Assam Tea Corporation – the way ahead

Government organizations that compromise between profit and greater social good may end up having a halfway house.  When such problems are inherent in the mission and vision of an organization it would be difficult for an organization to survive. Assam Tea Corporation (ATC) might be necessitated to ponder over their strategic decision making process if the organization wishes to revive itself and work to the fullest of its potential. They would be faced with a similar dilemma in doing so.  

Assam Tea Corporation was established in 1972 with the objective of protecting the biggest industry in Assam. Assam Tea Corporation was started under gloomy conditions during the 1960s and 1970s after the introduction of Foreign Exchange Regulation Act compelling the foreign tea companies to dilute their shareholder in tea companies in India. It was opened with the objectives of carrying out business of tea, protect and control the tea industry and the interest of the many people associated with the industry in Assam. The initial gardens that were acquired by the Corporation, prominent among them being the ones acquired from JTCL (Jorhat Tea Company Ltd.) were delivering profits. To safeguard the interest of the people and industry ATC was entrusted with the responsibility of acquiring sick gardens and till date it has acquired 14 such gardens. In simple terms sick gardens are those that are closed down by previous owner or is on the verge of closing due to lack of money. During the initial acquisitions the corporation could divert money from the profit making gardens to the sick gardens for its operations. But with subsequent acquisitions the pressure increased and the profit making gardens started to fall sick. ATC was lacking money for its operations; they had a high crunch for working capital. Without distinctive planning the crunch increased to a level where the organization was on verge of closing its operations on 2001. With efforts from multiple stakeholders it resumed its operations in 2004. However the industry was hit. Many of the factories were shut down and the corporation had high accumulated losses. The 2006 balance sheet shows a loss of INR 155,612 for a company with the total asset value of INR 1,172,894. The factories that ceased operation was now becoming an additional holding cost for them. Due to lack of capital the replacement of the old bush has become hard. The overall operations have shrunk putting the large labor force in position of uncertainty. The corporation is unable to meet the basic facilities of the labours on a regular basis.

The scenario of the Indian tea industry during the last decade of the century as a whole was dreary. Tea plant was first spotted in Assam by Robert Bruce, a merchant and soldier way back in 1823. Among Indians it was Maniram Dewan an Assamese noble man who first started tea plantation. Many others followed his footsteps which led to the growth of tea plantation in Assam. Later many private players like Birla, Tata entered the fray. During the nineties the situation of the Indian tea industries was depressing. Prominent among the reasons were the disintegration of the erstwhile USSR that was the largest importer of the Indian tea. Among others was the problems problem of labor. India has lost its position as the largest exporter to China in 2004. India has come down to the third position in terms of export after Kenya and Sri Lanka. Indian tea is fast losing its brand value in the international market.

Assam produces nearly 56% of India’s tea. Assam teas are quality product and much valued in international market. The sector generates many direct and indirect employment opportunities. Apart from big companies like Assam Tea Corporation, Wiliamson Magor, and Tata Tea many small and medium scale growers have emerged over the course of time. Tea industry is now faced with new challenges. Significantly growing small tea growers who are more driven by quantity than quality that is starting to impact the quality of Assam tea. Without much development of new methods and technologies the tea industry is highly dependent on the weather conditions and manual labor. Climate change though not significant, has started to impact the productivity and availability of labor is a serious concern. A slowly brewing challenge will come from the coffee industry. Many national and international players are trying to endorse the coffee culture. Govt. is entrusted with the responsibility of safeguarding the interest of the people. ATC was entrusted with the responsibility of safeguarding the tea industry in Assam. The task is difficult when they are struggling for survival.

Now the obvious question is, is there a way ahead? Robert L. Flood and M. C. Jackson in their book ‘Creative Problem Solving’ argued that usual approaches don’t help organizations deal with their most important problems. ATC needs to device its own unique strategy to come out of the crisis. Land and Labor are two big assets that ATC has. Apart from this ATC also have infrastructure, old machinery of the factories. It needs an efficient and effective utilization of the resources to overcome the crisis. The challenge before them would be to accommodate the twin goal of revival and the social objective. The land that is devoid of plantation, the factories that are not operating could be used to generate revenue. In utilizing these assets ATC could lease out the assets. However large players would be able to benefit if large sections are put out on lease. This might disrupt the power balance in the sector. The other way ahead is utilizing the unemployed and educated youth to create small bodies leasing out small sections. The expertise in plantation and excess labor force in ATC could be utilized. This model could be used to replant in the areas of old plantation. Additional plantation activities to increase the yield per hectare or cultivation of crops that could result in value added products in the unplanted lands should be sought for. Capital investment for kick starting could be done through venture philanthropist, CSR or from financial institutions.  Production companies would be formed out of those bodies when they gain experience to exercise operations on the recovered sick gardens.

In future ATC needs to focus more managing rather than operating functions. ATC need to be more involved in the functions of value additions in tea and mitigating future challenges to the industry. ATC can focus on capacity building in the gardens performing well and strategically develop centers for creating new value added products. Organic tea is a new way to capture the lost foreign market. The gardens under the control would have potential of generating high revenue to create revival of the sick gardens. Assam tea has not lost its value in the international market and brand enhancement of Assam tea is highly demanded. Is it so easy?  Not really. There could be different strategies ATC could adopt in the way ahead. Above analogy shows one such approach while the consulting report by P&A associates, 2008 highlights another. What is of utmost important is the willingness of the management and the employees to work hand in hand to achieve the target. This would happen when the remuneration of the senior management is connected to the performance of the company. That is the important driving factor of well performing private sector. The top management of ATC largely comprise of bureaucrats. It has invariably argued many a times that bureaucracy needs to be separated from business. Albert Einstein said “we cannot solve the problems we have created with the same thinking we used in creating them”. A management body with expertise in technical, marketing and financial knowledge would be necessary to continue its functioning ahead.  Transparency and accountability are two important aspects that needs to be seriously focused. When I tried to search for the balance sheet of the company I couldn’t find one from the company’s side for the last 10 years in any public domain despite being a public company. This raises serious question on the functioning of ATC.

The recently elected state Govt. of Assam has kept development of Assam as the primary agenda. In 2014 our honorable prime minister came with the optimist picture of Acche din and look east policy. Does the lens for looking into the east be widened to include such atrocities being done at the cost of tax payers money? We are trying to drive new industrial growth through initiatives like make in India on the one hand when we are losing traditional business on the other hand. Tea industry has been providing significant number of direct and indirect employment to many people and it has the potential to provide more. We are at a critical juncture where we have still have opportunities to gain back the lost market but it is high time to act fast. Can a more concerted effort be put in to revive and continue the industry?