Following my latest post, I dug a little more into the plantation concept and I received some more information from a couple of people, so here is the follow-up.

According to the Tea Board of India, there are 833 small tea farmers in Darjeeling. I couldn’t get all the information I needed on them to compare them to the data I had but I got something.

For example, 60 of these farmers are gathered in a cooperative with approximatively 23 hectares of tea that aims to produce through its factory 15,000 kilograms of tea per year, which means an average production for the cooperative of 250 kg per tea farmer or 652 kg per ha. I wrote for the cooperative as they might sell it too to others (I have no info on that), which would mean that they could produce more.

When compared to the data available on the Nepalese small farmers (658.27 kg per site, i.e. per tea farmer and 847.43 per ha), the numbers I found for Darjeeling are much lower, meaning either a lower productivity per hectare (and coming back to the “problems” of older trees) or a willingness to produce less for higher quality or because of a more sustainable approach. However, this data is only on a small sample and might not be representative of the overall picture.

So after getting back on track, let’s get back to where we stopped last time and that was speaking about the financial backing needed to go into this business. From there on, I will dig a little more into this financial aspect, go through history/economical politics before trying to see what is specific in the “traditional” model of big estates before checking why would this model fail (if it fails that is).

Tea estates like most of the plantation crops can trace their roots to the 19^th century (even if some were there earlier because of being cultivated during and fuelling the European colonial expansion). And like all of them, tea production was hit by a drop in demand and therefore in price (since they hadn’t foreseen it, there was an overproduction) during the crisis following Black Tuesday (the Wall Street Crash of 1929).

“There have been attempts to restrict tea production in the past. In the world recession of the 1930s, tea prices fell dramatically. This prompted the major producers – India, Ceylon and the Netherlands East Indies – to enter into International Tea Agreements, which restricted production to 85 per cent of normal.ⁱ”

The obvious results of both the crisis and the reduction in production was that only those with cash could go through these years, leading to a further concentration as those without cash were absorbed and the small holders went to other crops that allowed them to eat or to gain more cash, just like in the Netherlands East Indies (http://teaconomics.teatra.de/2014/08/22/rise-and-fall-and/) or simply did not have the cash to withstand the decline in pricesⁱⁱ

Following the independence of India and as in most countries going through the same process, there was a wave of nationalisation of key sectors but the effects on tea were not those that could have been expected.

“Following on independence, the Indian government began to plan extensive nationalization of key industries. Tea featured in some of the recommendations, and many British companies took fright and began to run their estates down. They spent as little as they could on maintenance and renewal […] They also sold some estates to Indians. […] This catalogue of attacks on the British tea interest might have been expected to drive it out of India. However, it proved remarkably resilient. The companies that were sold were, in general, those with the poorer land or less successful management. The yield on the remaining British estates remained consistently higher than on the Indian-owned estates so that, although acreage fell, production was proportionally less affected.ⁱⁱⁱ“

This extract explains why nationalization didn’t mean the end of foreign controlled estates (which were still among the big players) or a rise in the support for small holders since the only known development models were focusing on productivity and heavy industry.

Furthermore, as in most independent countries, India focused on national development with protectionism and a premium to national industries (I don’t forget the Green Revolution but since I didn’t find any evidence that it had an impact on the tea industry I can’t be 100% sure about it).

“In the new tariff regime, investment costs sharply increased in businesses that relied on imported equipment, including tea.^iv”

As you can guess, all this combined meant that more cash was needed to invest in tea, to produce and “manufacture” tea, which meant that small farmers couldn’t efficiently compete.

In the previous lines, I spoke a lot about India and the independence process but not at all about Nepal. You might ask why. Simply because before 1951, Nepal was closed to foreigners and avoided as much as possible any contact with them (this was seen as a way to keep its independence).

After 1951, Nepal undertook a series of Five-Year Plans to develop first its infrastructures and communication and then agriculture (with cash crops being given priority in the Fifth Plan running from 1975 to 1980).

The situation and priority changed later on in both countries in the recent years and small tea farmers now have the support of both governments as can be seen in the most recent position and strategy papers in both countries.

“To attain the above position of tea industry in Nepal in 2020, the following strategies need to be adopted:

[…]

6. Provide support to small tea farmers for preparation of loan scheme and application and assist in the availing of credit from ADB/N and Commercial Banks.^v“

Why this change? The reason is simple. It is thanks to the new trends in consumption (smaller production, more authentic/sustainable/fair products). Small farmers are seen as those able to satisfy this demand; perhaps thanks to a higher motivation? Or to a certain ease to change their production processes?

Does this mean that in the modern consumption world, the small farmers model is more efficient? Once you have left the financing/investment aspect, what is left of the “sheer logistics of the old model” as said by Lazylitteratus in his original post? Does it make the old model inefficient?

We have seen that size, production and productivity set both models apart but the fundamental difference could lie in what makes the tea production system.

What I mean by system is everything needed to produce tea and to sell it. Since a picture is worth a thousand words, here is an oversimplified drawing of what I see as the tea production system.

The tea production system

To again simplify things, there are three main suppliers of these services, the private sector, the public one and a mix of both.

Factories are needed to produce tea and they are linked to an estate or a company like in the “old” model (but smaller farmers can be allowed to have access to it) or linked to a State initiative or to a cooperative (backed or not by an estate).

Schools and infrastructures are something that the State has to provide. They can both benefit from private “help” or sponsorship but the final provider remains the State, which means that everyone, all around the country has to pay for it.

