The plantations industry which is currently passing through a bad phase has been further hit by the recent diesel hike announced by the government. Moreover the prices of leco have also gone up substantially.

All this, besides other taxes and duties, would result into very high production costs and its is feared that many planters may have to opt out of their business. Not to forget the labour related problems which the plantations industry has been facing from quite sometime now.

As PAT's president, Sethna will have a tough year ahead as it will be during his tenure when a final wage settlement has to be negotiated with the labour work force, for a three- period term from January 1.

The Financial Express spoke to Sethna on his experiences during the past one year as on his priorities for the coming year

What are the major issues affecting the growth of the plantations industry ?
The main concerns of the plantations industry in Tamil Nadu are related to high rate of agricultural income tax, a very high sales tax, the Rs 2 excise duty on bulk tea, the irrational labour demands, the recent hike in leco prices and the diesel price hike which would result into very high transportation costs.

All these factors have resulted into a massive increase in our production costs. The government must immediately take note of these issues before planters in industry are forced to pull out of their businesses.

Agriculture income tax, which has been contributing to the state's revenues in a big way, has been the most talked about subject at every forum. As against the existing tax structure, what do you feel needs to be done and what is your justifications towards this. What are the rates in the neighbouring states?
The agriculture income tax levied on the plantations by the state governments continue to be very high and is in the range of 50 to 65 per cent. The rate of this tax is the highest in Tamil Nadu at 65 per cent.

Moreover, we are taxed by the state as well the centre. As for instance, while 40 per cent of the income from tea is taxed under the Central Income Tax Act (CIT), 60 per cent is taxed under the state agricultural income tax acts (AITs). The state AIT is the highest in Tamil Nadu at 65 per cent compared to 60 per cent in Kerala and 50 per cent in Karnataka.

This high rate of taxation seriously affects the capacity of internal resource generation by the plantations. This needs to be ratified immediately by the government.

We feel that the assessment of income tax payable by a planter should be brought under the purview of the central income tax act and then subsequent allocations can be made to the states. The plantations industry should also be taxed in the same way as other manufacturing industries.

Both PAT and UPASI, have been taking up and pursuing the issues with the southern state governments. My efforts would be to request the government to bring down the rates at par with the central income tax rates. This is a a major issue which needs to be re-looked by the government to help survive the plantations industry.

You mentioned about zonal classification of excise duties. Can you explain?
Excise duty on packaged tea was re-introduced in the Finance Bill 1997 and was subsequently abolished in the last year's budget. However, a high level duty at the rate of Rs 2 per kg was introduced on bulk tea at the point of production in the estate and the bought leaf factories, all over India.

Ever since 1958, the government had taken care to see that different tea growing regions in the country received fair and equitable treatment taking into account their cost of production, price profile etc.

All along differential rates of excise duty used to be prescribed based on a zonal classification and the South India tea produce always attracted a much lower level of duty. South India came under the category of Zone II and was bearing only one- third of the levy prescribed for zone I.

The entire tea plantations of the South are in hilly terrains and the cost of production of tea in the South is very high especially because of the labour wages. The tea industry in South is already facing a very difficult situation and the excise duty at Rs 2 per kg is an enormous additional burden that the tea industry is finding difficult to bear.

It is in this backdrop that PAT feels that the government must abolish this duty and till the time it is done, the duties on the teas produced in South India should be lowered to one- third of the normal rate as was being done in the past.

What are the major labour issues which are coming in the way of the settlement of the wage agreement?
The plantations industry in Tamil Nadu employs as many as 1.75 lakh of workers. Labour wages are the highest in South India and as on date it is Rs 63.88 per day as compared to Rs 31.60 in Assam and West Bengal and Rs 56.25 in Karnataka and Rs 62.33 in Kerala.

Apart from the cash wages, plantation workers are paid substantial incentive wage and annual bonus and are also entitled to a large number of retirement and social security benefits which take up the real daily wage paid by the Industry to over Rs 120 a day.

However there have been unfair demands over increasing the daily wages to Rs 150 a day which amidst growing production costs seems an unviable proposition. It is on account of this only that a proper wage settlement agreement has not been finalised. However we are trying our best to reach on a mutually agreed wage settlement and the negotiations in this regard are on with the labour workforce.

What are your views on the recent diesel price hike. How has it affected the plantations industry?
The recent diesel price hike besides the steep hike in leco announced by the Neyveli Lignite Corporation (NLC) may put a heavy additional burden on the production costs of the plantations industry. It is estimated that the production costs would go up substantially by Rs 8 a kg. The industry is already burdened by heavy taxes and duties besides high labour wages. All these escalations are creating major problems for the industry and needs to be corrected upon immediately by the government.