CHAPTER 1

PLANTATION CROPS I N KERALA

Plantation crops form the backbone of the agriculture sector

in Kerala. The major plantation crops cultivated in Kerala are

.-
Natural Rubber, Tea, Coffee and Cardamom. The plantation

industry is a well-organized sector of Kerala agriculture. The

significance of plantation crops is increasing year after year with

respect to area of cultivation, production and productivity. The area

under plantation crops was on the increase up to 2000. After

2000 there has been no significant progress in the expansion of the

area under cultivation of these crops.

Plantation crops are cultivated in different parts of Kerala.

Rubber is cultivated in plain and sloppy areas where the soil is

deep and well drained. A warm humid equable climate (21' to 35'

Centigrade) and a fairly distrrbuted annual rainfall of not less than

200 cm. are necessary for its proper growth. Tea and cardamom

are cultivated in hilly areas whereas coffee is cultivated in both

hilly and plain areas. Cardamom is cultivated as intercrop in

forests. I n most of the plantation crops growing areas workers are

available locally. Except for tea, initial processing and grading

facilities are available to small farmers themselves. But in the case

of tea plantations, arranging processing facilities is expensive and

is available only in big estates. Climate and economic factors along

with a favourable export rnarket encouraged the growth of

plantations in Kerala. Some of the crops got preferential treatment

even when the state was def'icit in food. Food requirement was

m e t mainly through imports. A study on the cropping pattern of

the Travancore region showed that the area under commercial

crops of which coconut and rubber were the more important ones,

increased continually since at least the 1920s.' I n terms of its

physical features, the land is divided into four distinct types: (i)the

highlands vouching the Western Ghats (ii) the midlands (iii) the

lowland plains and (iv) the coastal belt. Over 40 rivers feed it.

The undulating topography of the state, the tropical climate (high

incidence of sunlight, rainfall and warm temperature)as also the

cool temperature of the hills generate a variety of agro climatic

conditions which led to the growth of a range of crop specie^.^

P.G.K. Panikar (1977) "Population growth and Agricultural

Development: A case study of Kerala", Centre for Development
Studies, Thiruvananthapuram P.4.

Syamsundaran Nair K.N. (1994) ' Constraints to Kerala's

Agricultural Development or What Ails Kerala's Agriculture" A.K.G.
centre for research and studies, International Congress on Kerala.
1.1 Area, Production and Productivity of Plantation Crops

in Kerala.

The record of plantat~oncrops in India shows that the

development has taken place very much in tandem with what

these crops had experienced elsewhere in the world. A major

portion of these crops produced in India is from Kerala, ie. 92 per

cent of natural rubber, 56.4 per cent of Cardamom, 24.4 per cent

of Coffee and 8.4 per cent of Tea. Development aspects relating to

these crops are also looked after by the Commodity Boards under

the Commerce Ministry of the Government of India. Kerala State

has a long tradition in the cultivation of plantation crops and as of

today the state accounts for about 50 per cent of the area under

this category of crops in the country. I n Kerala economy the

plantation sector plays a crucial role as they occupy nearly one

quarter of the net cropped area in the most productive and

ecologically high altitude regions in the State.

Plantation crops in general are very important from the

national point of view as they contribute substantially for export or

import substitution. The area under plantation crops i n Kerala and

India is given in Table. 1 1. The Table shows the relative

significance of Kerala in the production of Plantation crops in India.

 Table 1.1

Area Under Plantation Crops

(Hectares)

Rubber Board - Indian Rubber Statistics compiled.

Thus it is clear that Kerala holds a place of pride in the

development of plantation crops in India.

One peculiarity of plantation crops in Kerala is that they are

mostly produced not for domestrc consumption but for sale. The

producers consume only a small portion of their produce. So a

major portion of the plantation crops produced in Kerala is

exported to other regions.

Plantation crops in Kerala are cultivated in climatically

suitable areas. The planters of these crops adopt mono cropping.

Since these crops are perennial in nature their production cannot

be adjusted in accordance with short term fluctuations in prices.

But a comparatively long term trend in price (at least two years)

will be reflected in the area re-planted and newly planted. Out of

the plantation crops i n Kerala natural rubber shows a constant

increasing trend with respect to the area newlyplanted and

replanted. A detailed analysis about each plantation crop in Kerala

with respect t o area, production and productivity is significant.

Tea Plantations

India is the largest producer of tea in the world and

accounts for 27 per cent of global production. I n Kerala production

of tea is less than 10 per cent of the total tea produced in India.
Tea is cultivated mainly in the mountain ranges of Kerala. The

production of tea plantations in Kerala is concentrated in the two

high range districts Idukki and Wayanad. The tea plantations are

located in the relatively remote areas as they grow in the high

altitude areas of the Western Ghat. Sizeable portion of the estates

is on government land and it is on long term lease varying it from

30 to 99 years.

