India's Transnational Tea Companies Enjoy Windfall Gains, Workers Are
For decades India has been one of the world's largest tea markets - in
fact, more tea is produced and consumed in India than anywhere else in
the world. Moreover, India is the base of operations of two of the world's
largest transnational corporation (TNCs) associated with tea: Tata Tea
and Hindustan Unilever Limited, HUL (before 2007 known as Hindustan Lever
Limited, or HLL).
Tata Tea is part of the Tata Group, a transnational corporation owned
by one of the wealthiest families in India which, besides tea, has interests
in engineering, hotels, communications, automobiles, steel and chemicals.
In 2005-6 the Tata Group recorded US$22 billion in revenue (equivalent
to 2.8% of India's gross domestic product) and claimed to employ 246,000
workers. The Group has operations in more than 80 countries. Tata Tea
is the world's second largest tea company. Tata Tea recorded US$258 million
in sales in 2005-06.
Limited is the Indian subsidiary of Unilever, the Anglo-Dutch TNC and
one of the world's largest food and personal products companies. In 2006
Unilever had global sales of US$55 billion (equivalent to 7% of India's
gross domestic product) and employed 179,000 workers in almost 100 countries.
Unilever is owner of the world's highest selling tea brand, Lipton, with
US$4.1 billion in sales. The company purchases 12% of total global black
tea production, making it the world's largest buyer of tea. HUL, producing
everything from ice creams, shampoos, soaps, chemicals and tea products
had sales of US$3.26 billion in India in 2006. In terms of tea products,
HUL recorded US$352 million in sales in 2006.
in 2005 and 2006 Hindustan Unilever cut the jobs of more than
permanent plantation workers.
These two giants of the tea industry in India dominate the market, with
a 60% share of branded tea sales in 2005. For decades they were significant
employers in the sector, owning plantations with thousands of workers
in the key tea producing areas such as Assam, West Bengal, Kerala and
However, this has all changed, with 2007 and 2008 marking the final phase
in these companies exit from plantations. In 2006, HUL shed itself of
its last plantation worker. Tata Tea has rid itself of most of its directly-employed
plantation workers in southern India, and is looking to do the same in
This restructuring process is built upon both companies' change in orientation:
away from producing tea and towards being sellers of tea products. That
is, no longer are the companies interested in growing tea in India, they
are only interested in purchasing tea.
To put it another way, both companies realised that their levels of profits
could be greatly increased by selling branded and processed tea products,
rather than owning plantations. So, plantations workers, who had contributed
to building the profits of these companies over the years, were no longer
needed and were to be divested and demerged.
HUL has moved the
furthest in this process. In April 2005 the company, at the time called
Hindustan Lever (HLL), announced that 6,100 permanent workers, 3,100
hectares of plantations and three processing factories in Assam would
be parcelled off into a demerged company called Doom Dooma Tea Company.
By December 2005 HLL announced the transfer and sale of Doom Dooma to
McLeod Russel India.
In 2006, Hindustan
Unilever showed after tax profits of US$464 million, an increase of 32%
compared to 2005.
With the same April 2005 announcement, HLL parcelled together its holdings
in Tamil Nadu, encompassing 6,300 permanent workers, 3,700 hectares
of plantations and six processing plants, into a demerged company called
"Tea Estates India Limited". On 1 March 2006 HLL announced the completion
of the sale and transfer of Tea Estates to the Woodbriar Group.
Thus, between 2005 and 2006 Hindustan Unilever managed to divest itself
of the responsibility of more than 12,000 permanent workers (see depiction
above). Of course, the total number of workers affected by this decision
would have been much higher as the number does not include contract
or day workers, nor is the number of family members part of the equation.
Tata Tea has been
somewhat slower to divest itself of its plantations, although, like
Hindustan Unilever, it has made clear its exit plans.
The evidence of that restructuring is clear when looking at the Tata Tea
accounts from 2001 to 2006. In those five years, Tata Tea has decreased
its total wage payments by 12.5% (cuts of approximately US$2.75 million),
reduced its provident fund payments to workers by 43% (approximately US$3.13
million) and decreased welfare payments by 40% (approximately US$4.1 million).
