Tài liệu Trade Reforms and Crisis in India’s Plantation Agriculture: Reflections on Tea and Rubber Plantation Sectors pdf

Trade Reforms and Crisis in India’s Plantation Agriculture: Reflections on Tea and Rubber Plantation Sectors P K Viswanathan, Amita Shah Gujarat Institute of Development Research, Ahme

Trade Reforms and Crisis in India’s

Plantation Agriculture:

Reflections on Tea and Rubber Plantation Sectors

P K Viswanathan, Amita Shah

Gujarat Institute of Development Research,

Ahmedabad, India

¾ Context of the study

¾ Objectives, data and methods

¾ Growth in plantation sectors: India vs major countries

¾ Trade reforms and impacts on two plantation sectors

¾ Policy perspectives: revamping plantation sectors

¾ In the backdrop of the ‘crisis’ affecting India’s plantation sector in recent

years

¾ Triggering factors of the ‘crisis’ – both exogenous and endogenous

¾ Exogenous: Asian financial crisis, casualties of the changing external trade regimes in the post-WTO scenario: removal of trade barriers enabling easy market access through NAMA (level playing field with windows of

opportunities… for whom? )

¾ Endogenous: ‘crisis’ opens up an array of issues, challenges and internal contradictions in the sectors…needing thorough revamping and

interventions

¾ Little empirical evidence as ‘how the crisis spread far and wide and with what micro level implications on the plantation sector and its sustainable future’

I The study

I Backdrop

¾ India’s plantation sector, viz tea, coffee, natural rubber, cashew and spices, though is insignificant in the country’s agri trade (<5%), has pivotal role in the regional contexts: coffee, rubber & spices concentration in the South; tea concentrated in the North, NE and Southern regions

¾ Turmoil in the plantation sector means collapse of the regional economies…

¾ Loss of profitability/ viability to the corporate/ private sector plantation entities…affecting future investments and sustainability…

¾ Questions on survival of the smallholder producers and plantation labour communities… affecting livelihoods of small producers (rubber & tea) and plantation dependent workforce (tea and rubber) and households

¾ Collapse in the growth dynamism evinced by the plantation sectors since the colonial times…

I Backdrop (contd )

¾ Plantation production system emerged under colonial patronage (European capital and indigenous resources) had a smooth sailing with strong state

support and policies until the launching of WTO and the trade reforms

¾ Tea and rubber are distinct: Tea has always been promoted as an export crop (perhaps under conditions of lower domestic demand) and rubber has always been a strategic raw material catering the growth of the domestic automotive industry with a ‘net importer status’

¾ While almost 80% of tea production comes from the large and medium

private/ corporate plantations, almost 90% of rubber production comes from small/ marginal holders with an average holding of 0.5 – 2 ha

¾ Protective state policies have been highly rewarding in terms of sustaining the growth of the sectors, which also forms mainstay of about 4 million

livelihoods of smallholders and plantation workers

I Backdrop (contd )

¾ Outcome: India emerged and continues to be one of the top five players in both tea (area-18%; production-25%) and rubber sectors (area-6%;

production-8%) in the world

¾ WTO and the subsequent trade reforms has resulted in phased removal or dilution in tariff and non-tariff protective measures leading to decline in

international commodity prices

¾ The magnitude of price decline from the peak reported during 1991 has been highest for tea (33%) and rubber (11%): Tea - US$ 0.213/kg (1991) to $0.143/kg (1995); Rubber – 0.6 $/kg – 0.54 $/kg

¾ Low prices triggered adverse effects on the tea and rubber sectors leading to

an unprecedented crisis prices were ruling below production costs…

I Backdrop (contd )

¾ Tea planters and rubber growers responded vehemently to the crisis: a) cost saving measures; b) neglect of plantation management activities; c) close down/ lockouts; d) abandoning of plantations, etc

¾ For bigger tea planters, majority of whom own plantations of 250-400 ha,

labour displacement, cut down in wage and non-wage benefits were the

immediate workable options to tide over the crisis (mystified notion that labour was the triggering factor for the crisis)

¾ Real issues and challenges causing the crisis have been ignored: issues

pertaining to structure and organisation of production, marketing and

institutional impediments, etc

¾ Hardly any attempt to understand the crisis from a holistic perspective (other than the conventional supply/ demand/ trade frameworks) of the plantation system, per se, which has lost its relevance as a production system in the context of global economic integration and new trade reform measures

II Objectives

¾ Understand the macro scenarios of production,

employment and trade and changing policy environments

¾ Examine differential responses from the plantation sector and their implications on sustainable production systems and livelihoods of the dependent communities

¾ Suggest policy perspective on new institutional model for sustaining the growth dynamism of the tea plantation

sector in the emerging context (could tea sector take

lessons from rubber in the Indian context?)

