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Chapter V

THE STRUCTURE OF TEA INDUSTRY AND THE ROLE OF PRESSURE GROUPS IN INDIA AND SRI LANKA: A

COMPARATIVE ASSESSMENT

1. Introduction

It is visible from the analysis in the previous chapters that there are numerous pressure

groups which have been active in the policy domain of tea industry. Most ofthe policy

changes/ initiations in the issue areas of trade, labour and taxation have come on the

basis of intense bargaining between the pressure groups and between pressure groups

and the Government. The present chapter does a comparative analysis of the structure

of the tea industry in India and Sri Lanka and the role of the pressure groups in order

to understand why on some occasions the pressure groups succeed and on some

occasions they don't. It is also attempted to see how the structural factors like politics,

Government and society enable or impinge upon the functioning of the pressure

groups in the domain of tea industry.

2. Pressure Groups and the Structure of the Tea Industry: A Comparison

The pre-independence structure of Indian and Sri Lankan tea industry was similar,

where the organized British planter' groups along with Agency Houses controlled tea

production and tea trade. HoweYer, after independence, the structure of tea industry

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altered significantly in both the countries. While, the Indian tea plantations remained

with the private plantation companies, Sri Lanka nationalized its tea plantations in

1975. Because of these changes, there were differences visible in the pressure group

activities in both the countries.

2.1 The Early Plantation Structure: A Comparison

The tea production in both India and Sri Lanka has been essentially confined to large

tea plantations. These tea plantations could be defined as organisations for the large-

scale production of commodity crops by a u11iform system of planting, cultivation and

often onsite processing under a central management and with a trained labour force,

mostly living in estate housing in an environment controlled by the same

management. Its foundation is the expert direction and training of its work-force by

the use of a technology of detailed routine working and supervision. 1

Most of the tea plantations are located in geographically isolated areas, the so-called

'plantation enclaves'. These tea plantations are not just economic production units, but

rather social institutions, which control the lives of their resident work force to a large

extent. 2 The plantations were set up to produce export crops for the West em

developed countries by the people and capital which came from the same developed

countries. Land was alienated and fenced off from the rest of the country, labour was

hired (or in early days bought as slaves), was given housing and incorporated into a

1 Edgar Graham and Ingrid Floering. The .l!odern Pl;n/alion in !he Third World (London: Croom Helm. 1984 ). pp. 33-35.

2 Edgar Graham and Ingrid Floering. n. I. p. 15.

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new form of society, the pattern of w·hich was dictated by the management of the

plantation and designed solely to suit the needs of the plantation.'

All the inputs to the plantations like seeds for planting, fertilisers, tea chests,

machineries, building materials and even the managers in these tea estates were

imported. Similarly all the output were exported where overseas manufacturers used

to sell it to local consumers. As a result the overseas owners used to reap in a huge

profit, which was remitted to them. Apart from that there were specialised agencies

known as Agency Houses. 4 The Agency Houses used to control the banking,

insurance, food supply to the estates, shipping and all other non-farming activities

related to the tea plantations. Under these circumstances, the producers and traders

pressure groups could easily influence the policy making in the tea industry of India

and Sri Lanka.

2.2 The Early Producers and Traders Interest in India and Sri Lanka

The commercial production of Indian tea in the selected tracts by the British started

from 1838-39. By 1859 there were fifty-one tea gardens owned by the private

individuals or private firms. In 1862 there were five public compames, Assam

Company, Jorhat Tea Company, The East India Tea Company and the Central Assam

Tea Company. The main areas of tea production, which continues even today, were

Darjeeling, Dooars, Cachar, Assam in the eastern region, the Gharwal hills in the

North, Nilgiris and Idukki regions in South India. In 1881, two tea companies Skinner

3 Edgar Graham and Ingrid Floering. n. I. p. 33.

4 For a detailed analysis on Agenc~ Houses- pkasc rckr to Chapkr 1: Prrssure Croups and Tea Trade S1ra1egies of

India and Sri Lanka.

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and Company and Dunlop and Company took the lead in the fom1ation of IT A in

Calcutta.5

Tea cultivation began in Sri Lanka during 1867 and expanded rapidly, replacing

coffee, which was destroyed by a fungus disease. The expansion led to considerable

socio-cultural changes, namely the transformation of a so-far feudal agrarian society

into a capitalist plantation economy. The Coffee planters' of Sri Lanka fanned the

Planters' Association of Ceylon (PA) on I i 11 February 1854.6 The main areas of

production are situated in Ruhuna, Dimbulla, Nuwara Eliya, Kandy and Uva regions.

Both IT A and P A were fom1ed with specific purposes of bring about a certain degree

of concert and unity of aftion amongst the owners and managers of the tea estates

with regard to resolve the problems faced by the British planters, like labour shortage

and renewal of agreements with the labourers. Recruitment of labour was one of the

biggest problems faced by the planters as it was hard to find workers to work in the

remote tea plantations situated right in the middle of jungles.

