The Beedi Industry in India

Based on a draft report circulated by the Centre for Workers’ Management, New Delhi

CWM recently undertook a study of bidi work across four states in India – Karnataka, West Bengal, Maharashtra and Madhya Pradesh. The objectives of the study were triple: One, to assess how the ‘job work from home’ structure of bidi rolling had impacted workers access to minimum wages and other statutory benefits; Two, to gauge the validity of management threats to close and shift operations to other states when faced with labour agitation; Three, to verify management claims of falling profitability in the sector.

Brief Overview

In 2015, the estimated number of beedi smokers in the age group 15 to 69 years was around 69 million (6.9 crores). To compare, the same estimates for cigarette smokers was around 61 million (6.1 crores).

Children in beedi work – Pc Womens news network

The beedi industry in India employs an estimated 5 million (50 lakh) workers, around 90% of whom are women. These women undertake beedi rolling despite very low wages as the work is home-based and can be done without the time constraints of a factory environment. But the absence of a factory environment leads to very little regulation of employment relations or working conditions.

The primary employers in the four states that were studied are some of the largest in the country: Mangalore Ganesh Beedi Works and Bharat Beedi Works in Karnataka; Shyam Tobacco, Ceejay Tobacco, PatakaBiris in West Bengal; Ceejay Tobacco and Sable Waghire in Maharashtra; PrabhudasBeedis in Madhya Pradesh.

Beedi workers are entitled to minimum wages, leave wages, provident fund, bonus and social security via the Bidi Workers Welfare Fund Board which is funded through a cess on manufacturers. Through the board, workers can get health care and scholarships for their children.

Payment of Minimum Wages and other benefits

Women Rolling Beedis

Karnataka: Despite minimum wages being fixed as per the Minimum Wages Act 1948, the bidi industry in Karnataka refused to pay the mandated amount, taking the fight all the way to the Supreme Court. The legal battle went on for ten years and in the interim, the industry signed an agreement with many trade unions settling for an amount that was less than the mandated minimum wage at the time. The employers argued that paying the minimum wage would’ve been financially disastrous to them and would force them out of business. CWM points out that this is wrong on two counts: one, the Minimum Wages Act negates any agreement that allows an employee to settle for an amount below the minimum wage and two, Justice Gajendragadkar of the Supreme Court was unflinching in his statement that “No industry has a right to exist unless it is able to pay its workmen at least a bare minimum wage”. In the end, the Supreme Court case was never heard as a settlement was signed in 2007 where employers agreed to pay minimum wage and paid out Rs 4500 as arrears for the previous decades’ exploitation!

Madhya Pradesh: In MP, the absence of a review mechanism for 50 years that rectified the notified Minimum Wage with regard to inflation led to statutory wage that in 2014 was 23% less than the wage in 1966. Finally, in 2014 the minimum wage was revised to Rs 92 per 1000 bidis but this was linked to a minimum production which contravened the intent and premise of the Minimum Wages Act.

West Bengal: In WB, the notified wage is about Rs.190 per 1000 bidis but workers get paid approximately 2/3rd  -Rs.126 per 1000 bidis. This was fixed at a negotiation between unions and employers in Murshidabad and copied in other districts. The labour department isn’t included in these consultations and no benefits other than PF are agreed upon.

Maharashtra: Similarly, while the statutory rate is Rs.210 per 1000 bidis, workers only get Rs.140 in Maharashtra. This is informally fixed between employers and unions in Solapur, the biggest hub for bidi rolling, and is copied elsewhere in the state. The negotiations between unions and managements happen only after strikes and agitation. No automatic increase linked to the actual minimum wage takes place.

As the CWM report states, “The main issue with wage regulation in the industry in West Bengal and Maharashtra is the impunity with which the Minimum Wage Act is violated.” Also, the lack of linkage between Variable Dearness Allowance (VDA) and the Consumer Price Index leads to workers seeing a fall in wages in real terms – sometimes up to 25%.

