, Calcutta, 1996. p.177.

- 13 7 -

consumption of tea is one kilogram per annum, which is much higher than India's per

capita of 630 grams per annum, in spite of the similar living standards. They argued

that trade with Pakistan can give a tremendous boost to India's tea exports. The major

lobbying effort by the CCPA with the government succeeded, with the govemment

granting pennission to an Indian tea delegation to visit Pakistan in July 1997. This

visit provided opportunity to the CCP A members to meet the Pakistani tea importers

who had evidently lost touch with their Indian markets; The delegation also succeeded

in clinching a deal to export two million kg of tea to Pakistan.

The CCP A team were also able to create major interest among the Pakistani tea

traders. This is visible from the visit of an eight member Tea Delegation from Pakistan

Tea Association (PTA) led by its Chairman, M.M. Ispahani. This visit from 16th to

25th November 1997 was significant because this was PTA's first visit to India after

independence. 176 The delegation represented some of the biggest tea companies from

Pakistan accounting for almost 70 percent of the tea trade in Pakistan. During these

visits, the CCP A and IT A were successful to sign an agreement to export tea from

India to Pakistan. The IT A proposed to launch a generic promotion programme in

Pakistan for Indian tea, keeping in view the consumption pattems in that country. The

IT A and CCP A Chairman, Vinay Goenka said, "Even if India was able to capture 10

per cent of this market (170 million kg) it would be a huge 17 million kg, a valuable

addition to the overall export kitty." 177

176 Indian Tea Association. Annual Report, Calcutta, 1998. p.45.

177 E. Pal. "Hindi-Paki Chai Chai." 22 Dec. 1997 <www.rediff.com/business/dec/22pak.htm>

- 138 -

The Pakistani tea market has been dominated by tea from Kenya. However, there

many times the tea crops have failed in Kenya, leading to substantial shortfall of tea in

Pakistan. Indian tea has the advantage of being cheaper with Assam CTC tea offering

a better alternative for Pakistani tea drinkers. IT A pointed out these issues to the

Pakistani delegates. The PTA on their part felt that Indian tea has the quality and the

range suitable for blends in Pakistan. The IT A sought the help of PTA in influencing

the Pakistani Government to reduce the high import duty rates. Although PTA agreed

to the proposal, both IT A and PTA felt that these issues should be tackled under the

framework of the concessions offered under SAPT A. 178

The CCP A indeed succeeded in forging a close tie between the tea industries of the

two countries. Even the governments of both India and Pakistan could not achieve

this. The PTA Chainnan's comments appropriately sums up the success of CCPA and

PTA. Ispahani observed, "We have broken the ice at last"179 This is also evident from

the fact that Indian tea exporters continue to get good enquiries from Pakistan despite

a strain in bilateral relationships between the two nations following nuclear tests held

at Pokhran on 11 and 13 May 1998. An UP ASI delegation visited Karachi on May 14,

a day after the nuclear tests. Yet, M H Ashraff, the Chainnan of UP ASI, and the head

of the delegation said that they received a warm welcome from the Pakistani side. 180

The Commerce Secretary P.P. Prabhu also reiterated, "We have not received any

reports of the trade being affected due to the current strain in the relations." 181

178 E. Pal,"Hindi-Paki Chai Chai.", n. 168.

179 ibid.

180 "Pakistan Keen on Indian Tea Despite Nuclear Tests." The Financial Express, Bombay: 29 May 1998.

lSI Ibid.

- 139-

Although the imports went down in 1999 due to Kargil War, but the relationship

between the ITA and PTA didn't break down. Rather, in the year 2000 the tea imports

from India increased to 3.1 million kg (Table 2. 14). In January 2001 an Indian

delegation, comprising representatives from the IT A visited Pakistan at the invitation

of the PTA to promote trade. The IT A delegation has been successful in signing a

Memorandum of Understanding with PTA. According to the agreement, India would

be supplying 7-10 mi. kg in the current calendar year. 182

Table 2. 14: Yearly Indian Tea Exports to Pakistan

Year

1

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

In MI. Kg

0.38

1.57

1.86

0.18

0.3

2

1.45

0.41

3.1

4.67

7*

-------------~-

*Expected Sources: Compiled from Trains Software on Internet, 25 April 200 I <http://cs.usm.my/cgi­bin/untrains/train6.pl> and Tea Statistics, II September 2000 I <www. teauction.com/ statistics/expcountry.asp>

182 "MoU Signed to Import Indian Tea." Dml'll, Islamabad: 08 Feb. 2001.

- 140-

Although, this agreement did not have the direct patronage from the govemments, it is

a great achievement of the IT A and PT A. 183 In spite of the political pressure the tea

trade has been increasing significantly between the two countries (Table. 11 ). This

cuuld happen mainly due to lobbying by the IT A and UP ASI along with other

members of CCPA. In fact, the CCPA Chainnan, R.S. Jhawar has even offered to

raise tea supply from India to Pakistan up to 15 to 20 miiiion kilograms from 2002 at

"affordable prices". 184

Thus, it could be seen that pressure groups have been able to achieve what the

govenunents of India and Pakistan failed to do for a long time. The IT A and other

members of CCPA were able to convince the Indian Govenunent about the benefits of

tea exports to Pakistan. The cooperation between the two countriesat the govenunent

level has been minimal owing to political reasons. However, IT A and CCP A have

regularly lobbied with the Indian Govenunent to open up tea trade with Pakistan.

They have succeeded in trading with Pakistan even when the political relations were at

abysmaily low level.

It has also successfuily linked the issue of tea imports from Sri Lanka to India with the

issue of tea exports to Pakistan. This has served two purposes for CCP A. Firstly, they

could gain more than a foothold in Pakistani tea markets, one of the largest in the

world. Secondly, they could gain some time in order to face competition from cheaper

Sri Lankan tea imports. For this purpose, the CCPA has been instrumental in the

183 P S Sundar. "Tea Exoort Talks with Pol:i<ton" M11<t"' '"'" 1nn1· <h ..... u;- '-;- ··~'--- --·--''""..,

- 141 -

fom1ation of a Tea Association for South Asia. CCPA is keen that Pakistan should

join this association in future.

8. Pressure Groups and Sri Lankan Tea Trade Strategies

8.1 Background of Pressure Group Activities in Sri Lanka

Most of the pressure groups active in Sri Lankan tea industry were fonned during

colonial period. From the colonial period till the present time, Sri Lankan tea industry

has witnessed various changes. Yet, the pressure groups influence on tea trade policy

of Sri Lanka has never receded. The estate management was in the hand of some big

British f~milies who were involved in the coffee plantations in Sri Lanka. However,

the majority of plantation owners were expatriates and away from the scene of their

investments, leaving management completely in the hands of resident directors and

Agency Houses. Moreover, the collapse of coffee plantations during the year 1880

. made many of the families bankrupt or financially very weak. This forced them to

borrow heavily from the relatively small number of agents in business. 185 The agency

business soon grew, and the formation of Sterling and Rupee companies 186

mushroomed, taking advantage of many estates being available at give away prices. 187

I So Roben Wilson. "History of Ceylon Tea··. 6 June 2001 <http://www.wilstea.com/ceylon.htm>

186 TI1ese companies replaced the European speculati\·e landlords in 1890's. The companies registered in the UK were called 'Sterling Companies' and the ones registered in Ceylon were called 'Rupee Companies'.

137 S B De Silva. The Political Economy ofUnderdel'elopmelll, (London: Routledge and Kegan, 1982) pp. 287-89.

- ! 42-

Some of these Agency Houses later became big multinational tea companies like

Brooke Bond, Hanisons & Crossfield, and James Finlay. 188 The tea plantations

continued to remain under the ownership of foreign companies and the Agency

Houses even after independence.

8.1.1 The Agency Houses influence in non-agricultural aspects of tea trade

The Agency Houses dominated the insurance sector in Sri Lanka as principle agents

of overseas insurance firms. A considerable amount of foreign exchange was remitted

abroad annually by way of premiums. The Agency Houses derived a fair income from

commissions accruing to them on the various transactions handled on behalf of their

principals as well as from various charges and fees.

The Agency Houses controlled the shipping business in Sri Lanka as well. They acted

as agents for reputed shipping lines and were able to offer both westbound and

homebound cargo comprising mainly of exports of plantation produce and imports of

estate supplies such as fertilizers, tea chests, machinery and general bulk cargo

representing the tied business that they controlled on behalf of sterling tea companies.