2.3 Political Influence of the Early Pressure Groups

It has been seen that the success of the pressure groups largely depends upon their

accessibility to the decision makers. Both IT A of India and the PA of Sri Lanka from

the very beginning took active interest in the political affairs as long as it pertained to

the tea industry. It was due to the constant lobbying by IT A, a representative of the

planters' was allowed in the Viceroy's Legislative Council under Indian Councils Act,

5 Parcivai.Griffiths. The Hist01y of the Indian tea Indus! I)', (London: Weidenfeld and Nicolson. 1967). pp. 536-37.

6 Maxwell Fernando. Commemorating /0(} fears a_( the C7TA (Colombo: Colombo tea Traders' Association, 1995). pp. 17-19.

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1892. IT A fUI1her succeeded in getting two separate tea industry representative in the

new council fonned under Morley-Minto refom1s in 1909. In 1919 under Montague

Chelmsford Refonns, a representation to the Indian legislative assembly was granted

to the Assam Europeans. These Europeans were essentially tea planters associated in

various capacities with IT A. Furthennore, E.S. Roffey, the Secretary of ABITA was

appointed the Political Secretary of the European Group in the Assam Legislature in

1929.7 Similarly, in South India, the United Planters Association of Southern India

(UP ASI) had its members nominated in the Madras Legislative Council. In the case of

Sri Lanka, the PA members were also nominated in the Legislative Council of Ceylon.

The planters' presence in the decision making bodies helped them to take up the cause

of the planters with the Government very effectively.

It was mutual benefit for the private companies as well as the Colonial Government.

The British Government was getting a high royalty from the tea business as most of

the profits were repatriated. Moreover, the Colonial Government could generate lot of

funds for military expenditure by taxing the tea industry. The planters' in response

would cut down whatever little bit of developmental activities it under1ook to generate

resources for the Colonial Funds. Most often this will mean cutting down on labour

welfare.8

2.4 Independence and Changes in the Structure of Sri Lankan Tea Industry

After the independence of India, the structure of tea industry did not change as tea

production and exports continued to be controlled by the private players. The only

7 Grinith, n.3. pp 526-27.

8 "The Planters' Association of Ceylon", (Colombo: Times of Ceylon Ltd .. 195-l ). p. I 0.

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difference was that gradually the indigenous planters began to own and manage the

tea plantations and Government enacted a separate Plantation Labour Act in 1951 to

regulate the labour relations in the tea industry. Although, ITA's direct representation

in the Government ceased with India's independence, it continues to be represented in

various Government and non-government bodies associated with policy making in the

tea industry. However, Sri Lankan tea industry went through various changes in its

structure after independence.

Immediately after independence, the pressure groups like Colombo Tea Traders'

Association and Planters' Association of Ceylon continued to be influential. The

pressure groups managed to insulate the domain of tea industry from the changes

which were taking place in the political sphere. They could do so because of complete

dependence of Sri Lankan economy on tea exports. The pressure groups supported the

native liberal party in the elections with the condition that their interests won't be

harmed. It is widely acknowledged that the election of D.S. Senanayake of United

National Party (UNP), the first Prime Minister of independent Sri Lanka was backed

economically and politically by the sterling companies.9 Moreover, the Sri Lankan

Government was receiving a massive foreign aid, most which was coming from

British Government. So the Sri Lankan Government was not in a position to go

against the British interests in the country. The planters' pressure groups succeeded

with the help of UNP to get a Land Acquisition Act passed in 1950, which made it

mandatory to pay compensation to the planters if the land is acquired by the

9 Ronald Rote. A taste of Billemess: The Political Economv o(Tea plolllations in Sri Lanka (Free University Press. 1986 ). p. 99.

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govemment. This way the British Planters' interest prepared fi·om the beginning about

any eventuality of nationalisation of the tea estates.

However, 1956 general elections saw a new trend of coalition govemment in Sri

Lanka. The coalition govemments were composed of various parties with different

ideologies and different interests. The main coalition partners were the socialist Sri

Lanka Freedom Par1y (SLFP) lead by S.W.R.D. Bandaranaike. In this coalition there

were many Marxist and Sinhala Chauvinist parties as well.

Thus, the British tea planters' were faced with two kinds of counter pressures. The

first came from the Marxists whose leader and the Minister of Agriculture in the

coalition govemment, Philip Gunawardene claimed that excessively high dividend

paid by the sterling companies amounting to I 00 percent of total share capital between

1946 to 1956, were a drain on nation's economy. 10 On the other hand the Sinhala

Chauvinists, particularly the Kandyan segment, which is a powerful pressure group in

post independence Sri Lanka, maintained that the tea plantations have expropriated

lands of the Kandyan peasantry and have rendered them homeless. The Kandyan

group, the last to accede to colonial rule in Sri Lanka, viewed the British planters as an

extension of British rule.

