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`Employee buyout' model in tea plantations tastes success

R. Ramabhadran Pillai

Kanan Devan Hills Plantations company plans diversification

MUNNAR: The success of the Kanan Devan Hills Plantations Company Private Limited, a new venture formed under the `employee buyout' scheme, is giving new hope to the crisis ridden tea plantations in Munnar. The company, established in April 2005, has recorded a post-tax surplus of Rs.2.37 crores in the very first year of operation and is set to attain greater heights.

The new model for running the company was evolved at a time when the plantation sector was no longer an attractive proposition. Though the South India Plantation Division of the Tata Tea management had taken a decision to exit from the plantations, it was keen to protect the interests of the employees, according to T.V. Alexander, Managing Director of the new company.

A cooperative model was tried, but the employees did not find favour with it. The `employee buyout' model was explored then. It envisaged the formation of a professional managed company having employees as part owners. The ICICI Bank was chosen as the financial partners.

A voluntary retirement scheme was rolled out as part of the scheme. About 3,000 out of the 16,000-odd workers opted for the VRS.

In the first stage of transition, the business of the 16 estates in the High Range in the Kanan Devan Hills was transferred to the new company. Over 12,000 employees representing more than 97 per cent of the workforce became shareholders in the new company, holding almost 70 per cent of the equity stake. Tata Tea holds 19 per cent stake in it.

The new company administers a total of 24,137.51 hectares of land. The company has on its rolls 13,115 employees including 11,996 workers, 322 supervisors and 63 management staff.

"In a radical shift from the past, the company has introduced a bottom-up management plan rather than the top-to-bottom hierarchical approach that has been the norm in the plantation industry," says Joy Joseph, a Director of the company. The company gets a participatory nature because of the inclusion of representatives from workers and staff, points out T. Damu, another Director. The company has inducted Chandra and T.M. Abraham, as directors representing the workers and staff into the Board of Directors.

Advisory panel

Divisional Advisory Committees have been set up to advise the company on daily administrative functions as well as welfare and safety aspects. The committee has a representation from the workers. Two men and two women workers and a supervisor are elected from among the shareholder-employees. The committee holds weekly meetings to discuss matters such as manpower deployment and material requirement. There are advisory committees at the factory level. The Divisional and Factory advisory committees liase with consultative committees that hold monthly meetings to advise on matters like cost control and productivity enhancement. There are various sub-committees to advise on functions like marketing and business diversification.

A productivity linked incentive scheme has been introduced by the company. The average productivity has increased from 28-30 kg. to 39-40 kg. now, according to Mr. Alexander.

The workers have to be complemented for this, observes Mr. Damu. The company expects an increase in turnover to Rs.130 crore this year from Rs.105 crore recorded last year.

The company has ambitious plans to diversify. Key initiatives have already taken for producing strawberry and a variety of vegetables. It is awaiting a key legislation that permits a small percentage of tea plantations to be converted for other useful purposes. The company is planning to produce organic tea and `white tea' for export. Initiatives have also been taken to expand plantation tourism. Re-plantation is also being taken up in phases in a bid to increase the production.

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`Employee buyout' model in tea plantations tastes success

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