July 2013 | Shubha Madhukar

A renewal in tea country

With a heritage steeped in history, Assam’s tea plantations are evolving new business models, complete with employee ownership, technological innovations and organic cultivation

The morning siren goes off at 5:30am, signalling the dawn of a new day at the Amalgamated Plantations (APPL) tea estates in Assam, a state in India’s northeast. Voices arise amid a flurry of activity in the workers colony — people getting ready to report at the tea garden at 8am, young kids getting ready for the crèche, older ones for school...By 6am the lights are on in the estate offices and the daily kaamjari (operations) meeting is conducted by the jamaadar babu (supervisor).

APPL is a unique company. Comprising 25 tea estates, the plantation is not only India’s largest integrated tea operation and second largest tea producer, it is also partly owned by its employees — 21,000 of them — making it one of the largest employee shareholder companies in India. The estates, covering more than 14,000 hectares, belonged to Tata Tea (now Tata Global Beverages, or TGB) until April 2007, when Tata Tea divested from the plantation business and APPL emerged. In the six years since, while acreage and tea production have remained more or less the same, revenue has grown by 45 percent and the company has forayed into new business streams such as aquaculture. APPL now sells about a third of the over 35 million kg of tea it produces to TGB. The rest typically goes to auction markets in Kolkata, Guwahati and Siliguri.

Much has changed at APPL yet much remains the same. The employees still feel ‘Tata’ at heart, the company continues to follow the Tata Code of Conduct and many Tata policies are still in place.

The name and ownership change started in 2005 after Tata Tea successfully transferred 17 tea estates from its South India plantation operations in Munnar, Kerala, to a new company called Kanan Devan Hills Plantation Company under the employee buyout model. A similar route was considered for the company’s Assam and West Bengal plantations; in 2006 a proposal was mooted to incorporate a new enterprise where employees would own the company along with the International Finance Corporation (IFC) and some partner investors.

The proposal caused panic among the employees. There was confusion, uncertainty and a sense of betrayal as rumours of employees losing jobs did the rounds. Tata Tea continued to proceed very carefully. It accelerated the communication drive and got IFC to conduct a series of workshops across the tea estates on savings and investment, the primary objective of which was to encourage ownership among all of the company’s employees.

However, educating and convincing the workers, most of them illiterate, proved tough even though the management tried several methods. What did evoke some response was the assurance of returns of 6 percent per annum or dividend declared on equity shares, whichever was higher.

A stake for all
Tata Tea was keen on all workers having a stake in the new company. “All employees were offered preference shares,” says Rana Barua, manager of the Chubwa tea estate. “APPL provided interest-free loans to fund the shares to be bought. Workers were eligible to buy Rs8,000 worth of shares and the clerical staff Rs20,000. For the management a slab-based formula was worked out.”

When the offer opened in 2009, 19,000 employees subscribed; a further 2,000 employees followed suit when the offer was reopened in 2010. The benefits of having shares became clear to all only when the company announced dividends in August 2010.

As of today, TGB remains the single largest shareholder with 49.66 percent equity (IFC has 19.06 percent and the balance is with investor partners). There is no operational interference, with TGB guiding the company only at the board level.

The initial days were tough for APPL, as Sanjeev Verma, deputy general manager at the Powai tea estate, recalls: “The changeover happened at a time when the tea industry was reeling after years of steep price decline.” Several tea gardens had to either close down or suspend operations for some time. But in spite of challenging market conditions, the company has managed to transition successfully. Says Anup Mehra, senior manager of the Kelleyden tea estate: “We proved ourselves as a quality tea producer and made a name within two years.”

APPL’s heritage goes back to 1836, when the British-owned Chubwa Tea Company first successfully planted and commercialised tea in Chabua (in upper Assam). The company’s name has changed several times (Tata Finlay in 1976, Tata Tea in 1983 and APPL in 2007) but the estates are still proud of their heritage. Says Mr Barua: “Several eminent personalities, including Lord Curzon and Jawaharlal Nehru, visited and planted tea bushes in Chubwa. In their honour, we have the sections named after them.”

Assam contributes 51 percent of the annual tea production in India, but many of the older tea estates are struggling with low yields. At APPL’s tea estates help comes from the Toklai Tea Research Centre and the APPL R&D centre (set up by Tata Tea in 1988) at Teok tea estate. While the former is dedicated to scientific research in the areas of manufacturing techniques, clones, soil, drainage, etc, the latter works to improve productivity in the company’s tea estates through soil testing and fertiliser recommendations (see box: Going the organic way in Hathikuli).

Technology to the fore
Technology has made a huge difference in streamlining daily operations at APPL. Since 2010 all estate workers use an RFID-enabled smart card that is linked to the central system for their attendance, daily productivity and wages. Since the estates are located in remote rural areas, each tea estate has its own VSAT system and power backup. Says Mr Verma: “Technology has brought in accuracy, transparency and savings in time and money.”