It was a classic case of a issue related to one particular domain expanding into a larger

issue and pressure groups who are not directly part of the tea industry policy domain,

i.e. the Kandyan lobby getting involved in a major way. This kind of pressure made

the British planters slowly wind up its tea production activities by selling their estates

10 Philip Guna\\·ardene, Qtd. in Ronald Rote, n. 9, p. I 01.

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to the local people as they feared that the tea plantation may be nationalised sooner or

later. Although, the British interests slowly got out of tea production. they

consolidated their hold on tea processing and tea marketing. The SLFP Govemment in

collaboration with the Marxist and Kandyan Sinhalese groups again came to power in

1970 and began the process of nationalisation from 1972 and finished nationalisation

ofthe tea plantations by 1975.

2.5 Emergence of New Pressure Groups in the Post Nationalised Period

With nationalisation, the govemment put a 20 Hectare ceiling on land and passed the

acquired land from the private companies to some specialised agencies like Up-

Country Estates Development Board (USA W ASAMA), the Janatha Estates

Development Board (JEDB) and the State Plantation Corporation (SPC). With

nationalisation, one of the most influential pressure groups, the PA became ineffective

as none of the government agencies chose to be members of P A. However, CTT A

which had many Agency House members 11 continued to remain influential as most of

the tea produced by Sri Lanka were sold in the auctions conducted by CTT A.

Moreover, the biggest buyers of Sri Lankan tea were also members of CTT A.

During this phase, a rapid increase in tea small holdings was also witnessed. The tea

small growers, mostly Sinhalese tea growers from South emerged as one of the most

politically influential pressure groups. The small growers organised under government

sponsored Tea Small Holdings Development Authority (TSHDA) has been able to

11 For a detailed account of membership of CJTA and the role of Agency Houses \\ithin C!TA please refer to Chapter 2: Pressure Croups and Tea Trade Strategies of India and Sri Lanka.

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gain concessions on the price they get for green leafs. The small growers now produce

around 60 percent of the total tea produced in Sri Lanka. Along with the small

growers, the private tea factories numbering around 500 have emerged as a major

player. The private factory owners are organised under their association Private Tea

Factory Owners Association (PTFOA).

However, in 1990's the Sri Lankan Government was forced to privatise the tea estates

again. The two major reasons for the government to embark on the privatisation of the

tea plantations were: Firstly, the acceptance of the policy of privatisation of all public

enterprises as part of the structural adjustment programme under the guidance of

World Bank and International Monetary Fund (IMF) in the 1990's with the

assumption that privatisation would bring in private expertise into management of tea

plantations. Secondly, the government was unable to bail out the two state owned

corporations (JEDB and SPC) whose annual loss towards the end of the 1980's

amounted to over a billion Rupees. 12

After privatisation, the tea plantations have been given to 22 private companies for 99

years lease. With privatisation, the PA has again become influential in the policy

making related to tea industry. The Government of Sri Lanka have devoted two

ministries for plantation sector, i.e. the Ministry of Plantation Industry and Ministry of

Small Holder Development. In case of India, since the structure of tea industry was

not altered, the IT A along with the traders and brokers lobby have remained

influential.

12 P P. Manikam. Tea Plantation in Crisis. An Overvie11· (Colombo: Social Scientists' Association, 1995), p. 16.

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3. The Pressure Groups and Tea Trade Strategies: A Comparative

Analysis

In the sphere of trade policy making in the domain of tea industry it was visible that

because of the structure of intemational tea trade, the traders' lobby in both India and

Sri Lanka remained effective in spite of the changes that took place in the production

area.

3.1Jmport of Tea

The issue of tea imports have witnessed massive lobbying from the planters and

counter lobbying from traders in both India and Sri Lanka. These groups have put

regular pressure on their govemments in order to change the tea import policies. The

governments in spite of declaring import liberalisation as a policy were forced to

curtail tea imports. However, again it was because of the timing of pressure group

campaign that was largely responsible for the success of pressure groups.

The Indian Govemment was keen to move towards bilateral Free Trade Agreement

(FT A), as there was very little progress on multilateral South Asian Preferential

Trading Arrangement (SAPIA) due to problems of cooperation with Pakistan. India

already had signed Free Trade Agreements with Nepal and Bhutan and wanted to

extend it to Sri Lanka as well. It was felt that the FT A is a dress rehearsal for the

process of globalisation that has been set in motion because of WTO. Moreover, India

was under pressure to open up their market to its neighbours as it enjoyed a

overwhelming trade surplus with them. 13 Hence, tea was put into the list of 2000

13 The Hindu (Chcnnai). 20 September 1998.

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commodities on which quantitative restrictions were lifted for imports to India at

concessional rates.

This kind of tea imports benefited the tea traders, expmiers to large extent because in

1998-2000, the Sri Lankan tea prices had touched rock bottom because of less buying

from Russia and a negligible domestic market. The traders wanted to make a big profit

by mixing the high quality tea with Sri Lankan cheaper tea for export markets. It also

tied up nicely with the government's plan of providing cheaper tea to the masses as it

was felt the excess tea that could not be exported would be sold in rapidly growing

domestic market at a cheaper rate. But, the planters' groups in India led by CCPA

devised a very scientific lobbying strategy to counter any such move.

