A worker sprays pesticides on a tea plantation in Coonoor, Tamil Nadu, India, on Saturday, November 30 2013

The World Bank is launching a formal investigation of its investment into a company set up by Tata Global Beverages, maker of Tetley tea, to own and operate 24 Indian tea plantations that the Mumbai conglomerate wanted to divest.

In April 2009, the International Finance Corporation, the World Bank’s private lending arm, took a 19 per cent stake in Amalgamated Plantations Private Ltd, which now runs the plantations in Assam and West Bengal previously wholly-owned by the Tata group.

However, social activists have raised serious concerns about working conditions and health and safety practices for the 31,000 permanent workers at APPL, in which Tata Global Beverages, the former Tata Tea, is still the largest shareholder.

Last year, three non-governmental organisations, including a church group, filed a complaint on behalf of workers on three APPL estates alleging inhumane living and working conditions including excessive working hours, poor health and hygiene conditions, insufficient water, and lack of freedom of association for the workers – all potentially serious violations of Indian law governing plantation labour.

Earlier incidents in 2009, when workers were subjected to a three month lockout, and 2010, when two protesters were shot dead and several injured as police tried to suppress demonstrations following the death of a 25-year old at work, had already raised concerns among NGOs and international unions about conditions on the plantations.

The Compliance Advisor Ombudsman, the IFC’s independent grievance redress mechanism, said late on Tuesday that it will investigate whether the IFC conducted proper due diligence both before investing in APPL, and in its subsequent supervision of the plantation company.

The decision to launch the probe comes just a day after a report by the Columbia Law School Human Rights Institute criticised an APPL share-purchase scheme for the impoverished, mostly illiterate plantation workers.

Some 21,000 are now investing Rs8000 ($128), equivalent to at least five months net wages at this year’s pay rates, in APPL shares, funded by interest-free loans that will take seven years to repay through pay-cheque deductions.

Tata Global Beverages decided more than a decade ago to stop running tea plantations in order to focus on more lucrative areas of retailing and marketing, with APPL created to hold many of its former tea estates – and eventually, go public.

In a preliminary assessment last year, the CAO found that the IFC invested in APPL primarily on the strength of Tata’s reputation of “being at the forefront of Indian corporate practices” in regard to labour standards. But the ombudsman said there was no evidence of any IFC discussions with workers or unions to verify the Tata’s claims about conditions at the plantations.

The CAO questioned whether the IFC had “sufficient evidence to support the strong positive findings on labour relations and occupational health and safety issues” before investing. It also expressed concern about the IFC’s supervision, and assessments, after the two incidents of labour unrest.

Get alerts on Indian society when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article