Development of INDCO Tea Factories in Tamil Nadu

The INDCO tea factories plays a very crucial role in sustaining rural economy in Nilgiris since inception. The first unit of INDCO was opened at Kundah in 1962 and the latest one at Bitherkad in 1998. This unique model was introduced by Government of Tamil Nadu to provide an opportunity to smallholders in sustaining their livelihoods and safeguarding them from the vulnerabilities of market. Though there are 15 states in India where tea is grown by smallholders today, such an initiative of regional development model at grassroots is lacking in other states. The INDCO tea factories are identified as growth-centres and equated as spatial model in boosting rural economy by engaging growers and improving their scale economies. This model allowed the participation of smallholders in tea processing and marketing of made tea through auction and non-auction routes and showed their visibility in tea supply chain. The present chapter is an attempt to have critical review and map the journey of 15 INDCO factories, their functioning and deliveries made during the post-reform period. It was seen that though all the 15 factories operated under the similar forms of governance structure, their performance and deliveries differ over geographical space within the region. There is a spatial variation of the outcomes of the growth-centres over a period of last twenty-five years (1990–91 to 2015–16). Therefore, an attempt is made to answer whether local geographic conditions and governance play a vital role in their functioning and efficiencies or external economies impacting the viability and sustainability of such units. It is also realized that there are 181 privately owned Bought-Leaf Factories (2004) producing roughly 70–80 million kg made tea in a year. This mushrooming growth has happened mainly during post-reform period. It is apparently seen that there is a huge private capital entering into smallholder sector to capture the tea market in Nilgiris though the region has witnessed a classic model of cooperatives in the country since 1960s. Therefore, the chapter focuses on their economy and functioning of INDCO tea factories during the post-reform period and seeks to answer whether unhealthy competition, between corporate ownership of Bought-Leaf Factories and State-owned INDCO factories with limited capital flow, can sustain the force of economic liberalization.