They focussed on research and came out with a study by ORG-MARG, a renowned

market survey agency to counter the govenunent sponsored survey conducted by

Indian Institute of Management (liM), Calcutta. While the IIM-C study portrayed a

tremendous growth in tea consumption, the ORG-MARG study showed that although

the tea production is growing but the rate of tea consumption has come down in a

major way. They also analysed the FT A and felt there are provisions in Article VIII

(1) suspend preferential treatment to a commodity if it threatens the local industry.

The second strategy they adopted was to use their chmmels of access to the Ministry

of Commerce to persuade the decision makers against such a move on the basis of

their research results.

However, when these strategies failed, the CCPA decided to expand the issue that was

till then confined to the domain of tea industry only, by using the media in a major

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way. The strategy was to stir the national sentiments with newspaper headlines like

'·Tea Industry in Crisis" ... Sri Lankan Tea Coming" etc. 1 ~ By this process, CCPA

could not only put pressure on the government but could develop a larger alliance

against the tea import policy.

The CCP A further expanded this issue area by collaborating with other pressure

groups who were not involved with the issue till then. The CCPA collaborated with

the trade unions, particularly with Indian National Plantation Workers' Federation

(INPWF) but also supported the campaign against tea imports by the trade unions like

CITU, AITUC, HMS representing a spectrum of political ideologies. The CCPA thus

could create a large coalition based on an astute argument that tea imports would lead

to unemployment for almost 2 million workers directly or indirectly involved in tea

production in India. They also got the support of the Chief Ministers of the tea

producing states, who sent protest letters to the Prime Minister against tea imports.

Thus, the government was pressurised to put tea in negative list with a quantitative

restriction, allowing only 15 mi. kg of imports under FT A. The government also put

non-tariff barriers of allowing tea imports from Sri Lanka through only two ports in

India.

Although, the CCP A used most of the conventional methods of lobbying like sending

reminders to the. decision makers, doing research, using the mass media but what was

most helpful behind their success was the timing of their campaign. During 1998

when the negotiation for tea imports under FT A with Sri Lanka was going on, Indian

I~ Qtd. in Fair Trade lntcmational. ··r.:a Industry Ill Crisis:· 16 October 1999 <1111w. transfair.calfairtrade/fair66 i .html>

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tea industry was going through a major crisis manifested in the form of closure of tea

plantations, loss of jobs and even starvation kind of situation for the workers, fall in

expo11s because of continuous fall in tea prices in general and the South Indian tea

markets in particular.

Although, there were factors like lack of investment in the upkeep of the tea gardens,

mismanagement, old age of tea bushes leading to fall in production, and unethical

practices in the tea auctions etc. as major factors behind the crisis, 15 the CCP A

highlighted the issue of impm1s as the most prominent factor behind the present crisis.

They also bracketed the issue of tea imports with the issue of globalisation and WTO

which has laid down rules for liberalisation of import and exports. Hence, they got

complete support from the trade unions and State Governments ideologically against

WTO and also pacified the workers who were living in pathetic conditions.

While discussing about timing, when we analyse the case of Sri Lanka, we find

exactly the opposite kind of situation. The Sri Lankan Government 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. 16 This policy was initiated on behest of strong

representations from the CIT A representing tea traders. The tea traders, most of them

being directly or indirectly related to TNCs felt that the export from Sri Lanka could

be more than what it produces through tea imports. This policy could not be

15 For a detailed account of the crisis please refer to a report of Fact Finding Team comprising of Central Trade Union leaders. academicians and journalists organized by Centre for Education and Communication. New Delhi. Crisis in Indian Tea lndus11y .--1 Report (New Delhi: May 2003).

16 Thusari D Zoysa. "Liberalizing Imports of Foreign Orthodox Teas for Value Addition in Sri Lankan Tea Exports". Colombo: Institute of Policy Studies. 2001. p. 9.

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challenged by the PA because their position was very weak due to nationalization of

tea plantations.

However, after privatization the P A regained its lost influence because all the

privatized tea plantations along with the state controlled JEDB and SPC became

members of P A. Hence after 1995, while the CTT A has lobbied in favour of tea

imports, the P A has used its influence to stall such policy. What is interesting to note

here is that the P A apart from using the normal channels of lobbying with the Ministry

of Plantution Industries, like CCP A, expanded the issue by drawing national

sentiments against Indian domination of Sri Lankan tea industry. It brought in

common public into the issue of tea imports by giving statements in the newspapers

that Indian tea might ruin the Sri Lankan tea industry. It was not difficult for PA to

gain the support of the masses because of common apprehension of a small country

against the domination of big country. By this process, they succeeded in stalling the

import of orthodox tea.

However, even in this case the failure of CTT A which was one of strongest pressure

groups in Sri Lanka can be attributed to the timing of the campaign. During 1992-95

Sri Lanka had embarked on a privatization programme of all the tea plantations and

sought the help of the planters to revive the sagging fortune of Sri Lankan tea. At this

crucial juncture, any failure on the part of planters could have been attributed to the

government's policy of tea imports. That could have affected the government's

privatization programme in a major way and as a result could have had an effect on its

political fortune. Hence, the government chose to give the concessions to the planters

at the cost of the traders.