The tea plantations also required supplies such as fertilizers, fuel, pesticides, tea chest

and machineries etc. Most of these items had to be imported which were provided by

the Agency Houses. In fact, the Agency Houses were also providing food supplies for

the plantation labour. In addition to the commissions paid by the Agency Houses at

different level, they used to charge 2.5 percent on all procurements for estate supllies.

The Agency Houses used to procure tea chests and fertilizers from London at a high

188 Economic and Social Commission for Asia and the Pacific. Transnational Corporations and the Tea EJ.port Industry of Sri Lanka, Colombo: 1984, p. 17.

- 14]-

price and will deliver them to the tea plantations at a even higher ptice. They also

supplied miscellaneous items such as building materials, agticultural implements,

agro-chemicals, factory machineries and equipments.

The sterling plantation compames used to take credits from the foreign banks

operating in Sri Lanka. Later, these companies had to obtain prior approval, by the t'

controller of exchange in respect of each application for such credit. This used to

cause delay and hence the companies found it convenient to borrow on short tenn

basis from the Agency Houses. Loans given by Agency Houses to the companies were

normally secured through a lien on the stocks and sometimes, by a mortgage on a

borrowing company's immovable property. 189

Thus the Agency Houses were in complete control of the tea plantations in Sri Lanka.

In the 1950's, Sri Lanka was receiving financial and technical assistance under

Colombo Plan, 1951 in which British Government was the major donor. Hence, Sri

Lankan Government could not take any action against the interests of the Sterling Tea

Companies or the Agency Houses. Not surprisingly, in 1952, sixty nine percent of all

the registered tea land was under foreign ownership and more than 70 percent of tea

was purchased by the British traders.

However, to check the growing power of these groups, the government introduced

various controls like Tea Control Act, No. 51 of 1957. This Act was meant to regulate

the tea industry as whole. It included registration of tea growers, manufacturers, and

traders controlling the planting and replanting processes, licensing of traders and

189 Rachel Kurian, State, Capital and Labour in the Plantation Industry in Sri Lanka, (Neitherlands: Univ. of Amestcrd<Jm, 1989), pp. 121-24.

- 144-

exporters and administration of tea control fund. 1<J0 The government also introduced

various financial controls like Moratorium on the repatriation of profits and dividends

by the non-nationals in July 1964. 1<)

1

Another incident that took place in 1956 was the collusion between the Marxists and

the Kandyan groups. The Kandyan people are the Sinhalese people settled in and

around Kandy who believed that the coffee and tea plantations have deprived them of

their land and that ought to be returned to them. In effect this coalition was responsible

for the final take over of the estates. In May 1970, A United Front Govemment was

elected on a mandate that resoundingly endorsed socialist policies. In 1972, the

government also adopted a new constitution and changed the name of Ceylon to

Democratic Socialist Republic of Sri Lanka, severing her last constitutional link with

UK. The United Front's next step was to target the tea plantations owned mainly by

the planters' from UK.

In 1972, the nationalisation of the tea plantations commenced with the enactment of

Land Reform Law no. 1 of 1972. This enactment imposed ceilings on the extent of

land that could be privately owned. It also provided for setting up of a Land Reform

Commission (LRC) vested with powers to acquire private land held in excess of the

ceilings. 192 This ceiling limited private holding to a maximum of 20 hectors. During

the period between 1972 and 197 5, the LRC started purchasing tea estates from the

companies. The govemment purchased the majority of the tea estates ( 411,187 acres)

190 Ronald Rote, A taste of Billerness: The Political Economy of Tea plantations in Sri Lanka (Free University Press, 1986 ).

191 ibid.

192 G. H. Peiris. Del'elopment and Change in Sri Lanka (Kandy: International Centre for Ethnic Studies, 1996), pp. 228-29.

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and placed them under the control of two state corporations, Sti Lanka State

Plantation Corporation [SLSPC] and Janatha Estate Development Board [JEDB]. 193

8.2 The Nationalisation of Tea Plantations and the Pressure Groups

The Agency Houses controlling tea trade tried to enter into a deal with the right wing

elements of the ruling party SLFP, which would have allowed them to continue in

return of their support to the government on the issue of nationalization. However, the

coalition partner in the government, the Marxist Lanka Sama Samaj Party (LSSP) was

totally against the Agency Houses and wanted complete nationalization of the tea

trade. 194 Moreover, most of the areas where Agency Houses were influential like

insurance sector, shipping, estate supplies etc were being gradually nationalized by the

Sri Lankan Government.

The nationalization of tea plantations was expected by the sterling companies and they

had begun to move out of production of tea. The British tea companies were

developing tea plantations in some of the African countries like Ken~a and were also

consolidating their dominance in tea trade rather than on tea production. Between

1950-55, the tea prices went down significantly, and the plantations survived by

cutting labour costs. It was then became apparent that local entrepreneurs are better

able to weather the storm than the ste1"ling companies. That is because of the proximity

of the local entrepreneur with the labour force meant a greater degree of supervision

of operations and greater economy of investment or infrastructure. 195

193 G. H. Peiris, n. 192, pp. 611-28.

1 ~< Ronald Rote, n. 190.

195 Rachel Kurian, n. 189, p. 346.

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Moreover, the local entrepreneurs \Vere more flexible in their response to pnce

changes. He could decide to over crop his estates during the time of high prices or

switch to altemative production when the prices were low. Additionally, they had the

possibility of using non-economic fonn of coercion through the use of kinship, caste

and other fonns of control to squeeze labour costs.

Another factor behind the sterling companies becoming keen to move out of the tea

production was adverse publicity it was getting in intemational market for its

treatment of labour forces. In 1973 a British television team made a documentary on

the condition of the estate Tamil workers in association with the Ceylone Workers'

Congress. CWC was largest trade union in the plantation sector hoping for betterment

of the workers condition through nationalization. 196 That was one of the first cases of

a pressure group with limited resources confronting a much larger pressure group by

expanding the issue with the help of media.

The screening of the documentary in 1973 and again 197 4 focused the attention of the

British public on the plight of the estate workers and brought in a major negative

publicity for the British sterling companies. The documentary also helped in

generating support from the British Labour Govemment and also from the British

trade unions for the nationalisation of the tea industry. The companies themseives

were so embarrassed by this adverse publicity that they were glad to hand over the

problem to Sri Lankan Government by agreeing to nationalisation. However, the

sterling companies asked for a hefty compensation in lieu of the nationalisation of the

196 Ronald Rote, n. 190, p. I 08.

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tea plantations. The companies and the Agency Houses petitioned to Prime Minister

H. Wilson of United Kingdom to take up the matter with Sri Lankan Govenunent.

Eventually, the British Govemment agreed to give a grant of£ 8 million to enable the

Sri Lankan Govemment to pay the sterling companies in full.

8.2.1 Continued influence of Agency Houses and Trans-National Corporations

(TNC!)) in Nationalised Sri Lankan Tea Industry

The nationalisation of the tea estates ended direct control of production by the large

multinational finns or their local affiliates. However, nationalisation did not affect the

tea trade or processing for export marketing, blending packaging, and final consumer

marketing. Thus, while 70 percent of tea production was in govenunent's hand, 90

f h k . . . h d 197 percent o t e mar etmg was m pnvate an s.

8.2.2 TNC's and tea processing and servicing activities in Sri Lanka

One of the crucial events was the changing pattem oftea retail trade in the 1970's and

80's in which tea bags became the most dynamic market segment of the otherwise

sluggish tea trade in the developed countries. Because of this trend, the distribution of

value-added within the tea sector moved from the producers to the processors where

the TNCs have a virtual monopoly. The MNC blenders and packers have actively

promoted tea bags, a tea form which requires less tea, lower quality tea and sells for

higher prices. 198

197 Economic and Social Commission for Asia and the Pacitic, n. 179, p. 6.

198 Goutam Sarkar, "Tea: Some Policy lsuucs," Discussion Paper no: 124, Institute of Development Studies, Sussex, 1978; also see, Ceylon Tea Centre, Market Re1·ie1r, January -March, 1981, p.33.

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Many TNCs in S1i Lanka which stmied with complete foreign capital subsequently

transfom1ed themselves into local companies based on local ownership. Some of such

examples are Carson Cumberbatch, George Steuart and Heath & Company. Some of

these companies also changed their names or amalgamated under different names.

Interlocking of board of directors facilitated this type of change. At present the major

TNCs present in Sri Lanka are Unilever, Van Rees, Harrison and Crossfields and

James Finlay. In all the cases the parent TNC is represented in the local board of

directors. Some of these TNCs also own subsidiary finns with management drawn

from the main company. For instance, Lipton had two fully owned subsidimies- R.O.