World tea production increased at an annual growth rate of

2.8 per cent between 1970 and 2000 expanding from 1.27 million

MT to 2.97 million MT. Most of the growth was due to the increase

in productivity rather than expansion in area. Preliminary

estimates indicate that the world tea production in 2002 reached 3

million MT. Black tea accounts for more than 70 per cent of world

tea production and green tea by 22 per cent. The output in tea is

estimated to have fallen in 2003-04 by 3 per cent due to

inadequate monsoon rains and due to low prices.

Big plantation companies produce major part of tea in Kerala.

Small farmers and marginal farmers contribute only a small

percent of the total tea prodr~cedin Kerala. The estate sector

above two hundred hectares accounts for 75 per cent of the area

and contributes 86 per cent of the production in the state. Around

4000 small growers having less than 50 hectares control only

 Table 1.2

Plantation Crops: Production in Tonnes

Tea Coffee Rubber Cardamom

Source: Kerala State Planning Board Economic Review &

Rubber Board - Indian Rubber Statistics.
 around 1 0 per cent of the area under tea. The area under tea

remained constant from 1990-91 to 1996-97. I n 1997-98 the

area under tea increased from 34600 hectare to 36817 hectare.

There after the area under tea ir; remaining the same. But at the

national level area under tea is showing an upward trend i n every

year. The production of tea is showing a constant increasing trend

in India. But such a trend is noticed in the production of tea in

Kerala. From 1998-99 the production of tea in Kerala is showing a

constant decreasing trend. A t present (from 2001 onwards) the

intensity of crisis in tea plantations in Kerala is utmost. Since the

price of tea has decreased to a marked extent the workers in tea

plantations have become unemployed. Several estate owners

abstained from planting activities and several among them left

their estates. The productivity of tea in Kerala is comparatively

lower than that of the national average. During 2001-02 the

productivity of tea in Kerala was 1791 kglha whereas the

productivity of tea i n India was 1950lha. No specific trend is

noticed in the productivity of tea in Kerala and India.

. -c
I n Kerala coffee is grown in almost all regions. Kerala

has 25 per cent of the total coffee produced in India. I n Kerala

coffee plantation is a small growers business. But there are big

estates in this field. Most of the area under Coffee in India is

owned by small holdings (less than 10 ha). This comes to 60 per

cent of the coffee plantations in India. The area owned by coffee

growers with a holding of less than 2 hectare is 42 per cent. But

the major share of the production comes from medium and small

growers. A sizeable portion of the coffee produced in Kerala does

not come to the market for sale because the farmers produce and

domestically process and consume it. This is the peculiarity of

coffee over other plantation crops. On the other hand, although tea

is daily consumed in Kerala its processing requires costly machines.

The area under coffee is remaining the same in India. From 1991-

92 to 2002-03 the area under coffee in Kerala increased from

84000 ha. to 84139 ha. Thus there is an increase i n cultivation of

139 hectares only. But in production there was a remarkable

increase. The production of coffee which was only 30960 Metric

tonnes increased to 64425 Metric tonnes in 2002-03. This increase

was mainly due to increase in productivity, ie. from 500 tonneslha.

during early 1990's to 766 tonnes/ha. in 2002-03. After 2001 there

has been an all time decrease in the price of coffee in Kerala. I n

the high ranges of Idukki District there were no buyers for coffee.

The farmers had to leave coffee plantations for free harvesting.

Hence these farmers were reluctant to cultivate coffee in their

holdings also. More than 50 per cent of the coffee produced in

India is exported to different countries. The major importers of

Indian Coffee (2002-03) are Italy (23.48 per cent) Germany

(16.13) Russian Federation (9.49 per cent) Spain (7.13 per cent)

and Belgium (7.06 per cent). During 2002-03 the total quantity of

coffee exported was 63593 metric tonnes which earned foreign

exchange equivalent to Rs.296 crore.

Table 1.3

Area Under Coffee and Tea in Kerala (Area In Ha.)

Area Under Tea

479

Source : UPASI, Kottayam.

The widespread coffee leaf disease of the 1870's adversely

affected the prospects of Coffee in Kerala. The effect was that

many planters turned to tea cultivation. Coupled with this

calamity, the strong competition from Brazilian coffee resulted in

the decrease of cultivation of coffee in Kerala and India as a whole.

Hence the transition of cultivation from coffee to tea happened

during this period. This can be seen from Table 1.3.

Table 1.3 shows that the development of Tea plantation

industry in the early 1900's was mainly at the expense of Coffee.

The main relevance of tea industry in Kerala is that it is cultivated

in areas with no possibility of other crops. I f tea cultivation had

not been introduced in Kerala, such land would have remained as

waste land.