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3.2 Regulation of Auctions in india am/ Sri Lanka

The tea marketing has seen major lobbying and counter lobbying between the

producers' and traders' lobby in India. The CCP A representing the producers were

against the Tea Marketing Control Order of 1984 which binds the producers to route

75 percent of their tea through auctions. This was a big gain for the traders, brokers

and the agents of TNCs who regularly buy tea from the auctions. However, the CCPA

initiated a comprehensive campaign against TMCO pointing out the producers should

have the choice to sell their tea in whatever fonn available. 17 The campaign of CCPA '

was again based on research, lobbying through various channels of access available to

the producers like their representation in the Tea Board and access to Ministry of

Commerce.

As it could be seen from the discussion in the Chapter on Trade Strategies, CCPA

eventually succeeded in amending the TMCO and regained the right to sell privately

in 2001. It also succeeded in amending some of the auction rules division of tea lots

among 1 bidder and 4 partners and proxy buying and put in place a changed TMCO

2003, which makes it mandatory for the traders, brokers and agents to provide

accounts to the government for its sales.

This policy changed was achieved amidst massive opposition from the traders' lobby.

who even blocked tea sales in the auction centres through out the country and even

took recourse to judicial intervention. However, the case went against them and the

government went ahead and promulgated the TMCO 2003.

17 Interview by the researcher 11ith D. Chakrbarty. Secretary General of Indian Tea Association and Chainnan of CCPA. 26 October. 2000.

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Even though on the issue of TMCO, a perfect pluralist equilibrium is visible with the

policy coming out of pressure and counter pressure, the timing and intemal changes in

the pressure groups were the most crucial factor behind the success of CCP A. While.

the traders were a strong lobby under the patronage of TNCs like Hindustan Lever

Ltd. (HLL), in the year 2000, Tata, one of the biggest trading houses in India emerged

as a multinational after buying the tea interests of Lyon Tetley. Unlike HLL, which is

the biggest buyer in India, Tata have large number of tea estates producing around 78

million kgs per annum. 18 So the Tata's were keen to retain the option of selling their

tea through their old and newly acquired retail networks. So the campaign of CCP A

had the complete backing of such a major industrial house like Tatas. The second

factor was the constant fall in tea auction prices during 1998-2002, led to wide scale

protests against the auctions, particularly from the medium and small planters who

were completely dependent on auctions. Under these circumstances, the govemment

was forced to take the initiative to change the TMCO.

In the case of Sri Lanka also a striking resemblance in the strategies adopted by the

producers' lobby to change the auction rules is visible. Under the Tea (Tax and

Control) Act, No. 16 of 1959 export permits was issued only for tea purchased at

Colombo auctions along with the tea intended to be sold in London auction. However.

the P A wanted to get the right to sell tea outside the tea auctions and refonn the

functioning of tea auctions.

However, the CTT A was completely against such reforms as it would have directly

affected the interests of the TNC members. Moreover, the CTT A got the complete

18 Tata Tea Ltd. <http:/i\\Ww.tatatea.com/varied.html> 26 Sep. 2000.

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support of the tea brokers against any retonns of tea auctions. 19 Where as the PA and

the tea small growers organised under TSHDA were aligned in support of retonning

tea auctions and in demand of right to se II tea outside auctions. 20

Thus, it was a classic case of two equally resourceful groups of pressure groups pitted

against each other, with the producers trying to change the policy and the traders

ttying to hold on to the status quo. Eventually, the government tried to appease both

the groups by allowing 50 percent of tea to be sold privately but also made it

mandatory for the producers sell 50 percent of tea through auctions. It has to be noted

that none of the producer groups would have been individually able to influence the

change in tea auction policy in the face of opposition from much more resourceful

CTT A. However, an alignment with other groups, i.e. the TSHDA, similarly affected

by the auction rules, gave the countervailing power to PA and was successful in its

campmgn.

3.3 The Tea Small Holdings and Private Tea Factory Owners

The tea small growers are individually weaker pressure groups and would find it

difficult to lobby against stronger pressure groups like the planters or trader or for that

matter even the tea factory owners. Our analysis of tea trade in both India and Sri

Lanka gives a contrasting picture. While, in Sri Lanka, it shows that in many areas of

tea industry, the policy making has not remained confined to some of the resourceful

19 Interview by the researcher with Bryan Baptist. ivlanaging Director of Bartlcets Agro-Produce Ltd .. which is one of the largest tea brokering houses in Sri Lanka. Colombo. 20 November 2001.

20 Ranjith Jayasurya. Director, TSHDA. In ten ie\1 '' ith researcher. Butteramullah. Sri Lanka 15 Nov. 200 I

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business groups, as the small growers have come together as a pressure group and

could generate major influence on the government's policies. However, again it was

during the nationalised phase, the Sri Lankan Government actively promoted the small

growers and organised them under the TSHDA. One of the reasons of the growing

influence of small growers in Sri Lanka is that it produces 60 percent of the total tea

production and gives employment to more than 2,39000 small growers. These small

growers can influence the election results of the entire southern Sri Lanka and hence,

the government looks after their interests on a priority basis.