II Data and methods

¾ Macro analysis of the aggregate level performance of tea and rubber in the dominant producing countries in historic perspective: trends in area,

production, productivity, trade flow and employment (subject to data

availability), trade relations, etc – Time frame – 1960-2007, with special

reference to 1990s

¾ Micro level analysis of the stakeholder responses towards the crisis- cross section of tea planters and rubber growers and plantation workers in

Southern India (Kerala, Tamilnadu)

¾ Analytical methods: qualitative and quantitative, indicators of relative

performance on various counts: production, trade, prices, comparative advantages, cost-price-wage relatives

Tea and rubber growing regions in India

Tea production (%) Year

North

India

South India

All India (‘000 tons)

2007 77 23 944.7

615200 (100)

64883 (11)

547508 (89)

502240 (82) 2007

All India (Ha)

North East India

South India Kerala

Year

TEA PLANTATIONS RUBBER PLANTATIONS

III Growth of Tea plantations: India vs others, 2007

Tea area harvested Tea production (000 ha) (% share) (000 tons) % share

Productivity (Kg/ha)

No Country

III Growth of rubber plantations: India vs others, 2007

Rubber area harvested Rubber production ('000 ha) % share (000 Tons) % share

Productivity (Kg./ha)

No Country

Trends in tea plantation sector- India vs others

Five count

Trends in rubber plantation sector: India vs others

Year Indonesia Thailand Malaysia India Malaysia India China Sri Lanka World

Rubber harvested area (‘000 ha)

Trends in tea exports: India vs others

Year Lanka Sri India China Kenya Indonesia

Five countries (% share)

World (Million US $)

Emergence of China and Kenya and the continued presence of Sri Lanka may have significant impact on India’s trade performance in the emerging scenario

Structure of Tea Plantations in India

Structural features 2000 2001 2002 2003 2004 2005 2006

1 Share of small growers (upto 10.12

ha) in total no of plantations (%) 98.6 98.6 98.7 98.7 98.7 98.8 98.8

2 Number of Tea plantations

including big plantations ('000 nos) 112.01 115.26 127.8 129.03 129.03 140.71 143.22

3 Share of small planters in total tea

planted area (%) 16.96 19.88 20.58 21.02 21.25 25.68 27.13

4 Total Tea planted area ('000 ha) 490.2 509.81 515.83 519.6 521.4 556.81 568

5 Share of small Planters in total tea

production 14.31 19.16 21.24 20.85 20.57 19.47 19.21

6 Total Tea production ('000 Tonnes) 935.94 853.92 838.47 878.13 892.97 945.97 981.81

Trends in growth of plantation sectors

• India continues to be a major player in the global tea sector in terms of contributions to area, production and exports of tea, though it has been losing its competitive edge in recent times

• It also reveals that the dominance of Sri Lanka and emergence of China and Kenya would have significant impact on India’s performance in the global tea industry

• A drop in tea prices lead to serious repercussions on the production sector as evident from the crisis in recent years

• India has emerged as a dominant player in rubber with fourth position in production and first in productivity (impact of technology)

• But, unlike Thailand and Malaysia; like China, it continues to be a net importer to feed the fast growing automotive sector

• Rubber prices have been highly volatile and a drop in prices affects millions of small producers and their livelihoods

IV Trade reforms impacting the crisis

¾ Tea crisis began in the late 1990s Many estates were closed down in Kerala and West Bengal

¾ The immediate cause of the crisis in the plantation sector has been the

downfall of the international market prices of plantation products

¾ The trends reveal that India is losing its competitive position to producers such as Indonesia, Kenya, Sri Lanka and China

¾ The import of tea from Sri Lanka under ISFTA and from Kenya and other destinations by the EOUs has been creating further pressure on India’s

economy this had also resulted in the decline of tea auction prices in India

¾ India may stand to lose further, as the tariff rates for tea and rubber are

higher than that of its counterparts

Crisis and corporate responses

¾ Increase in abandoned plantations in Kerala as the prevailing plantation labour laws does not permit a closure…

¾ Lowering or stagnation in wages

¾ Non-provision of bonus; increase in workloads- a hike in the minimum quantity of tea leaves to be collected and increase in tapping task (no of rubber trees to be tapped in rubber)

¾ Curtailment of wage or extra-wage benefits and incentives;

non-compliance of provisions of welfare measures as provided by the PL Act, 1951

¾ Non-functioning/ closure of cresche, health centres; non-maintenance of labour lines

Crisis and employment decline

Tea Plantations (‘000 nos) Rubber Plantations (‘000 nos) Avg daily

Total

employment-Share of women (%)

Avg daily employment- Total

Share of women (%)

Employment decline in organised rubber plantations

Total employment ('000 nos) Tapping employment ('000 nos) All work-Total Kerala’s share (%) Tapping-Total Kerala’s share (%)

Performance of corporate plantations (HML ltd.)