The global Production of natural rubber was 71.10 lakh MT in

2002. This was below the production of natural rubber in 2001,

which was 72.10 lakh MT. The production in Thailand, the world's

largest producer with a share. of 35 per cent has been declining

steadily from the peak attained in 2000, mainly due to

unfavourable weather conditions and government efforts to

manage supplies in order to strengthen the prices. I n Indonesia,

the second largest producer, 5 per cent increase in output has

been reported. The declining trend in production in Malaysia over

the past decade was reversed wlth output rising at 8 per cent from

2001 level.
 India is the fourth largest producer of natural rubber with a

share of 9 per cent in the world The production of natural rubber

in India was 6.49 lakh MT in 2002-03, registering 2.9 per cent

growth over the previous year. India is at the same time the

fourth largest producer of natural rubber in the world after China,

USA and Japan. Indian industry comprising 29 tyre manufacturing

units and 250 medium scale and 5500 small scale units in the

organized sector offers 35000 diversified products, but 95 per cent

of the industries are outside Kerala.

Natural rubber is the most commonly cultivated

plantation crop in Kerala. Like tea, natural rubber is cultivated as a

mono-crop in Kerala. More than 90 per cent of natural rubber in

India is produced in Kerala. Natural rubber is the only plantation

crop in Kerala, which shows an increasing trend in Area, Production

and Productivity. The contribut~onof Kerala in keeping India in

fourth place among the rubber producing countries is significant.

Up to 1997 there was an increase in the price of natural rubber in

Kerala. But thereafter the price of natural rubber was showing a

decreasing trend. This downward phase came to an end by the

middle of 2002. Since 2003 the rubber growers are getting a

comparatively remunerative pricr. The various aspects of natural

rubber are examined in the next chapter.

 om Pliant&igms
Cardamom plantations are f'ound in hill tract regions in Kerala

especially in Idukki District. More than 50 per cent of the total

cardamom produced in India is from Kerala. Cardamom is

"
cultivated as an intercrop in forest regions. Small growers as well

as big growers cultivate cardamom. The area under cardamom in

India and Kerala is showing a decreasing trend from the early

1990s. But the production and productivity shows an upward trend

in recent years. The area under cardamom in Kerala is about 50

per cent of the total cardamom cultivated in India. At the same

time the production of cardamom in Kerala is above 70 per cent of

the total production. The main reason for this situation is the

increased productivity of cardamom in Kerala. The productivity of

cardamom in Kerala is more than 30 per cent of the productivity

of cardamom in India. After 2000-01 the price of cardamom is

showing a decreasing trend. Hence there exists financial crisis

among the cardamom growers ~nKerala. In July 2004 the price of

un graded cardamom (small cat-damom) in India was Rs.351.29/kg

whereas the price in 2003 JIJI~ was Rs.555/kg. Similarly the

international price of small cardamom decreased from

$11000/tonne in 2003 July to Rs.$9922/tonne in July 2004.

 Table 1.4

Productivity of Plantation Crops in Kerala and India

(Tonnes)

Source: Kerala State Planning Board Economic Review &

Rubber Board - I n d ~ a nRubber Statistics.
1.2 Commodity Boards and Plantation Crops in Kerala

The plantation crops in Kerala receive technical and financial

assistance from the respective commodity boards. Rubber Board

is the apex institution to foster rubber cultivation, whereas, Spices

Board is for cardamom and Tea Board for tea and Coffee Board for

coffee. These commodity boards are playing a positive role in the

promotion of plantation crops in Kerala. Fortunately two among

these commodity boards are having their head quarters in Kerala.

-
The headquarters of the Rubber Board is located at Kottayam

District of Kerala whereas Spices Board is in Ernakulam district. A

brief analysis of the functioning of these institutions is as follows.

Coffee Board of India is an autonomous body established in

1942 under the Ministry of Commerce and Industry, Government of

India. The major functions of the Board are to promote research

and development and extension activities, quality upgradation etc.

The Board also focuses on improvement of domestic consumption

as well as expansion of export trade.

The Coffee Board conducts basic research and it has 75

years of experience in this field. The research activity under

Coffee Board is under the Central Coffee Research Institute in

the Chickmangaloor district of Karnataka state. This is an

internationally reputed research institution in Coffee. This research

institution publishes various journals and periodicals. It also offers

various services to growers and exporters.

The Coffee Board encourages consumption of Coffee in India

and abroad. To attain this end the Board participates in food and

beverage exhibitions in India and foreign countries. The Board

also runs 14 Indian Coffee houses in India. The Indian Coffee

house brand of coffee powder is of superior quality. I n order to

ascertain the quality of coffee in India, the Coffee Board runs two

quality control laboratories in Bangalore and Hassan, which control

and advise the industry on quality issues. The Board also has a

market intelligence unit functioning from its head office at

Bangalore that keeps thf? industry posted on the latest

developments in the market including daily updates on prices.

The Coffee Board had a monopolistic control over the marketing

of coffee in India. But after 1995 the winds of liberalization swept

the Indian coffee industry and hence the marketing of coffee

became a strictly private sector activity. This led to an abnormal

decrease in the functioning of the Coffee Board and two-third of its

employees were retrenched under a voluntary retirement scheme.

 The farmers who participated in the survey were unaware of

the services rendered by the Coffee Board. Majority of the farmers

(60 per cent) use indigenous seeds for coffee planting. Those who

use other kinds of seeds also recommended these indigenous

seeds since they are comparatively better.