Mmmel & Company and Meddama Trading Company. Brooke Bond has been the

owner of Webster Automatic Packeting Company Ltd. Unilever had acquired S1i

Lankas on! instant tea production and export firm of that time- Ceytea Ltd. George

Pyne and Company has been a fully owned subsidiary of James Finlay and Company.

In the absence of adequate data, this information is only suggestive of the intricate

involvement ofTNCs in Sri Lanka's domestic tea processing and servicing activities.

8.2.3 TNCs and tea exports from Sri Lanka

The export of tea from Sri Lanka is primarily govem~d by the (Tax and Control of

Expo1i) Tea Act No. 16 of 1959. One of the major cc:1ditions for being a tea exporter

are that the applicant have an adequate organisation, sufficient financial resources and

suitable premises. These requirements were easy to fulfil for all existing Agency

Houses and TNC exporters. Hence the TNCs or TNC aided big private domestic

companies dominated most of the exports from Sri Lanka. It is visible (Table 2. 15)

that after one year of nationalisation, the top exporters were multinationals or big

domestic companies. ln 1980, well past nationalisation, still the top exporters were

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p1ivate finl1S. This trend is present even after one year of privatisation of tea trade in

1993 and in the year 2000.

The TNCs became a major pressure group in the Sri Lankan tea industry because of

two reasons. Firstly, the TNCs controlled large share of consumer markets and also

intemational tea industry and markets through brand names and advertising by the

parent TNCs. Secondly, S1i Lanka's continuing dependence on tea for vital foreign

exchange needs, the excess production of tea relative to world demand and the ready

availability of altemative supplies reduced the bargaining power of the Sri Lankan

Govemment in negotiations with the TNCs. The TNCs could easily affect the local tea

prices by postponing purchases, which put them into a very powerful position in the

Sri Lankan tea industry.

Table 2. 15: The Top Exporters of Sri Lankan Tea (Position Wise)

Company 1976 1980 1993 2000

Stassen Exports 2 2

Brooke Bond (Ceylon) Ltd.

Lipton (Ceylon) Ltd. 2 2 1* 4*

Jaffarjee Brothers 3 6 5 7

Harrison & Crossfields 5 5

Akbar Brothers 6 4 3

James Finlay Group 8 12

MJF & Co. 9 9 10

Van Rees (Ceylon) Ltd. 11 11 6 3

Source: Compiled from Mercantile Produce Brokers (Pvt.) Ltd. "Tea Review." Colombo: 2000, pp. 49-50 & Sri Lankan Government. "Report of the presidential Conunission on the Tea industry and Trade." Colombo: 1995, p. 57.

*Unilever acquired Liptons in 1972 and Brooke Bond in 1984.

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These, expm1ers and buyers are organised ·under the Colombo Tea Traders'

Association (CTT A) and have played a major role in the tea trade policy making of

Sri Lanka for a long time.

It has to be noted that if we take the total exports then these big companies are only

dominating 10 percent to 15 percent of the market. However, if we take various

segments of tea in Sri Lanka it will be seen that few companies have dominated

individual segments. For example, the low grown tea is mainly directed towards

Middle Eastern Countries and is dominated by local companies like Akbar Brothers

and Jaffatjee Brothers. The export of high grown tea is dominated by the Unilevers. 199

While, Van Rees dominated the bulk tea exports, Akbar Brother has been dominant in

the packet tea segment. The MJF Group, Akbar Brothers, and James Finlay Group

have dominated the tea bags segment.200

8.3 Pressure Groups and Structure of Post-Nationalisation Sri Lankan Tea

Industry

The tea trade structure of Sri Lankan tea industry was not altered even after

nationalisation. It has continued from the period of independence to the present day

without many changes (Fig. 8). Hence, the traditional system of marketing tea through

public auctions continued. In fact, almost 95 percent of total tea sales of Sri Lanka

take place through the auctions.201 The other methods of sales are private sales in

which the producer sells directly to the buyer bypassing the auctions. There is also a

199 Economic and Social Commission for Asia and the Pacific, n. I 79, pp. 26-27.

200 Mercantile Produce Brokers (P\1.) Ltd. "Tea Review." Colombo: 2000, p. 49.

201 "Review and Refonn of the Tea Regulatmy Environment Enforced by the Sri Lanka Tea Board." ReFiew oj"1he Law and Regula/ions, Colombo: Consultants in Technology, Management and Development Studies, 1996, p. 27.

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method of forward contracts. Under this system, the producer supplies a specified

quantity of tea over a pe1iod. However, not more than 5 percent of tea was marketed

through these chmmels. The tea exports were allowed only if they were routed through

Colombo tea auctions. This made the brokers an influential player in the tea trade

policymaking. These brokers are organised under the Tea Brokers Association.

The majority of tea processing factories have been in the ~ands of the private traders.

Therefore, their association The Private Tea Factory Owners Association (PTFOA)

has also played important role in formulating tea trade policies of Sri Lanka.

Figure 2. 10: From Producer to the Consumers: Sri Lankan Tea Trade Structure

Source: Interview by the researcher.

- 152-

8.4 The Tea Board of Sri Lanka (SLTB)

Another change that took place during the course of nationalisation was the

establishment of a Sri Lnakan Tea Board. The SLTB was established on 1st January

1976 with the objective of promotion and development of tea industry of Sri Lanka. It

composes of government officials as well as representatives from various pressure

groups. The SL TB has been the main regulatory body for the Sri Lankan tea industry.

Some the most important functions of SL TB are as following: 202

0 Registration of private tea factories 0 Ensure that the Reasonable Price Fonnula is paid to the small holders. 0 Pre-auction monitoring of tea ensuring they meet the ISO 3 720 standard. 0 Registration of the exporters. 0 Registration of the tea packers 0 Supervise the scheme of (CTC) tea imports for blending and export. 0 Monitors the quality of pre-shipment teas.

Apart from these actions, the SLTB is also actively involved in promoting Sri Lankan

tea all over the world. The Tea Promotion Bureau of the Tea Board conducts this

function. Hence, most of the pressure groups have lobbied with the SLTB.

9. A Brief Profile of Current Pressure Groups active in Sri Lankan Tea

Trade

As it has been mentioned earlier, most of the dominant pressure groups in Sri Lankan

tea industry owe its origin during the pre-independence period and continued after

nationalisation. The most important of these pressure groups are as following:

202 Sri Lanka Tea Board, "Annual Report," Colombo, 1995.

- 153 -

9.1 Colombo Tea Traders' Association (CTTA)

The tea buyers, sellers, and brokers associated with the Ceylon Chambers of

Commerce (CCC) fonned the CTTA in 1894. The need for the fonnation of the

association arose as the natural concomitant to the vast changes taking place both in

the field of production and marketing during the later part of 19th Century. Under the

changing circumstances, it was felt by the founders that an exclusive association is

required to look after the interests of tea trade, which will work as a subsidiary to the

CCC. The objective of CIT A has been "to promote the common interest of sellers and

buyers of tea, and to uphold the good name of the Colombo Tea Market."203

Apart from lobbying with the government officials for their members, the other

important function of CIT A has been to conduct the weekly tea auctions in Sri Lanka.

Since 90 to 95 percent of Sri Lankan tea is sold through Colombo auctions, the CIT A

has been one of the most important pressure groups in the Sri Lankan tea industry. It

has always adjusted along with the changes witnessed in the structure of the Sri

Lankan tea industry. After independence, many Sri Lankans began to play a greater

role in the functioning of CTT A. S.T.L. de Soysa became the first Sri Lankan

Chari man of CTT A. 204 Even after nationalisation, the influence of CTT A didn't

recede as the selling, exports, and value addition of tea continued to be dominated by

the CIT A member companies.

8.1.1 Organisation of CTTA

:w CIT A. "Rules of the Colombo Tea Traders' Association." Pamphlet, Colombo: 200 I.

20-l Maxwell Fernando, Commemorating /00 Years of the CTTA (Colombo: Colombo tea Traders' Association,

1995), pp. 120-21.

- 154-

All persons, tinns, companies or organisations who are sellers or buyers of tea in the

Colombo market or are agents of tea estates, or are tea brokers, warehousemen of tea

or are those actively engaged in tea trade are eligible for election as members of the

association.205 The members ofthe association are divided into three categories:

I. General membership

2. Affiliated associations

3. Honorary membership

The General membership is divided into active members and associate members.