Financial indicators (Rs million)

Revenue from

Total Expenditure

Staff expenses

Total Revenue

Profit after tax Tea (%)

Rubber (%)

Note: HML – Harrison Malayalam Plantations, a largest tea & rubber company based in

Kerala

Corporate responses: Case of Tata Tea Company,

1995-96 to 2006-07

Financial indicators (Rs million)

Share in Total income (%)

Total income

Profit after taxes

Employee payment

Employee payment

Profit after taxes 1995-96 5433 461 1331 58387 24.5 8.48 1999-00 9745 1246 2095 59740 21.5 12.78 2005-06 10401 1869 1763 34596 16.95 17.97 2006-07 11461 3065 1791 34506 15.63 26.74

% change 110.95 564.86 34.56 -40.9 -36.2 215.33

No of employees Year

Internal contradictions: plantation sectors

¾ Production sector dominated by small producers (98%) with only 27 % share in area 19% share in production (sharp contrast to rubber: SH -88%, estates- 12%)

¾ Auction driven pricing system is beset with varied problems- it reflects a rigid

marketing system for the Indian small tea producers who have no stake in the entire process, but to accept the auction set price (rubber an exception with high FGP

realisation).

¾ Quality of Indian tea is also considered as an important factor in the international market, as the world import demand is gradually shifting from CTCs to orthodox and other types of specialty teas- green tea India has not kept pace with this trend.

¾ Thus, India has been lagging behind Kenya and Sri Lanka (and China too) in terms of the quality upgradation that has been taking place in the global tea sector – almost 68% is in the form of CTC which mostly caters to the domestic market

¾ India’s production costs are the highest among the major exporters Relative costs per kg were reported as $1.60-1.62 in India vis $1.16 in Sri Lanka, $1.40 in Kenya and below 90 cents in Vietnam and Indonesia (rubber is also not an exception)

New Regionalism and commodity trading

¾ Explosive growth in the number of RTAs and PTAs and its impacts on the crop producing regions, including India’s plantation sectors

¾ These TAs assume more diversified scenarios of regional integration and delve into issues much deeper than the trade liberalisation, per se

¾ Specific to plantation products, the most decisive are the Indo-Sri Lanka; SAFTA and ASEAN; Pan Asian FTA similar to NAFTA or EU

¾ South India, particularly, Kerala to face larger consequences as trade related crops, including tea and rubber, occupy 80% of TCA

Regional trade agreements and impact on rubber

¾ Rubber is predominantly grown in the ASEAN region with limited production

in the SAARC region as well

¾ As these two trade blocks together account for 85% area and 87%

production, India’s FTAs with ASEAN & SAARC members will have serious implications, as many of the regional counterparts have comparative cost advantage over India – large scale commercial cultivation in rest of ASEAN vs homestead rubber production in India

¾ Apprehension prevails that India may turn out to be a market for the ASEAN imports due to cost disadvantage

¾ India even has been trying with cheaper rubber imports from China, Vietnam, etc

¾ Though international prices are attractive so that India could tap the

potential, the vast domestic market makes it less feasible

¾ More than ASEAN, SAARC FTAs, Indo-Thailand trade agreement appears to

be more decisive for Indian rubber sector, as Thailand has greater share of TSR compared to higher share of ungraded rubber in India

Crisis and mounting social concerns

• Tea plantations in particular have distinct features in terms of:

– largest workforce and population dependence (8 million);

– half of the workforce being women;

– major segment of the workforce being tribals; and

– a greater proportion of workforce being migrants

• These are the sections of population who are most vulnerable to the economic disturbances caused by poverty, illiteracy, lack of access to

socio-resources, ill-health, etc

• Hence, it is highly likely that the crisis as experienced in the plantation sector would have destabilized the livelihoods of the workforce and the dependent households

• Further, plantations are “low wage enclaves” with 74 per cent of the plantation workers belonging to the low wage classes below Rs 75 per day

Dwindling corporate social responsibilities

systems

welfare provisions of the PL Act

chains leading to decline in prices

Brooke Bond and

and outsource from most of the plantations

V Revamping plantation sectors: institutional reforms

¾ A well organised smallholder sector could make use of India’s tea corporate expertise to process, package and market tea for export sales, rather than relying on TNC brands, could be of much relevant to be thought of

¾ Means of value added supply chains also need to be explored, like the radical transformation towards implementation of fair trade principles such that

small producer margins are enhanced (daunting task? )

¾ Doha negotiations designating agri products as ‘special products’ that could

be insulated from being exposed to increased external competition and

imports: a) to protect and enhance developing countries domestic food

production, particularly in key staples; b) to sustain and enhance the

employment, food security and livelihood opportunities of the small

producers

¾ Tea & rubber could match the second objective as these crops are of

immense relevance to the livelihoods of millions of small producers and

workers—tea and rubber as qualifying ‘WTO special products’ status