West Bengal tea cos go to court over state govt’s wage hike directive

KOLKATA – The West Bengal government has kept in abeyance its directive on wage hike of tea plantation workers as tea companies in the state have taken the matter to court.
Along with the Indian Tea Association, some tea companies have approached the Calcutta High Court for relief on an earlier the state government directive, contesting that a further increase in wages would make them bankrupt and that they would not be able to provide the wages mandated by the state government.
Since the high court has scheduled the next hearing on Jun 12, the state's labour commissionerate has kept its directive in abeyance. A copy of the advisory is with Informist.
The state's labour department had asked all tea companies to increase basic daily wages of workers to 250 rupees a day from 232 rupees a day from Jun 1. The hike in basic daily wages works out to 7.76%
"Legal cases usually take time and the court has started hearing the case, so the court will hear the stand of the tea growers, the labour unions, and the state government, which will take some time," said a senior official with a major tea plantation company.
The official further said that whatever the court's ruling may be, the aggrieved party is expected to appeal to higher courts, which will again hear the case before giving its verdict. "Thus, it will take time," the official said.
Another industry official said that wages of workers were increased twice in the recent past. The cash component in wage hikes totalled 56 rupees.
"We had asked the state government to consider postposing the hike by a year as it is unsustainable this year," the industry official said.
Erratic rains have been affecting the crop in Dooars and Darjeeling, leading to a drop in tea production.
"On top of it, opening auction prices have been lower by 30 rupees a kg, so low prices and low output have been increasing production costs per kg," the second official said.
Data from tea brokerage companies shows production was down 8.75% on year at 22.74 mln kg in April in the Dooars-Terai region, which is a major tea producing belt. The data for May is yet to be compiled.
Kaushik Das, vice president & co-group head – corporate ratings at ICRA Ltd, said a wage hike would lead to a margin contraction of 500 basis points for tea producers focussed on quality.
Industry officials, however, said the impact would be more than what has been estimated.
"There are wage components which are paid in kind like housing, health, and others, which are subsidised heavily by tea companies, but that is not taken into consideration when wage hikes are discussed," a third official from a tea plantation company said.
"Moreover, the production cost is much higher in Darjeeling at 650-700 rupees a kg and this wage hike, if it comes into effect, will increase it further. At the same time, Darjeeling tea is not doing well and its global market is also under stress," the official said.