Associated associations are those having sectoral interests in the tea trade. However,

the Associated association representatives are not entitled to vote. The honorary

members are those who have made outstanding contribution to the tea industry. The

active members are those who purchase or sell more than 500,000 kg of tea in the

Colombo market. The General Committee of CTT A admits all the members through

ballots (Rule 7]. The General Committee is the most powerful organ of CTT A and it

manages all the important business of the association. It consists of five seller of tea

and five buyer of tea who are elected by general members and one representative from

Colombo Brokers' Association. Again, the Brokers' representative is not entitled to

vote at the meetings of General Committee [Rule 7 (A)]. The General Committee

again elects the Chairman and Vice Chainnan of CTT A from the buyer and seller

members.

205 Rule 4 (a) of CIT A. "Rules of the Colombo Tea Traders' Association." Pamphlet. Colombo: 200 I.

- !55-

9.2 The Colombo Tea Brokers

Since almost all of the Sri Lankan tea is marketed through the Colombo auctions from

the very beginning, the brokers became important actors in the tea trade. The brokers

perfonn an intennediary role in the sale transactions between producers and buyers.

They store, catalogue, taste and value, send samples to prospective buyers and put up

tea for sale at the auctions. The auctions are conducted two days a week, on Monday

and Tuesday. The brokers offer tea in two fonns: ex-estate and main sales catalogue

and these tea are auctioned in the fonn of lots as specified in their catalogues, and the

highest bidder for any particular lot becomes the purchaser. It is possible to share to

share the purchased lot with a maximum of three other buyers.

The brokers in Sri Lanka charge a fee of one percent of the net value of tea sold by

them. The function of Brokers also include collecting levies enforced by the

government and also to act as an agent for collecting dues owing to the various

lending institution by the sellers.206

The brokers are represented in the General Committee of CIT A. The brokers have

also fonned an organisation of their own in 1896 with the name, Colombo Share

Brokers Association. It was reconstituted as Colombo Brokers Association in 1904.

The CBA is composed of seven selling Brokers under the Licence of Tea Brokers Act,

no. 9 of 1979. These brokers have the exclusive right to deal at Colombo auctions.

They are as following:

0 Somerville & Company Ltd. 0 Forbes & Walker Ltd.

206 Maxwell Fernando, n.l90, pp. 33-35.

0 John Keels Ltd. 0 Bartleet & Company Ltd. 0 Eastern Brokers Ltd.

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0 De Silva Abeywardena & Peiris Ltd.-0 Mercantile Brokers Ltd.

These brokers have also entered into tea production after the government tea estates

were privatised in 1992. The Forbes and Walker (Kahawatte Plantation Ltd.), John

Keels Ltd (Namunkula Plantation Ltd.), Eastern Brokers Ltd. (Malwatte Valley

Plantation Ltd.) and Bmileet & Company Ltd. (Udapussellawa Plantation Ltd.) have

invested into tea production.207 This gives the brokers further scope of dominating the

tea trade.

9.3 The TNCs and their Influence in Tea Auctions

The bulk of the supplies in Colombo auctions are made against specific orders and

most local traders act merely as agents for foreign principals. The overseas buyers are

in three general categories:

a. Large TNC blenders/ packers with local subsidiaries, e.g. Brooke

Bond, Lipton etc.

b. Large TNC blenders/packers without local subsidiaries, e.g. Twinning,

Lyons Tetley etc.

c. State trading agencies

207 Y. R. Amarasinghe (Ed). "Recent Trend in Employment and Productivity in Plantation Sector." international Labour Organisation (ILO), 1993, pp.1 00-101.

- !57-

Since more than 80 percent of the purchases are against orders, most of the local

exporters are govemed by the purchase policy of the overseas principal.20x Secondly,

the overseas buyers communicate a price estimate to the Sri Lankan buyers on the

basis of the world market trends and the price and the price at the other centres for

similar tea. The local buyers detennine the maximum price he could pay at the auction

given his fixed charges, taxes etc. Then, he usually discounts the level of such fixed

export charges and offers a corresponding price at the auctions. As a result, the tax is

shifted to the producers in the fonn of lower auction prices.209 Thirdly, often the same

transnational companies tum out to be bidders at all the auction centres. As a result

their buying behaviour affects the detennination of prices. The concentration of

buying power and the ability to switch to other centres give TNCs a disproportionate

influence over price detennination in Sri Lankan auctions. There is a possibility that

the auction prices may not have any relation to cost of production and seller's

valuation as seller's valuation was often academic as far as its real effect was

concemed.210

9.4 The Planters' Association of Ceylon (PA)

The Coffee planters' of Sri Lanka fonned the PA on 1 ih February 1854. The rationale

behind the S!i Lankan planters' organising themselves into an association were similar

to that of Indian planters. The Sri Lankan planters also faced the problem of recruiting

labourers from India and their transport to work in remote coffee plantations. They

2(JS International Trade Centre, "An Introduction to the Structure and Organisation of the Primary Market for Tea,''

CCP: Tah 67/WP2 (Febru;1:-y ~967).

2()

9 FAO, Committee on Commodity Problems, "Barriers to Tea Consumption and Trade: A Review of Tariff and Non-Tariff Measures,'' Rome, CCP: Te77/WP4, August, 1977.

21° FAO, Committee on Commodity Problems; n. 209.

- 158 -

were also faced with problems like ananging their housing and maintenance of their

health. In these circumstances, the planters' fanned P A so that they could speak

authoritatively on these issues and deal with those responsible for the administration

of Sri Lanka? 1 1

8.4.1 Early Influence of PA

The plantation products like coffee and later tea were a valuable source of revenue for

the Colonial Govemment. Hence, "the voice of those responsible for the production of

wealth that financed the development of the Colony (was) heard with ever increasing

respect in the councils of the administration."212 The PA members like ITA, were

politically influential and were represented in the Legislative Council of Ceylon. The

Governor appointed them after consultation with P A.

Towards the end of the century, the plantation companies replaced the early planters.

During this period, the agency houses expanded their functions and transfonned

themselves into the role of managing agents in Sri Lanka for the British based

companies. After independence, the Sri Lankan Government initiated various policies

to check the influence of these agency houses like Tea Control Act, No. 51 of 1957 to

regulate the tea industry. During this period, the government also begun developing

large tea plantations and begun managing it. For this purpose, it fanned a public sector

corporation, the State Plantation Corporation (SPC). This SPC was created to end the

dominance of the multinational companies and agency houses. In spite of these

regulations, in the year 1952, 69 percent of all registered tea land was under foreign

:11 "The Planters' Association of Ceylon." Colombo: Times of Ceylon Ltd., 1954, pp. 4-5.

212 "ll1e Planters' Association ofCeylon." n. 198, p. 7.

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ownership, which came down slightly to 46.8 percent in the 1970's.213 Moreover, the

agency houses continued to dominate in tenns of production (Table 2. 16). In the

1970's, they were controlling 62.1 percent of tea production. This reflects the

influence of the PA on the production oftea.

Table 2. 16: Significance of Agency Houses as Planters (1970). ---------~·-·-

Tea Rubber

Total Production 468 ml.lbs. 350.9 mi. lbs.

Production by Agency House 291 ml.lbs. 96 ml.lbs.

managed estates

% Controlled by Agency Houses 62.1 27.3

-------------------Source: "Report of the Conunission oflnquiry on Agency Houses and Brokering Firms."

Sessional Paper No. XII, Colombo: 1974, p. 2.

Thus, even after the Sri Lankan Government initiated various control measures, the

planters' who were represented by P A continued to have considerable influence in the

tea trade policy making of Sri Lanka because of the support it received from the

British Government. Many local planters' also became members of P A during this

time. The P A played an influential role till the nationalisation of the tea estates in two

phases, 1972 and then in 1975. The PA lost most of its influence after nationalisation

of the tea estates as the government plantation companies didn't join the association as

members. However, after privatisation of the tea estates the PA has again emerged as

213 Economic and Social Commission fer A>i3 and the Pacitic, n. 179, p. 7.

- 160-

one of the most influential pressure groups in Sri Lankan tea industry. Even the

Govemment Plantation Corporations like SPC and JEDB has become members of PA.

8.4.2 Organisation of PA

The membership of P A encompasses all sectors of the plantation industry and includes

the large estates managed by the privatised Regional Plantation Companies (RPC's),

state sector, private owners of estates and factories, agricultural produce brokers,

plantation engineeting finns, agricultural advisor etc involved in the crops of tea,

rubber and coconut.214

The most important organ of P A is the General Committee. The members in this

committee are elected. The Chairman and the Deputy Chairman of PA are the ex­

officio members of the General Committee. Some of the people who have contributed

to a great extent for the Sri Lankan tea industry are admitted as life members as well.

The General Committee takes all the crucial decisions by unanimity related to the

functioning of P A. The General Committee also elects the Chainnan and the Deputy

Chainnan of the P A. The P A is represented in the districts by nine District Planters'

Association (DPA). These DPA's also have Chairmen and Secretaries like the PA.

