INTER-MINISTERIAL COMMITTEE ON PLANTATION SECTOR SUBMITS REPORT TO THE UNION LABOUR MINISTER

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Dr. Sahib Singh Union Labour Minister today received the first copy of the Report of the Inter-Ministerial Committee on Plantation Sector. The Ministry of Labour constituted an Inter-Ministerial Committee with the representatives from the Ministries of Commerce, Finance, Labour and the State Governments of Assam, West Bengal, Tamil Nadu and Kerala:

1. to study and explore the possibility to allocate social sector funds for the plantation sector through earmarking funds from the social sector ministries and State Governments;
2. to examine the policy of imports of tea for re-exports and the problems which Indian tea industry faced by way of imports of poor quality for re-export;
3. to examine the existing taxation structure for the plantation industry which was stated to be adverse to the industry;
4. to examine the issue of price determination in the auction system; and
5. to explore the modalities of remitting the provident fund dues of workers after discussing the matter with the employers and the workers representatives.

Subsequently the Committee co-opted Chairman Tea Board, Chairperson Coffee Board, Chairman Rubber Board, representative of Indian Tea Association and representative of UPASI (United Planters Association of South India) as members.

Plantation crops such as tea, coffee, rubber and cardamom are grown in Kerala, Tamil Nadu and Karnataka in South, and tea in Assam and West Bengal in North. There are other states who are minor players in tea cultivation. The plantation sector also provides round the year employment to the workers and promote a lot many ancillary activities. Substantial revenue accrued to the exchequers of the central and state Governments from plantation crops by way of cess, additional excise duty, sales tax, central income tax and agricultural income tax etc.

The highlights of the Executive Summary of the Report is as follows:

1. The Inter-Ministerial Committee (IMC) was requested to report on the possibility of allocating social sector funds to the plantation estates, the policy of import for export, the taxation structure, the issue of price determination and arrear provident fund dues.

2. The IMC considered it desirable to report only on social sector funding, taxation structure and arrear provident fund dues and set up three expert sub-groups.

3. The plantation industry consisting primarily of tea, coffee and rubber spread over many states. The largest in tea plantations is in Assam. Karnataka is dominantly a coffee producing state. Kerala and Tamil Nadu produce tea, rubber and coffee.

4. India is the largest producer of tea in the world accounting for 28% of world trade; while export of tea is decreasing, the import is rising.

5. The production and export of coffee is rising.

6. Many tea estates are closing down, especially in Kerala and West Bengal.

7. The age-old industry, in the changed environment of freer trade has not been able to withstand the pressure on its margin.

8. The marketing arrangement, high agricultural income tax and the wage-setting process contributed primarily to the poor health of the tea industry.

9. The plantation industry is regulated by the Plantations Labour Act, EPF & M.P. Act, Tea Act, Coffee Act and Rubber Act.

10. The Plantations Labour Act has made elaborate specification for provision of medical and other welfare amenities for plantation labour.

11. Twenty-six per cent of the population in the country are still below the poverty line who do not have income above Rs.327.26 per month. Among plantation states, there are still 36.09% of population in Assam living below the poverty line.

12. Significant proportion of the population in the country still do not have access to education health, water and sanitation.

13. The finances of the Union and the States is under strain. The consolidated fiscal deficit of the Union and the States together was 10% of GDP, according to the revised estimates for 2001-2002.

14. UPASI feels that expenditure on welfare provisions mandated under the PLA is burdensome for the industry, and affecting its competitiveness. The rate of Agricultural Income Tax (AIT) is high and should be reduced to 35% and penal provisions under EPF & MP Act for non-remittance of PF dues, be waived.

15. ITA suggested the incidence of AIT should not exceed the level of corporate tax, tea be levied sales tax at the rate of 4% and penalty on arrear provident fund dues waived.

16. The welfare cost per kg. of tea produced is Rs.3.96 and Rs.7.17 in South and North India, respectively.

17. The higher cost in North India is primarily on account of non-statutory but customary commitment on food and fuel (as high as Rs.4.28/kg. of tea).

18. India is the highest cost tea producer in the world. The cost of production is US$ 1.62 in India compared to 0.32 in Bangladesh.

19. Expenditure of the plantation industry on account of Plantations Labour Act be reimbursed to the plantation estates through Government funding. The annual requirement has been arrived at Rs.291 crores.

20. Provident fund contribution is governed by the Employees Provident Fund and Miscellaneous Provisions (EPF & MP) Act. The Act is applicable to all plantation estates, except Assam. In Assam, the relevant statute is Assam Tea Plantations Provident Fund and Pension Fund (ATPPF & PF) Scheme.

21. As on November, 2002 1367 plantation units are defaulting out of 4819 registered units. The amount of default at the beginning of the financial year was Rs.2212.34 lakhs and the amount collected during the year was Rs.397.98 lakhs. The total current default position in November, 2002 in the plantation industry (except Assam) was Rs.2800.59 lakhs.

22. Rs.1199.44 lakhs amounting to more than the half of the default was accounted for by 84 defaulting units out of 1050 registered units in Kerala. The other significantly default state is West Bengal. In Assam the default is as high as Rs.2677 lakhs involving 169 defaulting gardens.

23. Elaborate provisions of contributions, assessment, recovery, damages and penalty under the PF & MP Act have been provided.

24. The current thinking in the EPFO for liberalization of penal provisions.

25. Apportionment of central income tax and agricultural income tax for tea is in the ratio of 40 : 60. The ratio in case of rubber is 35 : 65, and 25 : 75 in the case of coffee.

26. The high rate of AIT has imposed a burden on the plantation industry and affected the re-investible surplus and the incentive structure.

27. The tax rate is very high compared to the tax rate in the competitor nations.

28. Too many other taxes, besides income tax, have made the process cumbersome and made it difficult to assess the incidence of tax.

29. There are very many taxes imposed by the Government of Tamil Nadu, Kerala, Karnataka, West Bengal and Assam.

30. Prof. Chelliah views the whole issue of taxation of the industry, not one of reducing this tax or that. For him it is a question of looking at the entire task from the point of view of economic efficiency and economic growth.