The Tea B o a r d o n s in Kerah

The Tea Board is the organization through which the central

Government exercises control over the tea industry. The functions,

which The Tea Act 1953 assigned to the re-constituted Tea board,

were formerly performed partly by the central Tea Board and partly

by the Indian Tea Licensing Committee. Greater Co-ordination of

activities was expected by the merger.

The functions of the 7'ea Board are both regulatory and

advisory. The extent of cultivation and export of tea are regulated

by the Tea Board. None is authorized to plant tea on fresh land

unless sanction from the Tea Board is obtained. Advisory functions

include steps to bring about improvement in the quality of tea, to

promote co-operation among growers and manufacturers and

better working conditions for workers. The Tea Act of 1953 has

brought the production and distribution of tea waste under the

purview of the government.

The Tea Board is rendering financial assistance to the tea

gardens under its three major schemes viz. Tea Plantation Finance

Scheme (1968) Tea Machinery and Irrigation Equipment Hire

Purchase Scheme (1960) and Re-planting Subsidy Scheme (1968).

Tea plantations are assisted under these schemes and are

expected to carry out re-planting, replacement planting and

extension of area under tea.

Another line of action, which the Tea Board can take care of,

is the tea auctions. Tea auctions organized by the Tea Board,

instead of the present system of auctions, where there is an

evident collusion among major producers, brokers, and buyers, can

rectify the travails of the industry to a certain extent. I f the Board

can undertake tea auctions, it can successfully control the buying

concentration, which should be supplemented by a dilution of the

control of production from the part of the government. Along with

the organization of auctions, it can also arrange for the

warehousing facilities for the majority of the producers.

The Tea Board has made a positive contribution in improving

the production of tea in Kerala. The main complaint of the

industry with regard to the working of the Tea Board is that

although it is assumed to function as a direct line of communication

between the industry and the government, it is the contact breaker

on the line of communication. The impression is that the executive

side of the Tea Board is inadequate and the government acts

independently of the views expressed by the Board. The fact is

that neither the officers with plantation experience manning the

development directorate, nor the top management drawn from the

I.A.S. with a few years administrative experience but with little

commercial and financial experience, can be expected to rise up to

the task, particularly because the latter are transferred even before

they have acquired basic knowledge about the conditions of the tea

industry in India in the context of the World Tea economy.

Rubber Board is the apex institution on behalf of natural

rubber in India. The contribution of Rubber Board in enhancing the

production of natural rubber in [ndia is significant. The technical

and financial assistance provided by the Rubber Board, High

Yielding Varieties of clones developed by the Rubber Research

Institute of India (RRII) Kottayam, training programmes of Rubber

Board through RPS etc. contributed much for the growth of rubber

plantations in India, especially Kerala. But the expenditure pattern

of the Rubber board is not congenial for the development of rubber

cultivation in the country. The scheme-wise expenditure of the

Rubber Board is given in Table 1.5.

Table 1.5 shows that more than 60 per cent of the

 expenditure of the Rubber Board is for increasing the production of

natural rubber in the country. During 1998-99and 1999-2000the

expenditure aimed at increasing; production of natural rubber was

65 per cent and 61 per cent of the expenditure of the Rubber

- Board, respectively. I n these two years the production of natural

rubber was above the consurnption of natural rubber in the

country. Moreover the productivity of natural rubber in non-

traditional areas is less (58 per cent in 1999-2000)and hence the

input output ratio is also less for rubber plantations in the non-

traditional areas. The experlditure of the Rubber Board for

processing, marketing and product development is less than 10 per

cent in almost all the years.

The main contribution of Rubber Board lies in its ability

to enhance the developmerlt of small growers in rubber

plantations. The introduction of RRII 105 clones by the Rubber

Research Institute of India is a commendable achievement. A

survey conducted among 600 farmers in the major rubber growing

areas of Kerala revealed that 87 per cent of the clones used in

rubber plantations are RRII 105. This is the major reason for the

increase in productivity of natural rubber in India. But the fact

remains that 29 per cent of the rubber growers are ignorant of the
schemes of the Rubber Boarcl. Hence their estates were not

registered under Rubber Board.

Table 1.5

Scheme wise Expenditure of Rubber Board (in Rs. Millions)

Rubber Marketing &

Production Product Others Total

2.30 35.40 159.63

Source:Rubber Board, Kottayam Indian Rubber Statistics compiled.

While appreciating the role of Rubber Board in increasing

production and improving the quality of natural rubber, the farmers

strongly demand market intervention from Rubber Board. In

1955-56 there were 446 estates which constituted 55.35 per cent

of the total planted area. I n 1999-2000 there were only 321

estates covering 12.23 per cent of the cultivated area.

The Sbices Board

The Spices Board India functioning under the Ministry of

Commerce and Industry is the apex body for the promotion of the

production and export of cardamom in India. The Spices Board

was established in 1987 with its headquarters at Palarivattom in

the Ernakulam district of Kerala state. The Board has been with

the Indian Spice Industry in every step. The Board plays a far

reaching and influential role as a developmental, regulatory and

promotional agency for Indian Spices.