The Secretariat guides and advice the DPA's in conducting their affairs.

9.5 The Private Tea Factmy Owners Association (PTFOA)

The PTFOA was fonned in 1990 mainly to protect the interest of the private tea

factory owners against the Sri Lankan Govemments policy of stipulating price

payable for green leafs. The private factory owners are represented in CTTA as an

"14 "The Planters' Association of Ceylon." Colombo: Times of Ceylon Ltd., 1954, p. 2.

- 161 -

observer. However, they felt that a separate organisation is required to specifically

address the problems related to the tea factory owners. The main objectives of PTFOA

are as following: 215

• To develop, assist and sustain tea industry and requirements of the tea factory owners.

• Assist in providing facilities to store tea and other financial facilities. • Organise seminars and training programs for the benefit of members. • Explore avenues in obtaining higher and stable price for tea by constantly

negotiating with relevant organisations. • Develop mutual friendship among the tea factory owners.

The PTFOA has emerged as an important pressure group in the Sri Lankan tea

industry because most of the small holdings sell their green leaf to the private tea

factories. The private tea factories then sell the processed tea in auctions. PTFOA is

represented at the Tea Board and most of the important decisions related to tea trade

are taken after consulting with PTFOA. The importance of PTFOA in the tea industry

of Sri Lanka can be seen below (Table 2. 17).

Table 2. 17: Composition of Tea Processing Sector of Sri Lanka, 1998 (In Million Kgs.)

Made Tea (kg) Own Leaf Bought Leaf

State Sector Factories 7.5 11.5

Management Company Factories 106.5 30.3

Private Factories 7.8 116.1

Total 121.8 157.9

Total

19.1

136.9

124.0

280.0

:'IS As told to the researcher by W.M.C.J. Wijctunga, Secretary GenerJI. PTFOA, Rajagiriya, Sri Lanka, 10 Nov. 2001.

- 162-

%of Total Production Own Leaf

State Sector Factories 2.7

Management Company Factories 38.1

Private Factories 2.8

Total 43.6

Source: Data provided by PTFOA, Colombo, Nov. 200 I.

Bought Leaf

4.1

10.8

41.5

56.4

Total

6.8

48.9

44.3

100.0

The PTFOA controls 44.3 percent of the total tea processed in Sri Lanka. Most of

green tea (77 percent) is bought from small holders in the low grown regions of Sri

Lanka. The PTFOA provides regular cash advances, short, and long-ten11 loans at very

low rates of interest to small holders. The fertiliser requirements for the small holders

are also provided on credit. The PTFOA also maintains regular contacts with the P A

and the CIT A. The PTFOA has a directorate of seven members and a committee of

32 members, which decides on important policy matters.

9.6 The Tea Small Holdings Development Authority

The other influential group that emerged immediately after nationalisation was the tea

small holders. They are small time farmers who own tea plantations, which are less

than 50 acres in size. These smallholdings are mainly located in Kandy, Galle, Matara,

Ratnapura, Badulla and kegalle Districts.

There are 239,000 small holders in Sri Lanka and the holdings of 84 percent of them

range between half an acre to one acre, while 15 percent own less than 2 acres and

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only 0.5 percent hold between I 0-15 acres.216 In unison, they control more than 60

percent of the Sri Lankan tea production. The small holders are organised under a

cooperative body called Tea Small Holdings Development Authority (TSHDA),

which was fonned by the government to help the small holders in 1975. It functions as

an autonomous regulatory body for the small holders.

10. Major Incidents of Pressure Group Influence on Sri Lankan Tea

Trade Strategies

All these associations discussed above, have acted as pressure groups. They have

regularly lobbied with the govenunent in order to protect the interests of their

members and to influence the tea trade policy. At times, the pressure groups have

lobbied together to protect their common interests. However, many times various tea

trade policies have witnessed lobbying and counter lobbying by different pressure

groups. Some of these trade policies are discussed below.

10.1 CTTA and its Early Political Influence

From its inception, there was constant dialogue between the members of CTT A and

the Colonial Office on tea trade related matters. The CTTA members were essentially

the Agency Houses who were influential because of their economic power. The

Agency Houses organized under CTTA regularly sought preferential treatment for Sri

Lankan tea from the British Government and in return they extended their fullest

cooperation to Britain during the Second World War.

216 ··Analyses of Tea Small Holders,"· Presidential Secretariat, No. 22. Colombo, 29 October 2000.

- 164-

In fact, it is even said that during British rule in Ceylon, the CTT A, CCC, and the

Planters' Association dictated the policy of the govemment conceming economic,

commercial, and even fiscal questions related to tea industry of Sri Lanka. "The Voice

of Queens House and Downing Street was merely the echo of the voices of these

associations. "217 There are many more instances of CTT A influence on tea trade

policies of Sri Lanka.

In the 1930's the tea pnces went down significantly prompting a government

controlled export regulation enforced in India, Ceylon, and Dutch East Indies. The Sri

Lankan State Council passed this Act and the administration of the scheme was

entrusted to the Ministry of Agriculture and Lands. The err A used its close contacts

with the British Government to bring together the three main tea producing countries,.

India, Sri Lanka and Dutch East Indies to agree in favour of regulating tea exports. For

Sri Lanka a 15 percent of reduction was negotiated based on the total exports of the

country in 1929. Annual quotas were determined for each country with provisions for

variations depending on the situation prevalent in the global market. Although there

were many dissenting voices, particularly from the producers associations, the err A

members virtually sat in the State Council and saw to. it that the scheme was at no

stage aborted. 218

10.2 CTTA and the Shippers Strike in 1958

Again, in 1958, there were strikes by the shippers and outward movement of tea came

to a halt. There were no tea auctions for five weeks during that time. CTT A appointed

- 165-

a sub-committe~ to study the problem and came up with a suggestion of expmiing tea

through the poti in Trincomalee. This was a radical policy change and it brought into

existence a new tea sales catalogue, which is still there. The Government of Sri Lanka

219 extended full support to these proposals.

10.3 CTTA in the Nationalised Phase

The CTT A remained int1uential during the nationalised phase as well. As earlier

discussed, the membership of CTT A essentially comprised of fully foreign controlled

TNCs or TNC subsidimies or TNC aided local companies engaged in tea exports.

Because of their global dominance in tea trade these companies continued to remain

influential and controlled more than 90 percent of Sri Lankan tea trade. During the

nationalized phase, the Sri Lankan Government made an attempt to extend state

control over tea exports and set up Consolidated Exports Corporation and State Tea

Corporation. However, the state controlled export houses could not compete with the

TNCs, who controlled the global tea trade and moreover almost all the tea continued

to be routed through the auctions. Hence, CTI A continued to be one of the most

influential pressure groups in the Sri Lankan tea industry. Its influence is further

visible from the fact that in spite of nationalizatiOJ;t, there was a rush for the

membership in the 1970's by the locally incorporated companies enjoying major stake

in tea exports. 220 The CTT A in the privati sed phase has begun to play a even greater

role in influencing tea trade policy.

219 Maxwell Femando, n. 190, pp. 79-82.

220 Ibid, n. 190, p.66.

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10.4 Role of Pressure Groups in the Privatisation of Tea Estates

In June 1992, the UNP Government introduced a scheme of privatisation of

management of state owned plantations. The agencies under Sri Lankan Government

SLSPC and JEDB were making huge losses. The annual losses at the end of 1980's

were around one billion Rupees. 221 There was lack of autonomy in decision-making

and the management had to make many uneconomical decisions like increase in

labour wages, providing subsidies etc. due to ·political reasons?22 In these

circumstances, the Sri Lankan Government was under pressure from the World Bank

and other international financial institutions like Asian Development Bank to privatise

1 . '23 state p antahons.-

The pressure groups like CTT A and PA have played a crucial role in Sri Lankan

Government moving towards total privatisation of tea plantations in 1995. The Sri

Lankan Government has consulted the CTT A and P A regularly after partial

privatisation to chalk out the future course of Sri Lankan tea industry. For instance, in

1993, CTT A was called upon to work out a long-term strategy for Sri Lankan tea

industry. It was said, "CTT A being a trade organisation created to look after the

interests of the buyers and sellers, was in a better position to view this problem more

rationally."224 CTT A made a comprehensive study using opinion survey methods and

221 P.P. Manikam, Tea Plantation in Crisis: An Overview (Colombo: Social Scientists' Association, 1995). pp. 16-17.

m P.P. Manikam, n.203, pp. 13-14.

223 N. Shanmugaratnam, Privatisation of Tea Plantations (Colombo: Social Scientists' Association, 1997), pp. 23-

25.