This was evident from the previously discussed issue of "Reasonable Price Formula

for Green Leaf' where in spite of pressure from the PTFOA, the small growers could

achieve a fair price for the leaf they sell to the factories. The price was fixed by the

government in 1987 when the ratio was fixed as 68 percent for the green leaf suppliers

divided by 4.5 ( 4.5 kgs of green leaf is equal to 1 kg of processed tea) and 32 percent

for the tea factory owners based on annual average prices in the auctions.21 Even

though the PTFOA were aligned with the traders and the brokers, they could not

reverse the fonnula because of the entry of government in this issue as a

countervailing force.

By contrast in India, there are around 2, 30,000 small growers, who are engaged in tea

production. Yet, they account for less that 20 percent of the total tea production.

Moreover, there is no major association or organization for the small growers and as a

result they had a limited influence over policy making in the tea industry. This is

21 W.M.C.J. Wijctunga. Secretary General. PTFOA interview by the researcher. Rajagiriya Sri Lanka. 10 NO\·. 2001.

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evident from the case of price paid by the BLFs to the small growers. It is based on

the auction price of some ·representative' factories in the area. However, there is no

formal list of these 'representative' factories and there are no disclosures made on how

the green tea price for the period was arrived at. During the massive fall in tea auction

prices the small growers have taken recourse to violent agitations but because of

inadequate resources and government support, they could not get a reasonable price

from the private factory owners. The small growers are highly fragmented and spread

across Tamil Nadu, Assam and West Bengal and hence they have not been able to

organize themselves into a strong pressure group.

4. Labour Policy in the Tea Industry of India and Sri Lanka: A

Comparison

In the case of labour policy making in the tea industry of India and Sri Lanka the

pressure group strategies and success have varied significantly. While in India, the

labour policy making in India have witnessed a closed domain with minimum

participation of pressure groups outside the tea industry, the Sri Lanka labour policy

making has expanded and became a core issue of the rights of Indian Tamil

population. As a result, the success of labour groups in India is limited, where as in Sri

Lanka the labour groups succeeded in gaining wide range of concessions.

In the tea plantations of colonial period in both India and Sri Lanka, the workers were

controlled by the planters' through coercive policies. In India there were coercive

techniques like flogging, illegal confinements and chowkidari (guarding) system and

Matta Bahira system, that means if the workers did something wrong against the

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management, they along with their family were ousted from the tea estate. Similarly in

Sri Lanka the immigrant workers were helpless in a foreign land and were not in a

position to play the role of an effective pressure group. The labour groups were not

allowed to fonn trade unions and the legal powers were vested in the hands of the

manager of the tea estate. The managers had the power to punish the workers if they

faltered on any of the works they were performing. The state rarely intervened in the

functioning of the tea estates and shared a harmonious relationship with the planters.

Thus, it was a classic case of 'enclave' both geographically as well as in terms of

policies, where the producers' groups organized under various planters' association

dominated the labour policy making with minimum interference from the

government. 22 Under such structure, the producers' associations of India like IT A in

North and UP ASI in South and the P A of Sri Lanka became the major players in the

formulation of labour policies in the tea industry.

4.1 Independence, Emergence of Trade Unions and Labour Policy

The insulated domain of tea industry controlled by the planters' got considerably

weakened after the independence of India and Sri Lanka. Nevertheless they remained

influential by way of their strong organisational set up and easy access to the decision

n:.akers apart from being foreign exchange providers. Most of the trade unions in India

and Sri Lanka emerged during the 1940's just before the independence.

In India most of the trade umons were affiliated to political parties like Indian

National Congress and the Communist Party of India. The newly emerged trade

?J -- !\ K Sarma. S N Thakur. J. John et.aL BreJFed in the SJFeat of Forced Labour. A Report on the Conditions of Tea

Plantation Labour (CEC New Delhi. 1999). pp. 3-4.

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unions were no match to the producers groups in tenns of resources or the

organisational capacity. However, the post independence nationalist government were

keen to improve the condition of the workers and supported many movements by the

labour groups. One of the biggest achievements during 1948 was the Minimum Wage

Act, which guaranteed minimum work hours, holidays and a minimum wage decided

by the government.23 However, the labour groups were not successful in gaining any

major concessions from the planters to improve the pathetic condition of the workers.

One ofthe reasons for limited success ofthe labour groups during the late 1950's was

the proliferation of trade unions in the tea industry with different ideological leanings.

Till the late 1950's the communist trade unions were locked in a battle of supremacy

with the trade unions affiliated to the Congress.24 As a result there was not much of a

unity among the labour groups, which affected their bargaining power.

However, the late1960's saw the trade unions coming together under the umbrella of

Coordinative Committee of Tea Plantation Workers (CCTPW) in West Bengal and

successfully entering into various strikes, demanding better wages and facilities for

the workers. The major reason behind the trade unions coming together in the 1960's

and the early 1970's could be attributed to the formation of left oriented United Front

(UF) Government in West Bengal in 1967. The UF Government with radical pro-

labour policies recognised the right of the estate workers to voice their legitimate

demands and grievances. The labour leaders also felt that with government support

they could achieve their goals by taking unified stand vis-a-vis the labour issues.