The Spices Board conducts basic research and the results are

made available to the farmers. The research activity under Coffee

Board is under the various Research Institutes in different parts of

the cou.ntry. Cardamom Research at Pampadumpara in the Idukki

district of Kerala state conducts the research related to cardamom.

This is a reputed research institution on cardamom. This research

institution publishes various journals and periodicals. I t also offers

 various services t o growers and exporters.

The Spices Board promotes production and export of organic

spices. Considering the importance of organic food products over

synthetic products, this is a remarkable step for the farmers. The

*
Board conducts training programs on organic farming in different

parts of the state. Out of the 250 farmers selected for the survey,

2 1 are the participants of the training conducted by the Spices

Board. Several institutions selected for the export of Organic

spices have exported organic cardamom to several countries.

I n spite of the fact that several research programs are going

on under the banner of Spices Board, 40 per cent of the cardamom

growers selected for the survey are using seeds produced by a

"
farmer under the brand name 'Njallany Seeds'. I n providing

market information and training facilities, the contribution of Spices

Board is significant.

1.3 Employment Generation in the Plantation Sector

Adequate supply of labour has always been one of the major

problems faced by the planters in the history of plantations in

Kerala. Tea, coffee and cardamom were initially grown in jungle-

infested inaccessible areas in the hills. They were mostly

uninhabited and there were nc, roads. So the pioneers had either
resorted to a system of forcible recruitment or imported artisans

and unskilled labourers from the nearest towns and villages.

Regional supply being inadequate, special recruitment proved

necessary to keep pace with the expansion of the industry. But

the pioneer planters' problems were made difficult due to the

competition from Sri Lanka and Malaya for South Indian labour to

work in their estates. I n early 1900's about 2, 53,000 South Indian

workers especially those from Tamil Nadu were working in Sri

Lanka's plantations.

Most of the early labour for the tea plantations in Kerala

came from Tamil districts of Salem, Madurai and Thiruchirappilly.

The immediate cause for the large migration of Tamil labourers was

mainly due the following factors.

a. Extreme poverty and insecurity of work combined with the

experience of terrible famines in the 1950s in Madras.

b. The destruction of the Tarnil weaving trade by the British free

trade.

At present plantation crops cover 25 per cent of the cropped

area in the state. The direct permanent employment opportunities

provided by this sector is above 5 lakhs. The permanent

employees in agricultural seaor are found mainly in plantation

sector. Hence plantation sector provides livelihood for lakhs of

people in Kerala. Hence the problems of the plantation sector

affect the well being of people in Kerala. For eg. the decrease in

the price of natural rubber from 1998 to 2002 led to economic

depression in central Travancore and other rubber growing areas in

Kerala. Similarly the decrease in price of tea and coffee led to

untold miseries to people in hilly areas.

Tea plantations provide employment opportunities in Kerala

to 89000 workers. One peculiarity of tea plantations in Kerala is

that it provides regular employment opportunities. This is an

advantage of Tea and Rubber Plantations over other agricultural

activities which are seasonal in nature. Rubber plantations are the

main employers in the agriculti~ralsector of Kerala. "Plantation

industries are labour intensive and rubber plantation industry is not

an exception to this rule. Rubber plantation industry plays a vital

role in providing employment opportunities to a large number of

people in the country "3. Rubber Plantations in India provided

employment to over 347700 people in 2000.

I n Kerala more than 93 per cent of the rubber growers are

small holders and the average size of their rubber holdings come to

less than 0.5 hectare. The entire enterprise of small rubber grower

3
George K.(1996) Labour C ~ ~ n d i t i o ni sn Rubber E s t a t e s -
Rubber Board B u l l e t i n , Rubber Board Kottayam p.26.

25
in India is a family concern. l'he average daily employment of

workers in the rubber plantation$; in India is given in Table 1.6

The data show only hired labour. The share of hired labour

forms only a small portion of the employment opportunities in

rubber plantation fndustry. Majority of small growers use own

labour in rubber plantations. Hence an opportunity for regular and

irregular employment (bordaux-mixture spraying, land preparation

etc.) from the rubber plantation industry is vast. The growth of

workers in rubber plantations is at a decreasing rate. One reason

for this is the decrease in the price of rubber. When the price of

natural rubber decreases, small rubber growers use own labour.

From the table it can be seen that on the whole there is

increase in the number of workers in rubber plantations in India.

Since more than 90 per cent of the natural rubber is produced in

Kerala, there are more than 300000 rubber workers in Kerala. The

number of rubber growers in Kerala comes to 900000. Here we

can see that a sizeable number of rubber growers use home labour

in rubber plantations. The Coffee plantations and Cardamom

plantations provide employment opportunities to 100000 workers.