224 Maxwell Fernando, n. 190.pp.86-87.

- 167-

gave its recommendations suggesting among other things to speed up the privatisation

. I. d c h . d 725 process in order to rev1ta 1se an trans1onn t e tea 111 ustly.-

The P A has also lobbied with the govemment from time to time in order to speed up

the p1ivatisation process. During the period of 1992 to 1996, it regularly sent

representations to the Ministry of Plantations and Public Enterprise Refonn

Commission. The P A also sent direct representations to the President of Sri Lanka

urging her to expedite the privatisations.226

The management of tea estates were given only for a five-year management lease to

the private companies in 1992. The P A demanded that the tea estates should either be

fully sold to the private companies or be given for longer period of lease. The PA

pointed out to the govemment through various representations that being just the

operating agents it was difficult for them to raise finance, outside the govemment

contribution for development and maintenance of the tea estates. The representations

of the P A had its effect and the govemment was convinced about the position of the

plantation companies. This is visible from the govemment's decision of selling shares

in the regional plantation companies to the private secto~. Under this arrangement, the

full risk and benefit of management was passed on to the private companies. The land

- 168-

was leased to the private sector for a period of 50 years, with the option to renew the

227 lease af,rreement.

The PA has been influential with regard to privatisation because of its easy access to

the decision makers. The Ammal General Body Meeting of P A has acted as a forum

for interaction between the decision makers and the planters. The Ministers from

Ministry of Plantations and bureaucrats have regularly attended these annual

meetings. The lobbying of the P A has been successful to a considerable degree in

convincing the govermnent to further speed up the privatisation of tea estates. The

Plantation Industties Minister, Ratnasiri Wickremanayake while addressing the 142nd

annual general meeting of the PA in December 1996, acknowledged the demand made

by planters. He promised that the tea industry would be fully in the hands of the

private sector by April 1997.228

11. Sri Lankan Pressure Groups, Privatisation and Indian Investments

Although the CTT A and P A have lobbied for privatising the tea estates, but at the

same time they have also successfully influenced the govermnent to restrict the entry

of Indian companies in tea production. When the tea estates were privatised, many

Indian tea companies showed interest in managing some of the tea plantations in Sri

Lanka. However, the CTT A and PA extensively lobbied with the govermnent to block

the entry of the Indian companies in the Sri Lankan tea estates. The CTT A and CCC

127 Rozana Salih. "Privatization in Sri Lanka." ILO Study on Pri\atization in South Asia: Minimizing Negative

Social Effects through Restructuring, I Feb 200 I <http://www.ilo.orgipublic /english/employment I ent/sedl download/pri vatsa. pdf>.

22s Shamindra Kulamannagc. "Estate Pri,·atisation to be Completed by Next April." The Sunday Times, Colombo: 22 Dec 1996.

22s Y. R. Amnrasinghe (Ed). "Recent Trend in Employment and Productivity in Plantation Sector." /11[emational Labour Organisation (ILO), 1993, pp. 84-85.

- 169-

jointly submitted a five-page report to the govemment waming of 'dangers' if there

was Indian par1icipation. The rep011 mentioned the following points to the

govemment:

Sri Lanka's tea estates remain prime agricultural properties, which produce the tea, which provides with its largest net foreign exchange earnings. Not only the ownership but also the management of tea estates should be regarded as strategic and valuable operations, which should be controlled by the Sri Lankan only.229

- 170-

the Indian finn Hanison Malayalam.232 This led to a wide scale controversy. The

CTT A and p A used the media successfully agam to portraying a picture of

mishandled privatisation of the tea estates and the danger from the Indian plantation

companies.233 By this process, the pressure groups tried to involve larger sections of

Sri Lankan society who are apprehensive of India's political and economic dominance

in the South Asian region. The CTTA also used the influential forum of CCC to put

pressure on the govenunent. The CCC came up with a public statement criticising the

whole policy on the grounds that 'it lacks transparency'. It also sent a letter to the

Minister of Plantations demanding an investigation to the whole incident.234 The PA

members also claimed that some of the Indian companies, which are already there

have come with the motive of reaping short term profits and are ruining the Sri

Lankan tea plantations by 'slaughter plucking' the tea leaves.235

The efforts of CTTA and PA in putting pressure on the govenunent against the

participation of Indian plantation companies succeeded in forcing the government to

review the policy. After the controversy, the govemment has initiated a legislation,

which bars the free transfer of shares of plantation companies without the approval of

the government.236 Thus, the pressure groups succeeded in keeping out most of the

important Indian tea plantation companies from Sri Lanka. Although some of the

Indian companies like Tata tea (Wattawala Plantations) continue to be present in Sri

232 "Indians Interested in Kotagala Teas." The Sunday Times, Colombo: 14 Apiill996.

233 N. Shanmugaratnam, Pril'(l/isation of Tea Plantations, Colombo: Social Scientists' Association, 1997, pp. 31-33.

''.J ibid.

235 lnter.·iews of PA members by the researcher, Badulla. Sri Lanka, November 200 I.

236 Shamindra Kulamannage. "Estate Pii\·atisation to be Completed by Next April." The Sunday Times, Colombo:

22 Dec 1996.

- 171 -

Lanka, there are other companies, which were compelled to move out. The companies

like Hanison Malayalam and A. V. Thomas & Co has initiated the process of moving

out of Sri Lanka. They have cited the ever-changing policies of the Sri Lankan

govemment regarding estate p1ivatisation as the main reason for this withdrawa1.237

11.1 Import of Foreign Ortfzodox Tea

The economic liberalisation in Sri Lanka begun in the late 1970's in which major

fiscal policy measures were adopted to stimulate tea exports. According to these

measures, the Sri Lankan Govemment initiated a policy of importing foreign tea for

subsequent exports under duty free regime in 1981. Under this regulation, all types of

tea imports were allowed (except tea refuse) for blending purposes aimed at the export

markets.238 This policy was initiated on behest of strong representations from the

CIT A representing tea traders. During the 1980's the Sri Lankan tea industry under

nationalised phase was going through a difficult phase and the production was also not

increasing. The trader felt that to off set the tea shortage cheaper tea could be imported

for re-exporting purposes. The Sri Lankan Tea Board issued import licenses under this

scheme.

After privatisation this import policy witnessed continued support from the CIT A and

major opposition from the P A. The P A members were apprehensive that cheaper tea

imports may affect their profitability and sent representations to the Ministry of

'·" Shyam G. Menon. "Tata Tea Control May See Hanisons Exit Lanka Venture." Business Line. ivladras: 12 January 1996.

''S ll1Usari D Zoysa, Liberalizing Imports of Foreign Onhodox Teas for Value Addition in Sri Lankan Tea Expons. (Colombo: Institute of Policy Studies, 200 I), p. 9.

- 172-

Plantations. The Sri Lankan Govemment had initiated a complete privatisation

programme for the tea plantations and hence it didn't want to put the planters in a

difficult position because of tea imports. Moreover, it was looking for a complete

support from the PA in its privatisation programme. Hence, the PA succeeded in

influencing the govenunent to ban import of orthodox tea in 1994.239 The growing

influence of PA after privatisation could be understood from the fact that it could do

so in spite of strong opposition from the CIT A.

The viewpoints of the exporters under CTT A and the P A vis-a-vis orthodox tea

imports have been shown in a recently concluded survey. The survey results have

been counter checked by a series of personal interviews conducted by the

researcher. 240

The main arguments of CTT A in support of orthodox tea imports are as following:

~ The value added tea exports has not reached its full potential. In terms of volume, value added exports fell from 44 percent in 1995 to 35 percent in 1999. The orthodox tea imports will provide additional markets for local exporters.

~ The high price of Ceylon tea limits the quantity of the product that can be sold in particular market. Through blending Ceylon tea with other origin teas, the prices can come down and open up the markets at the lower segments.

~ Increased foreign exchange via increased net export earnings because of greater volume of tea being exported in both bulk and value added form.

2'9

Gaminda Gancwatta, and G.W. Edwards, "The Sri Lanka Tea Industry: Economic Issue and Government Policy." Paper presented in Annual Conference, Uni1·ersity ofSydner, Australia: 23-25 January 2000.

240 The view points of CTT A and the PA arc based on an cxtcnsi\e survey published in, Tl1e IPS Report. "The Implication of Liberalizing Imports of 01ihodox Teas in to Sri Lanka for Value Addition and Re-Export." Colombo: Institute of Policy Studies, 2000; the author conducted extensive personal interviews in Nm·cmbcr 200 I with the officials of CTTA and the P A and found that the results arc more or less the same as that of the IPS Sur~.cy.