Whereas in 2001, 21% of Tata Tea’s total spending was in the form
of payments to workers (approximately US$40 million), as of 2006 this
was reduced to 15% of total spending (approximately US$30 million). In
2001, Tata Tea reported employing 58,888 workers, by 2006 this had dropped
five years Tata Tea has decreased its total wage payments by 12.5%,
reduced its provident fund payments to workers by 43% and dewcreased
welfare payments by 40%.
Such restructuring was built on the basis of divesting itself of the bulk
of its plantations in southern India. The biggest divestment was in 2005
when Tata Tea transferred 17 plantations to the company Kannan Devan Hills
Plantation Limited, of which Tata Tea retained a 19% share. Significantly,
Tata Tea kept the brand name "Kannan Devan". This restructuring
transferred 75% ownership of the company to workers and local management,
yet the reality of the transfer was workers were taking on an enormous
risk burden and were being shifted from a highly profitable company to
a company with much less capacity.
In north-east India, Tata Tea has initiated plans to demerge its 24 plantations
in West Bengal and Assam into Amalgamated Plantations Private Ltd. This
will affect more than 30,000 workers radically reducing the company's
direct work force (see table above). In order to fund this plan the company
has sought a handsome subsidy from the World Bank.
Tata plans to retain no more than 35% of the new company. The World Bank's
International Finance Corporation (IFC), through a US$7.8 million investment,
will retain 19%. Workers will hold 15 to 20% through a scheme where Tata
Tea will loan money to workers. The remainder will be held by private
Tata Tea's plan in
the north-east has been controversial (see box). As of August 2007, the
IFC does not seem to have granted final approval for the investment. Furthermore,
workers and unions have not reached a final agreement with the company
over the plan.
Reaction to Tata Tea Restructuring Plan
According to newspaper reports in India, during the months of March
and April 2007 significant discontent was expressed by workers over
the Tata Tea restructuring plan in north-east India. In March, more
than 1,000 workers from 20 Tata Tea estates in Assam rallied outside
the head office of ACMS, a trade union of tea workers. Workers noted
that as they had recieved no adequate explanation of the restructuring
plans they were in opposition. (The Telegraph, 13 March 2007).
In April, Montu Bose, general secretary of the CBMU, which represents
tea workers at Tata Tea's West Bengal plantations, delclared, "we
are against the entire recast and are also opposed, in-principle,
to employees picking up shares." (The Hindu, 7 April 2007)
Little wonder that workers are wary when considering what the impact on
their livelihoods might be. None of the workers who were ealier hived
off into other companies have any possibility in sharing in the windfall
profits now accruing to Tata Tea. Between 2001 and 2006 Tata Tea's after
tax profits increased 87%, from US$25 million to US$46.7 million.
Tata Tea's capacity for profit making will be most likely even higher
in 2007. In May, the company announced the sale of health-drink firm Glaceau
to Coca-Cola. Tata Tea had acquired the US company in August 2006, buying
a controlling share for US$677 million. Just nine months later Coca-Cola
bought the company for US$1.2 billion - Tata Tea's profit was US$523 million,
the equivalent of 17 years of its annual wage bill to workers in 2006.
HUL and Tata Tea's restructuring programs come at a time when tea workers
in India have felt the greatest decline in their conditions in decades
(Asian Food Worker has reported extensively on this). The collapse of
tea plantations across the industry and the illegal abandonment of workers
by employers has brought ruination and death. In this context, the two
largest tea companies have chosen a path of unbridled profit-seeking based
on the claim that the plantation business is no longer "suitable"
to their business model. They have legally abandoned plantation workers
so as to take advantage of the dramatic falls in the price of tea.
In May 2007, Unilever's global CEO, Patrick Cescau, announced that the
company would henceforth source all its tea sustainably: because we believe
it is the right thing to do for the people who drink our tea, the people
along the entire length of our supply chain and for our business. (Unilever
Press Release, 25/05/2007). Of course, the "right thing to do"
does not apply to tea workers in India, as Unilever cut their jobs 18
months previously. Tata Tea, when applying for US$7.8 million of World
Bank funding implied its generous nature as it built schools and hospitals
for plantation workers. However, under the Plantation Labour Act companies
are required to do this. There is nothing generous in a company obeying
Ultimately, it is hard to view these companies' statements as anything
but hypocritical. Workers are treated only as a means to profit, to be
bought and sold with the fluctuations of the market.