Unlike Rubber and Tea plantations the employment opportunities in

Coffee and Cardamom are seasonal in nature. Among the four

plantation crops in Kerala, Tea is the big planters' business. Hence

home labour is the least in Tea plantations.

Table 1.6

Employment Position in Rubber Plantations in India.

Source- Rubber Board, Kottayam-Indian Rubber Statistics compiled

I n the major Tea plantations in Kerala, group quarters can be seen.

The service condition of workers in tea plantations was

comparatively better than that of other agricultural labourers. But

the crisis in tea industry in early 2000 changed the situations

leaving the workers in Tea estates in a pathetic condition.

1.4 Processing and Marketing of Plantation Crops

The processing of plantation crops follows a similar pattern

for all the crops throughout the state. The domestic consumption

of plantation crops in Kerala forms only a small part of the total

production in the state. Hence the processing of these crops in

Kerala is not aimed at domestic consumers but mainly for the

foreign market. Hence proper care may be taken with respect to

high quality processing.

The major tea plantation companies are having tea

processing factories under their ownership. Tea processing

factories process and market their tea i n different brand names.

But the small tea growers arc? not in a position to process tea in

their capacity. Hence they sell their tea leaves in their primary

form t o the processing factories. The co-operative societies are

also not in a position to start processing factories of their own.

Since India produces 27 per cent of the total tea produced in

the world, a major portion of her production is exported to other

countries. Although India is the largest producer of tea in the

world, she faces competition from importers. After the removal of

the quantitative restrictions on the import of tea in India in April

2001 the import of inferior quality of tea into India particularly

from Malaysia has increased. This is a major threat to tea industry

in India, which has led to a decrease in the price of tea. Imports

increased from 13.4 Million kg. in 2000 to 16.6 Million kg. in 2001

and further increased to 21.9 Million kg. in 2002. The adverse

effect was mainly due to the irnport of tea at lower prices. The unit

value of imported tea in 2001 was 55.721kg. which declined to

Rs.45.95 in 2002. Around 55 per cent of tea is imported from

Vietnam followed by Indonesia (20 per cent). The average auction

price of Tea at Kochi was Rs.62/kg. which declined to 471kg.in

2002. International F A 0 composite prices also declined during this

period by 10 per cent. The price fall is mainly due to increase in

supply as well as carry over stocks. The price of tea shows a

constant declining trend from 1999.

Though the wholesale price of tea in India has decreased to a

marked extent, there was no decrease in the retail price of tea.

Considering the wide gap between auction price and retail prices of

tea, the commerce ministry appointed A.F.Forgusons and company

to study the market structure of tea and to suggest appropriate

reforms, which will lead to a reduction in transaction cost besides

introducing greater transparer~cy.Based on the recommendations,

Government of India has issued the Tea (marketing) Control Order

(1984). The major features of the order were

- All primary buyers have to register themselves with the tea

board.
- Apart from manufacturers of bulk tea, those who introduced

value added products like packet teas, tea bags, instant tea

etc. have also to be regrstered.(subsequently amended)

- Similarly apart from primary buyers of bulk tea, primary

buyers of value added products like packet teas, tea bags,

instant tea have also to be registered.

- Enabling provision has to be introduced to prescribe

compulsory purchase of tea of a specific percentage through

the auction in respect of buyers.

- Enabling provision has to be introduced for prescribing a

reasonable price to be paid for green leaves for a formula to

be specified.

The amendments introduced by the Government of

India in this regard are as follows:-

- Manufacturers of hand made tea have been excluded from

the definition of the term ' manufacturer' and only those who

make tea in factories will come within the purview of the

order. Those purchasing value added tea products and

secondary buyers who do not source their teas either from

auction or manufacturers have been excluded from the

definition of ' buyer'.

- Buyers will be required to file only quarterly returns with the

registering authority. The registration fee and fee for the

issue of license has been reduced from Rs.5000/- to

Rs.25001- and for renewal of license the fee has been

reduced from Rs.1000/- to ~ s . 5 0 0 / - ~ .

The grower himself can process coffee. Farmers make

coffee powder in their houses or i n powdering mills. This is not

a costly affair. Several marketing companies process and

market value added high quality coffee. Several plantation

companies also process and sell such kinds of branded coffee.

Like tea coffee is cc~nsumedthrough out India. Hence

a portion of coffee produced is consumed all over India. Coffee

is a highly export dependent crop and more than 80 per cent of

domestic production is exported. The unit value realisation has

Economic Review 2003, Kerala State Planning Board p.51

declined drastically from Rs.95.37/kg.in 1997-98 to

Rs.50.67/kg. in 2002-03. The quantity of coffee exported from

India declined in 2002-03 to 2.07 lakh tonnes from 2.14 lakh

tonnes in 2001-02. Increasing stocks in consuming countries

more than offset the contraction in stocks of producing countries

in 2002.