- 173 -

);> Increased employment in the local economy due to the generation of number of suppori industries such as printing, packaging, shipping, banking etc.

The P A has opposed these \·iewpoints. Their main arguments are as following: 241

);> Increased amounts of cheap imported tea competing directly with local high quality tea will have a negative impact on the high price of Sri Lankan tea.

);> The image of "Pure Ceylon Tea" and the high price it quotes in the world market will be undennined if imports of foreign tea are further liberalised. Sri Lanka's share of production is small compared to the rest of the world. Thus, there is a need to concentrate on marketing this premium tea at a high price rather than going for cheaper priced tea because of import liberalisation.

);> It will open the t1oodgates to inferior producers such as Vietnam and Indonesia diluting the image of Ceylon tea.

);> Mixed blends containing foreign tea will affect negatively on 100 percent "Pure Ceylon Tea" because of export substitution, leading to the decline in the demand for "Pure Ceylon Tea".

);> Over all it will lead to demise of Sri Lankan tea industry.

The interview with the PA officials further revealed that they were mainly worried

about the import of cheaper Indian tea. Thus, the PA could again play the nationalist

sentiments of protecting Sri Lankan tea industry from its biggest competitor, the

Indian tea industry. It regularly lobbied with the government against liberalising

orthodox tea imports through the Tea Board. It also sent various representations

directly to the Ministry of Plantations seeking to maintain status quo on imports. The

PA managed to incorporate support from the Tea Small Holders against the issue of

tea imports.

241 IPS Report. "The Implication of Liberalizing Imports of orthodo:< Teas in to Sri Lanka for Value Addition and Re-Export." n. 240.

- 174-

11.2 The Small Holders and Tea Imports

The small holders own tea plantations, which are less than 50 acres in size, which are

mainly located in Kandy, Galle, Matara, Ratnapura, Badulla and Kegalle Districts.

The small holders are considered to be the most dynamic segment of the ptivate

sector. The small holders grew in great numbers after the land ceilings were imposed

in Sri Lanka during 1972. The importance of the small holders can be understood

from the fact that there are around 230,000 small holdings and they control around 43

percent of the total extent under tea.242 The small holders produce about 60 percent of

the total tea production in Sri Lanka. Most of these small holders are Sinhalese and

have been politically influential in unison because of their numbers along with their

economic importance. These areas have also witnessed nationalist uprisings and

continue to be a very influential political group.

These small holders are very sensitive towards the tea prices as their survival depends

upon tea production. The P A managed to convince the small holders that liberalising

tea orthodox tea imports would lead to drastic fall in prices, which will eventually

finish the tea industry of Sri Lanka. This kind of arguments has made the small

holders totally opposed to the idea of importing orthodox tea. Due to this convergence

of small holders and the P A, the government has been reluctant to allow import of

orthodox tea in spite of lobbying by the tea exporters. This has been one of the biggest

lobbying successes of the PA.

242 Ranjith Jayasurya, Director, TSHDA, Interview with researcher. Butteramullah, Sri Lanka, 15 Nov. 200 I

- 175-

11.3 Pressure Groups ami Colombo Tea Auctions

The issues of tea auctions have witnessed divergence of opinion among the pressure

groups in Sri Lanka. The Colombo auction has been criticised by the P A, PTFOA, and

the small holders. It has been pointed out by these organisations that the auctions do

not ensure free and transparent competition. The big national and multinational buyers

work in collusion and dominate the auctions. As a result this leads to loss to the

d . c. . . 1: h . d 243 pro ucers and are demed a tmr pnce tOr t e1r pro uce. ·

The PA and the: PTFOA had been trying to influence the Tea Board to allow them to

sell tea outside the auction system. The tea auction system has been considered the

best method of detennining fair prices for tea and the sale of tea out side auctions was

therefore restricted for many .years. Under the Tea (Tax and Control) Act, No. 16 of

1959 export pennits was issued only for tea purchased at Colombo auctions along

with the tea intended to be sold in London auction.

The planters' have opposed this Act for a long time. However, the CTTA, which has

been operative even during the nationalised phase, was in a better position to lobby

with the government. It could use the economic clout of TNCs and TNC aided traders

and easy access to the decision makers to block any change in tea sales through

auction system. For instance, the Sri Lankan Government had set up a Task Force on

Regulatory Refonns on the Plantation Sector during 31st December 1991 to look into

the problems facing the Sri Lankan tea industry. This was considered as a prelude to

243 "ReYiew and Refonn of the Tea Regulatory Environment Enforced by the S1i Lanka Tea Board." Revie11 of the

Lmr and Regulations, Colombo: Consultants in Technology, Management and Development Studies, 199n. pp. 27-28.

- 176-

the privatization prot,rramme of tea plantations initiated by the Sri Lankan

Govemment. The Task Force along with other problems facing the tea industry

reviewed the tea auction system as well. The CIT A was able to convince the Task

force that the auctions should continue. In their representation to the Task Force, the

CTTA strongly opposed any dilution of the auction system.244 The Brokering

members were naturally the most vociferous supporter of the prevalent auction system

in Colombo. Although, the P A, PTFOA and the small holders made strong

representations against the auction system, but repeated representation by the CIT A

saw to it that no changes were made in the auctions system. This is visible from the

govemrnent's Task Forces statement, which is a replication of what CIT A has been

stating. The Task Force gave their opinion that "the auction is an established and

efficient medium for the sale of tea as a primary commodity. The state should

encourage the development of the Colombo tea auctions."245

However, the PA slowly began to grow in size after the initiation of privatisation

policy in the early 1990's. The PTFOA had also begun to grow in influence with its

increase in membership of the private tea factory owners. The representations sent by

these organisations had its effect on the govemment and. the tea private factories were

allowed to sell tea ex-factory up to a maximum of 3 percent of their monthly

production for local consumption. This was a break through for the P A and the

244 Sri Lanka. "Rcpo11 of the Task Force on Regulatory Retonns on the Plantation Sector." Pial/lotion Restructuring Unit, Colombo: December 199 I. pp. 21-23.

245 Sri Lanka. "Repo11 of the Task Force on Regulatory Rctonns on the Plantation Sector." Plantation Restmcturing Unit, Colombo: December 1991, p. 23.

- 177-

PTFOA in-spite of counter lobbying by the CTT A. The CTT A has opposed the direct

I - 11 . d 246 sa es on the to owmg groun s :

1. There is no guarantee that the producer will get a higher price than at the

auctions. It is improbable that any buyer would buy tea at higher price when

he can obtain it at auctions at a much lower price.

11. Advantages of Direct sales resulting from quicker cash inflow, and saving in

brokerage, storage and transport charges may enable to producers to sell tea at

lower prices than the auction prices. This will lead to the two-tier price system.

111. If the volume of direct sales rises to substantial proportions, demand at the

auctions would decline to that extent resulting in lower prices all round hurting

all tea producers.

IV. Direct sales may lead to corrupt practices such as switching of samples and

lowering of net sale average to reduce bought leaf prices and income tax

liability.

However, the producers were keen to have the right to sell tea through all the channels

available. The P A again made representations to the Ministry of Plantations to review

246 The CIT A gave made a representation to the Sri Lankan Government, Qtd. in Sri Lankan Government. "Report

of the presidential Commission on the Tea industry and Trade." Colombo: 1995. The researcher found during the interviews during November 200 I, that CITA still stick to some of these positions.

- 178 -

the auction system. The mam arguments of P A m favour of direct sales are as

1. The auction system is controlled by select by the select few big national and

intemational buyers.

11. The auction system does not necessarily ensure quality and value resulting in

malpractices in the sale of tea, which adversely affect the image of Sri Lankan

tea.

111. The tea could be sold much quicker as they pass auction procedures. The

auction system involves a time lag of six weeks for the disposal of tea, which

imposes burden of additional cost to the producers.

IV. The producers receive a higher price by the elimination of the brokers' fees of

one percent of the sale pnce and other charges such as warehousing and

transport.

It has been earlier analysed that the auctions are indeed dominated by few influential

buyers for a long time. During the nationalised phase, in 1981 there were 12

companies buying approximately 75 percent of the tea offered in the auctions?4s

There was similar concentration. of buyers before the nationalisation of tea plantations

247 Based on PA's representation to the Sri Lankan Government, Qtd. in Sri Lankan Government. "Report of the

presidential Commission on the Tea industry and Trade." Colombo: 1995; PA's representation to the "Review

and Refonn of the Tea Regulatory Environment Enforced by the Sri Lanka Tea Board." Raie11 of the La11· and Regulations, Colombo: Consultants in Technology, Management and Development Studies, 1996 and :1lso based on interviews conducted by author during November 200 I.