)'

-~ S. Thondaman, Tea and Politics: .\/\·Life and Times, vol. 2 (New Delhi: Navrang Publishers. 1994 ). p. 130. 24

Manas Das Gupta. Labour in Tea Gardens (Delhi. Gyansagar Publishers. 1999). pp. 29-39.

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Moreover, many trade union leaders have occupied important positions in the political

patties and have acted as pressure groups after being elected in Parliament and in the

State Assembly.25 Since, the trade unions are inherently weak in bargaining vis-a-vis

the economically and organisationally superior planters', the political power has

helped in creating a semblance of equality in the bargaining process.

However, the producer's groups have continued to remain most influential because the

labour policy issues remained confined between the producers, labour groups and the

government. The trade unions in the tea plantations emerged as the sole voice of the

labour and there was no other pressure group active in this sphere. Even among trade

unions, not all of them were allowed to be part of the collective bargaining process.

Only those groups which have sufficient membership were allowed to negotiate with

the producers. There were very rare occasions when the labour issues were expanded

to be tied up with other interests outside the domain of tea industry. As a result the tea

planters particularly IT A in North and UPASI in South could insulate the labour

policy making from any outside intervention.

However, in the case of Sri Lanka an exactly opposite trend is visible. The tea industry

of Sri Lanka witnessed emergence of very powerful trade union movement led by the

Ceylon Workers Congress (CWC) in 1970's, which could influence the labour policy

to a great extent. The success of trade unions like ewe unlike their counterparts in

India lies in various factors.

25 Manas Das Gupta. Labour in Tea Gardens (Delhi: Gyansagar Publishers, 1999), pp. 201-2.

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Firstly. the environment in which the trade unions had to function in Sri Lanka was

quite different tl·om the environment in India. The tea industry was nationalised

between 1972 and 1975 and most of the success of the trade unions are visible after

that. From 1978 onwards. the workers have seen rapid increase in their wages, equal

wages were given to both men and women workers (1984) and various health and

welfare facilities were sanctioned for the workers during the 1980's. The ewe along

with the left oriented Joint Plantations Trade Union Movement (JPTUC) could

achieve these facilities for the workers as there were no competing producers groups

against these policies. The lobbying of the trade unions was confined to the

govemment only.

Secondly, overwhelming majority of tea plantation workers are Tamils of Indian

ongm. The plantation Tamils were looked as foreigner from outside who have

grabbed Kandyan Sinhali's farming lands. Moreover, among the Sinhalese masses

there was dissatisfaction with the existing state of political and economic affairs and

took a false extemal direction- what is perceived to be the unreasonable demands

advanced by already privileged Tamils.26 This Sinhala-Tamil ethnic strife replaced the

class solidarity among workers ofthese groups by a trans-class ethnic solidarity.

The Tamil workers, who were struggling for citizenship as the Sinhalese political

leadership, did every thing possible to deport the maximum number of plantation

Tamils, settled in Sri Lanka for three generation to their native places in India. The

ewe was not only fighting for the labour rights but also for the right of nationality

26 C. Abeyesekara and N. Gunasing.he. Ed .• Plantation Labour in a Changing Context (Colombo: Social Scientists· Association. 1987). pp. vi-vii.

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and self respect of the plantation Tamils. Hence, CWC became the most influential

group in the tea plantations with its highly popular leader S. Thondaman emerging as

the leader of the Tamils. The CWC used this popularity to contest elections and

successfully contested various elections and held ministerial positions under many

govemments.

This kind of dual functioning of CWC as a trade union and a political party was

unique and due to sharing power with the government, it could gain various

concessions for the plantation workers.

Thirdly, in 1976 a fom1al declaration of sovereign state was made by the Ceylon

Tamil Groups. The Sri Lankan Government was facing insurgency from the Ceylon

Tamils on one hand and the radical Marxist- chauvinist uprising on the other. The Sri

Lankan Government did not feel it would be viable to open another front against the

Indian Tamils. The Sri Lankan Government were cautious from the very beginning

that the plantation Tamils do not join hands with the Ceylon Tamils' insurgency

movement led by Liberation Tigers' of Tamil Elam (LTTE). Hence, on the one side

the governn1ent shared some powers with ewe by giving the elected representatives

ministerial births and on the other side, provided various concessions to the tea

plantation workers to pacify them. Under these circumstances, the trade unions of Sri

Lanka could play a much more influential role than the Indian labour groups.

5. Comparison of Pressure Groups' Influence on Taxation Policy of India

and Sri Lanka

In the case of taxation also most of the activities of the pressure groups have been

related to the structure in which they operate. While in the case of India, the traders·

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and planters' have regularly lobbied with the Central and State Governments for tax

concessions, the pressure groups in the post-privatisation Sri Lankan tea industry haYe

fanned a comtor1able relation with the Sri Lankan Govenm1ent. They h3\·e

participated in various policy formulations related to taxation in the tea industry.