Amalgamated Plantations: A fact file

  • Founded: In 1836 as Chubwa Tea Company
  • Turnover (2012-13): Rs5.186 billion
  • Annual tea production (2012-13): 35.09 million kg
  • Types of tea: CTC, orthodox, green and organic varieties
  • Number of tea estates: 25
  • Number of tea processing units: 24
  • Number of tea packeting centres: Three (Kelleyden, Nonoi and Damdim)
  • Number of employees: 33,500
  • Average age of the plantations (tea bushes): 50-55 years

In 2007-08, to optimise land usage, APPL decided to develop unutilised tracts of land, especially in low-lying areas, to implement an aquaculture project. Ponds were created close to perennial water sources to cultivate rohu and katla of the carp family across 15 estates, and multiple carp hatchery units were set up in six estates as captive sources of quality fish. Additionally, a black pepper project was undertaken in all 25 tea estates with each having its own nursery.

These activities have generated employment of close to 1,80,000 workdays in the last one year, and additional revenues of Rs22 million. In 2011, a separate agri-business division was set up to look after all non-tea crops in the estates and to work with local communities across the north-eastern states for aggregating, adding value and marketing indigenous spices and fruits (the plans of setting up a spice and fruit processing unit in Assam is in the final stage).

APPL owns three tea-packeting centres, in Kelleyden, Nonoi (both in Assam) and in Damdim (in West Bengal), which packaged over 31 million kg of tea in 2012-13. Varieties of tea, sourced from various tea estates in Assam, come to the packeting centres, where they are blended according to specification and packed in different sizes (from as small as 18gm to as large as 5kg) as branded packets of Tata Tea Premium and Tata Tea Gold.

The social network
APPL’s tea estates are social institutions that care for their workforce. Apart from employment, the plantations provide free housing, potable water, medical facilities, crèches and primary education, and food rations are subsidised. The estate workers are also entitled to provident fund, annual leave of 20 days and a leave travel allowance. What about labour problems of the kind common in the tea business? “We do have problems from time to time, but less of it (in comparison with other tea estates) and they are manageable,” says Mr Barua.

In true Tata style, APPL carries forward the legacy of Tata Tea’s corporate sustainability work and continues to add to it. Says Mr Mehra: “We focus on improving the quality of lives in the communities we operate in through initiatives in education, health and livelihood.”

APPL has a scholarship programme for meritorious students (children of employees) called Applaud. The trade centre at Chubwa tea estate provides free training to local youngsters to become tailors, beauticians, artisans, plumbers and lab technicians. At the Damdim tea estate, the vocational training centre trains differently-abled people in making varieties of stationery (the finished products made by them are bought by the estates). And the technical college in Rotwa trains youngsters in different trades.

The Referral Hospital and Research Centre, a 75-bed, multi-speciality hospital, set up at Chubwa tea estate by Tata Tea in 1994, works on a non-profit basis, offering free treatment to all APPL employees and at minimal cost to the general public. In early 2013, APPL collaborated with Operation Smile to facilitate free cleft lip surgeries for 73 underprivileged kids.

Under the ‘land to lab’ initiative, most tea estates help local villagers by supplying high-yield seeds for cash crops, winter vegetables and poultry. The initiative was started in 1990 by Tata Tea with technical assistance from the Assam Agriculture University.

The serene green vastness of APPL has seen history unfold and change is part of the natural scheme of things. APPL’s tea estates are places where old ways and new march together in harmony.

Going the organic way in Hathikuli
Visualise lush green tea bushes spread over about 480 hectares, glistening golden in the sunshine. Imagine a herd of elephants or the occasional one-horned rhinoceros moving slowly through the tea garden. There is silence as nature likes it, broken only by bird song and the buzz of insects. This is the Hathikuli tea estate, situated in the Kaziranga National Park, a world heritage site in Assam that is also home to the biggest organic tea garden in India.

Established in 1908, the Hathikuli tea estate opted to go organic in 2007 and received its organic certification in 2010. “Organic conversion is a time-taking process,” explains Daljeet Singh, manager of the Hathikuli tea estate. “It takes at least three years for the soil to be rid of residual chemicals from fertilisers and to rebuild its inherent nutrient levels.”

The organic route is complicated and labour-intensive. Instead of spraying ready pesticides, the tea estate uses herbal concoctions made in-house using traditional methods. Local exotic herbs with anti-pest properties are plucked, collected, cut, chopped and fermented for 72 hours. One method of pest management is to introduce natural predators (such as birds) to control pests. Several fruit trees (other than the shade trees) are being planted in the estate for birds to nest.

Instead of chemical fertilisers, the tea bushes are fed with vermicompost. The making of vermicompost involves collecting the dung of lactating cows and mixing it with water hyacinth or banana tree trunk. No soaps or detergents are allowed in the processing unit and reetha (soap nuts) is used for cleaning. “Training workers in these traditional cultural practices is a continuous process,” says Mr Singh. “The process requires 20 percent more workers for the same amount of work.”

Going organic also meant that the yield dropped to less than half: from 1.06 million kg in 2006-2007 to 0.4 million kg in 2013. These are the reasons why organic teas are priced higher. “Organic and green teas are meant for the fastidious palettes of connoisseurs,” says Mr Singh, who expects the organic operation to become profitable in the next five years.

Hathikuli also introduced green tea in 2007 and this year it produced nearly 4,000kg of organic green tea. Visitors to Kaziranga often stop to buy Hathikuli organic black and green teas from the kiosk outside the tea estate.

This story is a part of a series of articles on the plantations of Tata Global Beverages published in the July 2013 issue of Tata Review. Read other stories:
Overview
A new brew comes of age
The Watawala way
Where coffee is king
Tranquil trails