248 Economic and Social Commission for Asia and the Pacitic, n. 213, p. 25.

- 179-

as we11.249 This concentration of buyers continued even in the 1993, a year after·

privatization was initiated. It was reported that I 4 large buyers out of total I 50 buyers

in 1993 accounted for 75 percent of the total tea offered in Colombo auctions.250

These facts were helpful for the P A to put forward their viewpoints. The lobbying by

the PA with the facts and figures they presented through different forums like Tea

Board and the media had its effect on the government. In November 1993, the

govenunent allowed the planters' to sell outside the auctions up to 50 percent of their

output. This 50 percent limit includes direct sales, private treaty sales, and forward

contracts as well. The government acknowledged that these concessions were offered

because of the regular representations sent by the P A. 251 This was indeed a great

success of the P A in the face of strong counter lobbying by CIT A.

11.4 The pressure Groups and "Reasonable Price Formula for Green Leaf''

The Sri Lankan Government has followed a policy from 1968 of fixing the amount

payable for the green leaf. It also fixes the actual amount receivable by the factory

owners for the cost of manufacture and profit. In this scheme the factory owners were

assured of a minimum income when the tea prices declined but not the green leaf

suppliers, majority of them are small holders.

249 There are many research works and Government Reports, which have cited that there has been concentration of

buyer in the Colombo Tea Auctions. Among others see, S S. Jayawicrama. "The System of Marketing Tea: lmpro\'ements and Alternatives." Marga, 3.4 ( 1976): pp. 63--5: P. Casper?_ "The Internal Structure of and Organization of Tea Industry: An overview." Marga. 3.1 (I 975 ): pp. 38-64 and Sri Lanka. "Sessional Paper VI I." Interim Report o(the Tea Commission, Government Press, Colombo, 1968.

2'0 Sri Lanka. "Report of the presidential Commission on the Tea industry and Trade." Colombo: 1995, p. 33.

25 I Ibid, p. 27.

- 180-

However, the small holders were sending representations to the govemment regularly

against this anangement as they were in great dit1iculty due to sudden fall in auction

prices. During the period 1983 the Sri Lankan tea industry was in a major crisis

beginning in 1982-83 with a total of 110,000 acres of tea cultivation went out of

production and the small holders were in great difficulty?52 The small holders wanted

a payment scheme which is relatively stable and which will help them to withstand the

regular fluctuations in the tea auctions. The government in 1984 replaced the previous

scheme with anew scheme called the Reasonable Price Formula for green leaf. Under

this policy, 25 percent of average monthly sales proceeds are given to the factory

owners and 75 percent of the average monthly sales price was given to the green leaf

suppliers which was divided by 4.5 (1 kg of processed tea is roughly equal to 4.5 kgs.

of green leaf).253 For example, if the monthly sales proceed is Rs. 100/- then Rs. 25

goes to the factory owners. As per the fonnula, the green leaf suppliers received Rs.

75 divided by 4.5 as per the formula. This formula was based on the relative estimated

average costs of production of green leaf and made tea. However, it was clear that a

greater weightage was given to the small holders.254

The private tea factory owners were not ready for such an arrangement as they felt that

their profits will significantly come down if this formula was implemented. Hence

they responded by sending a series of representations to the govemment. They even

threatened stoppage of work if such schemes were implemented. It has to be noted

that the private tea processing factories again had the patronage of TNC traders and

252 "Analyses ofTea Small Holders .. , n. 216.

253 Sri Lanka, "Report of the presidential Commission on the Tea industry and Trade." Colombo: 1995, p. 92.

25 ~ Ibid

- 181 -

also big brokering houses. Because of this kind of close cooperation between various

influential pressure f,JTOups they could pressurize the government to change the

fonnula to 30 percent for factory owners and 70 percent to the green leaf suppliers.

The tea factory owners continued to lobby for a fonnula, which is favourable to them

by building up domestic public opinion through publishing various documents

showing that the private tea factories are running in losses and eventually this will

affect all the small holders as they will be forced to close down. As a result, the

govenunent further revised the fonnula in 1987 when the ratio was fixed as 68 percent

for the green leaf suppliers and 32 percent for the tea factory owners.

The PTFOA have lobbied with the Ministry of Plantations to make the fonnula to a

rational 65 percent and 35 percent. It submitted the following proposals to the

Presidential Commission on the Tea industry and Trade, 1995.255

1. The green leaf -made tea out-turn percentage of 4.5 kg is equal to I Kg is

unrealistic. It does not take into account the high moisture content in some of

the teas, which increases the weight. This prescribed out-turn cannot be

achieved in wet months.

11. The 32 percent sale price is inadequate to cover their increased cost of

production. It should be revised more regularly.

111. The transportation charges of green leafs needs to be revised.

iv. The fonnula should be 65 percent for the green leaf suppliers and 35 percent

for the factory owners.

255 S1; Lanka. "Report of the presidential Commission on the Tea industry and Trade." Colombo: 1995. p. 93.

- 182-

Although, the Presidential Commission Report accepted most of the suggestions put

forward by the PTFOA, the government didn't bting in any change to the reasonable

price fonnula. This was mainly because not only numerically the small holders are

influential but also the survival of Sri Lankan tea industry depends largely on the

existence of the small holders who control 60 percent of the national tea production.

This kind of divergence in opinion has resulted into lobbying and counter lobbying by

the tea small holders and the PTFOA.

12. The Tea Small Holdings Development Authority (TSHDA), PTFOA

and Reasonable Price Formula

The TSHDA and PTFOA have tried to accuse each other of foul play through media.

The TSHDA Chainnan, Rohana Illangaratne have criticised the role played by some

of the tea factories. He said that the private factories actually get more than one kg of

tea from the stipulated 4.5 kg of green leaf. He also claimed that factory owners are

exploiting small holders by making unauthorised and high deductions from the leaf at

the point ofweighing.256

The PTFOA also used the media to put forward their point of view to these criticisms.

They cited research done by Tea Research Institute (TRI) of Sri Lanka, which pointed

out that it is difficult to get 1 kg of tea even from 4.5 kg of green leafs during rainy

256 The Sunday Times, Colombo, 7 March 1999.

- 183 -

seasons.257 PTFOA claimed that the govemment has been subsidising the tea small

holders because of their political importance.258

The PTFOA has succeeded putting across its point of view to the govemment. They

have pointed out through press conferences about the importance of private tea

factoties. They claimed that around 90 percent of teas produced by the small holders is

processed by the members of PTFOA.259 They have also wamed of dire consequences

if their problems are not urgently remedied. W.M.C.J. Wijetunga, the Secretary

General of PTFOA said that most private tea factories would be compelled to close,

which in tum would badly hit tea small holders and workers.260 The PTFOA is

represented in the Tea Board of Sri Lanka and they used this chmmel regularly to

lobby with the govemment. They have also sent a direct representation to the

President of Sri Lanka and have sought her intervention in favour of PTFOA.261 The

PTFOA have succeeded to get concessions on Reasonable Price Fonnula from time to

time, particularly during the times of draught. However, they have not been able to

revoke the Reasonable Price Formula completely because of counter lobbying by the

TSHDA 262 The TSHDA had constantly reminded the govemment that in the event tea

small holders withdraw from the industry, national tea production will go down by 60

percent and over 3 million people direc:tly or indirectly associated with the small

holdings will loose their income and around 500 tea processing factories would close

257 ibid.

258 W.M.C.J. Wijctunga, Secretary General. PTFOA, interview by the researcher, Rajagiriya, Sri Lanka, I 0 Nov.

2001.

259 ibid.

260 As gar Hussein, 'Tea Smallholder Sector Faces Crisis." Sunday Leader. 16 Sep. 200 I.

261 ibid.

262 W.M.C.J. Wijetunga, n. 239.

- 184-

down.263 Thus, the Govemment of Sri Lanka has always treated the tea small holders

as a issue of national interest.

Thus, it could be observed that although the structure of Sri Lankan tea industry has

seen many changes, yet the pressure groups have played dominant role throughout.

Some of the pressure groups, which were influential during the pre-independence, and

pre-nationalisation period like the P A lost its clout after nationalisation. However,

after nationalisation it has begun to play dominant role in the tea trade policy making

in Sri Lanka. Unlike India, no single group has been dominant in Sri Lanka. All the

pressure groups, which are relatively new, like PTFOA and TSHDA have played

important role in the fonnulation of tea trade strategies of Sri Lanka.

263 ''Analyses of Tea Smilll Holders ... n. 216.