During the colonial rule both Indian and Sri Lankan tea producers and traders had

direct access to the decision makers. During their meetings with the government

officials the pressure groups would put forward information on the status of their

industry and seek various tax concessions. The taxation policy was formulated on

basis of government assessment and the bargaining from the traders and the

producers. However, there was no role of any other pressure groups and the taxation

issue remained confined to these select groups. However, after independence, the

Indian Government have introduced various taxes and duties on tea industry. The

major taxation has been in the areas of Corporate Income Tax (CIT), Agricultural

Income tax by the states and the Excise Duty on packaged tea.27

This has led to a change in lobbying technique by the pressure groups. The CCP A

apart from using their access to the decision makers have spent considerable amount

of time and resources on research activities to emphasise that the tea productivity is

getting affected because of high taxation. The analysis of the case of Section 33 AB

under Income Tax Act have shown that the research inputs helped CCPA convincing

the government about the need of tax concessions on various developmental activities

like replanting, pruning, weeding etc. The government doubled the concession on

27 Percival Grifliths. The Hisl01y ofrhe Indian Tea lndusrrv (London. \\'cidenfeld and Nicolson. 1967), pp. 557-65.

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income tax, Jl·om 20 percent to 40 percent for development of tea plantations under

Section 33 AB in 2002.

However, the relationship between the producers' groups and the govemment with

regard to taxation issues has not remained always cordial. The CCP A has taken

recourse to judicial help and filed cases against the govenunent on the issue of

interpretation of Section 80 HHC which provides tax concessions to the exporters.

However, in the case of tea industry taxes are calculated after bifurcating the total

income into agricultural income (which would be 60 per cent of such income) and

non-agricultural income (which would be 40 per cent of such income). This 40 per

cent is to be treated as income derived from profits and gains of business and the

concessions are available under Section 80HHC.

However, the CCP A demand was to treat the agricultural income as well as non­

agricultural income as a composite income. After the tax concessions are given on this

composite income, it could be bifurcated into agricultural and non-agricultural

income. The notmal lobbying of CCP A with the Ministry Commerce did not succeed

to great extent because it directly clashed with the interests of State Govemments of

Assam, West Bengal, Kerala and Tamil Nadu which are heavily dependent on the

income derived from the tea industry. Hence, the CCP A had to take the matter to the

Calcutta High Court where the Judge gave the verdict in favour of the producers.

The CCP A has also used the technique of fom1ing coalition with pressure groups

which are not involved directly with the taxation issue. \Vhen the Central Govemment

put a excise duty of 8 percent on packet tea in 1998. the CCP A roped in consumer

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groups by contending that the increase in excise duty would lead to a increase in the

price of packet tea by Rs.l2 and affect the consumers. The other argument they put

forward was that the increase in price of packet tea may lead to large scale

consumption of loose tea which may affect the health of the consumers By this

process they got the support of the consumer groups. This was a rare occasion when

there was similar interest of consumer groups and the producers lobby. In this case

there was a complete cooperation between the traders and the producers as well. The

traders even entered into a strike against such policies. Under such pressure

govenunent removed to excise on packet tea in 1999. On the other hand, the CCPA

got the support of trade unions on the issue of a levy of Rs. 2 per kg on bulk tea as it

was made out that the excise duty will ultimately hit the workers. The trade unions

conducted a day long strike against 'centres anti-plantation policies'.

In 2002, amidst the pressure from all quarters, the govenunent was forced to reduce

the excise duty to Rs. I per kg. 28 Thus, on the issue area of taxation policies, the

pressure groups have used various strategies like research, close door lobbying using

their access to the decision makers, sending representations, fighting cases against

govenunent in· the court and also collaborating with less powerful pressure groups or

even groups which have not been involved with the issue of taxation.

Unlike India, the Sri Lankan pressure groups did not have to contend with the Central

as well as State Governments. However, during the nationalised phase, the Sri Lankan

tea industry was highly taxed and all sort of duties were introduced to milk the tea

28 !he Financial £-.:press, 6 Dec 200 I.

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plantations.19 However, under the guidance of World Bank, Sri Lanka slov.:ly

reduced/removed most of the taxes and duties like corporate taxes, Ad-Valorem taxes

and the export duties and tea cess after privatisation. At present, the taxes are decided

on the basis of negotiations between the producers and traders organisations. While

interviewing the P A and CTT A officials it was telt that these organisations are quite

satisfied with the taxation structure and there has been no major campaign demanding

reduction of taxes. Thus, the P A and CTT A have been able to develop a closed

corporatist ties with the government. However, it was mainly due to conditions

imposed by World Bank that forced Sri Lanka to change its taxation policy. With the

inkrvention of World Bank and IMF, the producers' groups and the traders' groups

have become the niche player on the issue of taxation policy in the tea industry in Sri

Lanka.

29 Task Force on Restructuring the Plantations. "Analyses and Recommendations Relating to Taxes. Cesses and Subsidies in the Tea and Rubber Sector." Colombo: April 1991. p. 2.