World coffee prices had fallen to the lowest level since

1973 in nominal terms. The fall in Robusta prices declined from

67.53 US cents/lb in 1999 to 27.54 US cents/lb in 2001. The

international price trends are reflected in the domestic market

also. The price of Robusta coffee in 1999 was Rs.58.86lkg.

which declined to 28.541kg. in 2001. The free trade initiated by

globalisation is the major reason for the parity in the prices of

crops in Indian and international markets.

The farmer himself mainly does the processing of

cardamom. An average farmer (having land above 2 ha.) owns

processing facilities in his own premises. The processing of

cardamom is not a difficult task.

A major share of cardamom produced in India is

consumed within the cour~tryitself. Only 8 per cent of the

produce is exported to other countries. Like coffee and tea, the

price of cardamom is also showing a decreasing trend. The

average auction price during 2000-01 was ~s.570/kg. This

improved to Rs.622.96/kg. in 2001-02 and further declined to

Rs.561.13 in 2002-03 The early trends indicate that situation

has further worsened and reached a record low of Rs.358.34/kg.

during August 2003 as against Rs.743.94/- in August 2002.

The Indian export of cardamom has increased from early 1990s

and reached a peak level of 1100 MT in 2000-01 and then

declined by 50 per cent in 2002-03 (550 MT).

I n Kerala natural rubber is produced in several forms. The

average and above average rubber growers in Kerala are having

their own sheet processing facilities. These farmers own rubber

roller and smoke house facilities. The processing of natural

rubber in other forms like crumb rubber and centrifuged latex

requires costly machineries. Hence only big estates and co-

operatives possess such facilities.

Natural Rubber in its primary form is collected in two forms.

One is field latex and the other is scrap rubber. The share of

scrap rubber is 20 per cent of the total production. The field

latex and scrap rubber are processed for various uses. The

forms of processed rubber are the following:

a. Ribbed smoked sheet

b. Pale latex crepe

 c. Preserved concentrated latex

I n India natural rubber is processed mainly in the form of

sheet rubber. But in major rubber producing countries, natural

rubber is processed mostly in the form of technically specified

rubber (TSR). The grade wise production of natural rubber is

shown in Fig.l.1. I t shows the trend in the production of particular

grades of natural rubber. The share of sheet rubber remains more

or less fixed above 70 per cent I n the case of latex concentrates

there is a slightly decreasing trend.

Two reasons can be attributed for the decline in the

production of centrifuged latex. One reason is the increase in the

range between the price of RSS 4 and un graded rubber. Since the

price of field latex is related to the price of un graded sheet rubber,

farmers hesitate to sell rubber in the form of field latex. Another

reason is the reduction in import duty of polyurethane, which can

be used as a substitute of centrifuged latex.

The production of technic.ally specified rubber is showing a

decreasing trend. The scrap rubber produced by rubber growers is

processed in mainly two forms. One is technically specified rubber

and the other is estate brown crepe. Here Estate brown crepe is

included in the category of 'others'. This is a welcome sign since

the quality and the price of technically specified rubber are higher

than estate brown crepe.

Fig 1.1
Grade Wise Production of Natural Rubber in India
(In percentages in 2000-01)

- -
E4 RSS
Latex Conc.
TSR
PLC
Others

The production and consumption of natural rubber in India is

,
more or less the same. India ranks 3rdamong the rubber producing

and 4th among the natural rubber consuming countries. The range

between production and consumption of natural rubber

in India is the least among the major rubber producing and

consuming countries.

Natural rubber prices are expected to remain high in this

decade after the historical fall in 2001-02. Natural Rubber prices

are expected to remain high above $l/kg. in this decade. The

consumption of natural rubber in the world is showing an

increasing trend after 2002. The demand for natural rubber has

also been aided by lower demand for synthetic rubber the prices of

which increased considerably because of high crude oil prices.

1.5 Market Imperfections and Price of Plantation Crops in

Kerala

After 1998 - all the plantation crops in Kerala face price

fluctuations. When we probe into the reasons for the decrease in

the price of plantation crops instability in the prices can be

noticed. This is illustrated in the field survey conducted among 600

farmers in Kerala.

Table 1.7 shows that there is high rate of imperfection in

agricultural market. I n the last two years the price of coffee in

Idukki district was striking. Tne remuneration fixed by the coffee

grower for one full day harvesting of the crop was Rs.50/- only.

But in the tea shops the difference between tea and coffee is

Rs.3/-per cup. The only difference in the cost of preparation of

Tea and Coffee in Tea shops is the difference between the price of

Tea Powder and coffee powder. 'The price of coffee that the farmer

gets in the market has no relationship with the price he gets in the

tea shops. This is a clear case of market imperfection. Actually

the main problems leading to decrease in the price of agricultural

commodities are market imperfections. The benefits of these

imperfections are shared fully by the industrial and business

sectors. The farmers and the ultimate consumers are fully exploited

in this regard.

Price of Agro-based Consumer Goods

Buying Price
(In -/Kg.)
I Coconut
I 6
I 10
I
I I
Tapioca 3 6
I I
Banana 10 16
I I
Rice 9 15
I I
Coffee -- 70
I I
Tea 5 60

Cardamom 400 1000

I I

Vegetable 7 12
I I I I
Source: Field Survey
 Several are the reasons for the exploitation of the farmers

through market imperfections in the agricultural sector.