Provident Fund: Most employer bypass provident fund norms by simply underreporting the number of employees. But using production numbers and average worker capacity, normal number of workers can be calculated. One estimate says that 96% of Madhya Pradhesh’s bidi rollers are not registered on the books of their employers. In some places like West Bengal, the workers are aware of it and see it as an important saving mechanism but in many places, they aren’t aware.An employee of a bidi manufacturer in Bangalore said only 1500 out of 25,000 workers were on the rolls. Most factories have a very hands-off attitude with regard to PF, saying that it is the responsibility of the contractors to ensure that the money reaches the workers.

Leave Wage: Most workers didn’t know that they were entitled to leave wage and were not clear on what it entailed.

Bonus: While they were paid bonus in many places, workers did not have any real way of keeping track of how much they were owed and could not verify if they were being paid the correct amount.

Welfare Board: Bidi Workers Welfare Board was constituted through Bidi Workers Welfare Fund Act and is funded by a cess charged on bidi manufacturers. The cess is currently Rs. 5 per thousand bidis. In Mangalore in particular, the workers were all aware of the Welfare Board and were making use of it to avail scholarships for their children who used it to study and get jobs outside of bidi rolling. But in Bangalore, most workers had no interaction with the Welfare Board at all. So even within a state, depending on the strength of unions and collective bargaining of workers, access to Welfare Board varied. In Solapur, Maharashtra where unionisation is high, most workers reported access Welfare Board for scholarship and health facilities. Even houses had been constructed.

The Political Economy of the Bidi Industry

The tobacco comes from Gujarat and North Karnataka and the tendu leaves from Madhya Pradesh, Rajasthan and Orissa. Procurement is centralized to ensure quality while production is dispersed. Most of the large bidi manufacturers have operations in multiple states (to take advantage of lower wage rates) though their markets are mainly in the North. The tobacco is premixed (unique to each brand) and sent to the production centres. From there, tobacco and tendu leaves are dispersed through contractors, rolled by the workers and collected back again in the production centre. They are roasted and sent for packaging and once that is done, they are transported to the markets.

Interviews with contractors revealed that the original commissions did not work for them economically either. Thus they had to collect commissions over and above the basic rate – either in cash (from workers’ wages) or in kind (by pocketing some bidis which they would sell on the open market). Some of them even give the workers less than their fair share of tobacco or tendu leaves so they can use it elsewhere. As one contractor said, “That is how we make our profit. This sort of operations has become the unsaid rule of this industry. True we feel like thieves – stealing on our own efforts.The big companies extract their profit at our expense and we are made to look like the thieves.”

CWM estimated that the bidi industry’s aggregated revenues are Rs.16300 crore per annum. With the biggest players have turnovers of Rs.500-900 crore each. It is a common refrain that the bidi industry is facing a declining market with cigarettes growing in market share. But an analysis of profits for the major companies and their dividends (in case they are companies) shows that they are still earning substantial profits. Most have more than a 10% rate of profit after tax as per their official financial statements. The companies tend to be family-owned and pay their promoters in crores every year in the form of salaries and dividends.

Note on the Threat of Production Shift

A regular threat issued by managements is that they will shift production to other states in case of worker agitation or government intervention. While this did take place in 1968 with Mangalore Beedi shifting away from Kerala, CWMbelieves that this is much more unlikely today. There is a segmentation of the market according to preferences of the consumers so brands can’t just switch markets at will. A combination of VAT rates and labour costs tends to make financial ratios almost similar across states so there isn’t a real economic benefit from shifting production. Most importantly, manufacturing systems take a lot of time and investment to build and they are not easy to replicate in a new area.

CWM has not made their report public as yet – only a draft is being circulated. They hope to build on this report by working with unions and workers on the issues discussed. Armed with these facts, unions can refute many claims made by the management, especially regarding their financial conditions and the threat of shifting production.


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