“There are three schools […] they belong to the Indian government. The estate has nothing to pay to keep them operating (apart from a few repairs now and then). Furthermore, the registration is not really free as the family must pay 250 rupees per year. Like the health system, these measures are mandatory by Indian law.^vi”

Health and housing should be provided by the estate but the situation depends on the estate and evidences are not so clear as to who pays what and why (hence why I won’t say anything further on this topic). In theory, the Indian law make a free health system mandatory for the workers of the organised sector^vii. This means that for health and housing the estate should pay something (but according to different sources, on some estates, they don’t pay much).

So we saw that most of the things that makes the tea system are either provided by the State or are not really making a huge difference. The only factor left and the reason why the “logistics of the old model” might be failing (unless someone points me to what is lacking) comes from the only thing that we have not studied yet: people.

On an estate, there are two different kinds of people: those working on a temporary basis and the permanent ones, those last one being paid all year long.

Number of workers in the factories in West Bengal in 2004^viii

Number of workers in the fields in West Bengal in 2004^ix

Number of workers in the tea estates in West Bengal in 2004

As can be seen from the data I found (I know these are official figures and that reality can be different but I had to use some figures), the permanent workers are the most numerous ones, which means that most of the workers are paid the whole year.

To compare those percentages to something, I can tell you that in 1985, the family farms in Gujarat employed 70% of temporary workers^x.

This highlights the real difference between both models. It is not as much the investments or the production capacity but rather the way the people are employed and paid that makes the difference.

“In fact, reliance on family labour is usually the main factor explaining why small family farms are more efficient than large ones relying on hired labour which necessitates costly supervision (Muyanga and Jayne 2014,4).^xi

I guess this conclusion is not really what we expected.

As quite often these days, this month article was inspired by @lazyliteratus or rather by him being quoted by the Nikkei Asian Review in an article on Nepal and Darjeeling teas.

Even if Geoffrey’s article was not focusing only on how the tea is produced but more on how civil, all the tea industry/drinkers… can and should be. To quote him “Tea is just tea. It’s dead leaves in hot water. Nothing more. There is no money in it. The value lies in the way we -as people- experience it. The value is in the story of the person who picked the two leaves and bud… in the person who did the withering, rolling and drying… in the artisan who shaped it… in the merchant who hocked it… in the wide-eyed seller who bought it… and in the drinker who experienced it.” If you want the whole story, just go there.

But he did write that the “old plantation model is dying.” And this assessment that I overlooked at that time came back to me when I read by the other article I was referring too. That question was too big to let it go away and I will try to bring some elements to answer it, not from a tea quality point of view (I won’t judge if a model is better than the other as there is never a true answer that is valid forever and out of a peculiar context) but more by trying to draw elements from different social sciences (to see what is in this field of research, you can check here).

The fist question that needs to be answered is what are we talking about? In other words, what is a plantation? Is there a plantation model? Do Nepal and Darjeeling tea organisation fit into this model? I will try to answer the question of its oldness along the way.

According to the Cambridge dictionary, a plantation is “a large farm, especially in a hot part of the world, on which a particular type of crop is grown.” Now, this brings more questions than it answers but it is a start.

From an article on agricultural plantationsⁱ, it seems English classified their rubber tree plantation based on the size of the piece of land. With the estate being more than 40 ha and the small holding less than 40, we can see there is a huge gap between the two of them and to make it more solid, a further distinction was made with small holdings (less than 4 ha), medium estates (4 to 40 ha), estates (40 to 200) and big estates (above 200 ha).

So let’s compare Nepal tea estates and Darjeeling ones to see who fits where.

Data from fiscal year 2014-2015 on Nepal tea estatesⁱⁱ

Data from fiscal year 2014-2015 on Darjeeling tea estatesⁱⁱⁱ

I couldn’t find any data on small farmers in Darjeeling apart from a few references to them, which means the comparison between Nepal and Darjeeling is not 100% complete but it is a start.

From the data gathered and their average (which is not always the best instrument to compare things as I once said), it seems obvious that there are two different sets of production places in Nepal, the small holdings (the more numerous and with almost 50% of the total tea plantation surface) and the estates (with the biggest production share).

When comparing Nepal to Darjeeling, where plantations are in the big estates category, some counter-intuitive facts are brought forward. For example, the productivity of the tea hectare in Darjeeling is lower than in Nepal or the production of the Darjeeling tea estates is lower than those of the small farmers in Nepal alone.

Regarding the productivity, there are three obvious explanations that might need some further research: a more sustainable/biodynamic approach being used in Darjeeling, a productivity problem (with trees being older and thus giving less tea), a deliberate lowering of the production with the aim of increasing the price on the short/middle run.

Traditionally in agriculture, the intensive farming was the dominant model, meaning that the aim was to mass produce to give access to the maximum number of people, which coupled with the high amount of money needed to create tea plantations (between jungle clearing, bringing the tea trees, nursing them, bringing the needed labour to the selected area) meant that only people with a good financial support could do it.

A fine example can be found when tea was introduced in Assam: “The situation continued to deteriorate and by 1847 the Company would have been glad to sell out if anyone had been ready to buy.^iv” The first dividend was paid in 1853 and at that time, fortune began to change, favouring those who had invested so much.

So capital was needed to enter the tea market which combined to the high expectations from those putting money in this business, only big estates were being build (something that was natural in these days) but did this problem suddenly disappeared to allow for smaller tea gardens to become interesting?

No. This is a rather straightforward answer, isn’t it? Don’t worry, I will back it up. “Establishment of tea garden requires huge investment with long gestation period. Equity capital forms only a small portion of the total investment. The rest has to be raised through loans from the financial institutions. It has been found that the loans provided to tea gardens for the planting of tea and its maintenance per unit of land is inadequate.^v”

So the financial problem is not the key to the selection of one model or of another and we will have to look a little bit further to see if one model is better than the other.

Sources