The disparity in wage is the root of the challenge the tea industry in North India is going through at the second, feels Jagjeet Singh Kandal, running director, Amalgamated Plantations Pvt Ltd (APPL), a Tata Group enterprise, which owns 25 tea estates with a overall annual manufacturing of 41 million kg. In a telephonic interview with Soumonty Kanungo, he suggests that the value of output of tiny tea growers is 50% fewer than the organised market, implying that 50% of the country’s generation is readily available at the industry for virtually half the output price tag of big organised tea gardens.
Wages of tea employees have considerably long gone up in both West Bengal and Assam for the organised sector. How do you see it impacting the plantation companies?
Although the organised field pays for cash and non-hard cash components, the compact tea growers or unorganised sector spend only the cash part. Their expense of creation is 50% considerably less than ours. The promoting price ranges of manufactured teas are not raising considering the fact that there are teas available in the industry at 50 percent the organised industry’s expense selling price. This twin economic climate has to be taken off and the government need to appear at it, by abolishing the Plantations Labour Act, 1951. If that happens, there will be only dollars wage element which will be paid out by absolutely everyone. Even the tiny tea growers will shell out a wage very similar to ours and the gap in our prices will bridge. Compact tea growers account for pretty much 50% of the country’s tea manufacturing and they are only developing. Considering that they only make use of informal workers when they want, their expense liability is not similar to ours. We have a workforce to seem soon after, even all through the a few months time period of no production. Except if there is a stage area, the organised sector will find it tricky to endure.
Will it lower disparity in wages?
We do not brain paying out increased wages, but the rates of tea need to commensurate that. In the absence of a proportional enhance in selling price to the wage raise, our margins are going to be severely under stress. In the past five several years, charges have remained stagnant or have even declined a little bit, while the wage has gone up by 76% in the course of the interval and hence our charges have only absent up. Wage accounts for 60% of the tea providers full value of output. The disparity in wages of the organised and the unorganised sector is pulling down the ordinary promoting price of tea. Although the unorganised sector is however ready to make a financial gain, our selling cost is decrease than our price tag price tag. For my gardens, the cost of production is Rs 210 for every kg though my offering value is Rs 180 for each kg. On the other hand, the price tag of creation for the unorganised sector is Rs 110 even though it is offering at Rs 130 for each kg, making a profit of Rs 20 for every kg. They can do it because they never have to pay out for the non-hard cash factors which we have to shell out. And, the unorganised sector pays almost the same money wage as us. Consequently it is very important for a industry correction to happen that the disparity in wages be taken out.
To deliver down charges, do you feel it tends to make feeling to opt for mechanisation?
In the absence of a amount industry, there is no other choice. At APPL, we are raising mechanisation each and every yr but cannot maximize it over and above a particular place, due to the fact workers cannot be laid off. For the duration of the peak time, we are just about 30% mechanisation even though the same is 20% in general. If the labour legislation is rationalised, then we can go for extra mechanisation and can minimize our fees more. On the other hand, we have to have to warning in this article that this will direct to occupation reduction, specially with informal workers.
Out of your whole generation of 41 million kg, your very own gardens develop all around 26 million kg while rest is from bought leaf factories (BLF). Would you like to raise your procurement from BLFs going forward?
With the latest wage hikes, our price of production has increased by Rs 20 per kg for Assam, while the identical for West Bengal has elevated by above Rs 30 for every kg. Supplied the current condition, acquiring from bought leaf factories is way much better than developing our have. With that design, we will at the very least not incur any losses. So we have to acquire more from tiny tea growers and manufacture teas to shield our margins.
To your head, in which is the business heading to?
If the governing administration does not act, a great deal of gardens will be pressured to close down and then the federal government has to determine out what to do with these employees. Else, we have to seem at extra mechanisation and lower down on casual workers. That will also give increase to unemployment and the govt will have to obtain out a solution. That’s why, they need to attempt to occur out with actions which will help the organised and unorganised sectors as nicely as the employees. Enhanced income wages will stabilise selling prices and gain both the little tea growers and organised field. A balanced Sector will also lead taxes which at this stage is almost nil to the exchequer.