Important among them are discussed below

a. The farmers in Kerala are unorganised. Hence the demands

of the farmers will not be accepted. The existing farmers'

organisations are functiorring under the banner of political

parties. Hence the decisions of these organisations will

depend upon the manifesto of these political parties.

6. There exists oligopoly in the markets for plantation crops.

The buyers of plantation crops are few in number. For eg:-

natural rubber is consumed by tyre manufacturing companies

which are less than 5. :In the case of tea and coffee also

major marketing companies and exporters are few in

number. Hence these buyers are able to control the market

in their favour.

c. The main agencies, whicb can show the collective strength of

farmers, are co-operat~ve societies. There are special

purpose farmers' co-operative societies for all the plantation

crops. Moreover there are ' Karshakasamithies' for different

crops. Politicians to a rnarked extent dominate these co-

operative societies. Hence farmers' views are not reflected

t o a great extent. 'The failure of these co-operative

 marketing societies acts as a major reason for the absence of

collective bargaining power of the farmers.

d. The processing and marketing cost of the products from

plantation crops are comparatively larger. The processing of

natural rubber i n the form of Crumb Rubber and Centrifuged

latex requires huge machinery, which is unaffordable for a

small rubber grower. Sim~larlythe processing cost of tea is

also higher. I n the marketing front also the problems are

similar. The selling costs of these products are higher which

can be afforded only by big marketing firms but not within

the reach of farmers.

e. I n several rural areas there is absence of transportation

facilities. Plantation crops especially Cardamom, Tea and

Coffee are grown mostly in hilly areas. I n these regions

transportation facilities are comparatively lower. Hence

these farmers will not get remunerative price for their

produce.

f. The rural people are unaware of the market conditions.

Hence they are not in a position to stock their produce in

expectation of a further increase in price. Hence the

middlemen will earn this profit.

 g. I n rural areas, banking; facilities are comparatively lower.

Moreover the procedures of taking loans are not within the

reach of poor farmers. Hence the farmers are compelled to

take advances from iridigenous money lenders. These

money lenders will purchase the produces of the farmers

especially at a very lower price than those which prevail in

the domestic market in urban areas.

h. The farmers in Kerala are unable to adopt strategic

intervention in the market. The farmers are unable to

control the supply of their produce through collective action.

But the buyers are able to abstain from the market as a

strategy to reduce the price of agricultural products.

1.6 Comparative Advantage of Rubber Plantations in India.

The significance of rubber plantations in Kerala lies in the

comparative advantage of rubber cultivation in Kerala. According

to the comparative cost advantage theory of international trade put

forward by the Classical Economist David Ricardo each country

produces and exports commodities, which it can produce with

comparative advantage. Hence the comparative advantage in the

production of various crops needs to be analyzed. This can be

examined with the help of Table 1.8.

 Table 1.8.

India's Global Rank in Major Agricultural Crops.

Crops Rank in 2000

Area Production 1 Yield

Coarse Grains 4 125

Pulses 1 138

77 Oil crops(Primary)

Jute &Jute like fibres

5 147

2 1 13

Coffee (green) 7 7 14

2 2 31
I I I
Natural Rubber 5 3 1

Source: Reserve Bank of India (.%000)Report on Currency and

Finance P.111-20 & Indian Rubber Statistics compiled.

 Table 1.9

Country wise Export of Natural Rubber (In 1000 tonnes)

Source: Rubber Board, Kottayam- Indian Rubber Statistics

Compiled.

Table 1.8 shows that India ranks first in the production of

Pulses, Jute, Jute like fibers, Tea etc. But in the case of

productivity the ranks are 1138, 7 and 13. I n the case of natural

rubber India ranks third in the production and first place in

productivity. Moreover, natural rubber is the only agricultural crop in

which India ranks first in terms of productivity. Hence the

comparative advantage of natural rubber cultivation in India is

higher. But India is not incjuded in the list of natural rubber exporting

countries. This can be examined with the help of Table 1.9 which

shows the export of natural rubber from the natural rubber producing

countries.
- -.
Fig. 1.2

Export of NR from Rubber Exporting Countries

( year 2001, in 1000 tonnes)

Countries

From table 1.9 i t can be seen that India is not included in the

list of rubber exporting countries. I n the table countries exporting

less than 10,000 tones of natural rubber are not included. India is
*

blessed with a balance between demand and supply of natural

rubber. A t the same time there is lack of co-ordination between

natural rubber growers and rubber industries. The export and

 import of natural rubber is the result of the lack of co-ordination.

I n the present circumstances natural rubber is being imported

during surplus seasons and on the contrary natural rubber is

exported during deficit seasons. The ultimate result of this

7-
unhealthy competition is the loss of freight charges and foreign

exchange reserves. Hence India is not utilizing her comparative

advantage in the production of natural rubber.