by Nick Mathiason

The Chamraj estate in Tamil Nadu is thriving thanks to the Fairtrade Foundation - but the same cannot be said for the south Indian tea industry

The price of basic farm commodities has been hammered over the past 40 years, placing unbearable pressure on farmers.

At the bottom of the food chain are smallholders. With processors, brokers, auctioneers, speculators and retailers all taking a cut, there is little left to pay the producer. The situation adds to the rural poverty endured by a third of the world's population.

It is why 15 years ago the Fairtrade Foundation started. The idea is to offer growers a minimum price to make production cost effective and then pay a premium on top, to be invested in social projects – normally education, health, environment, energy and pensions. How and where money is invested is decided by a committee elected by co-op members or workers on an estate or plantation.

The Chamraj tea estate in Tamil Nadu, south India, was one of the very first to be certified. The estate used to be run by the family who founded the Hoare merchant bank in London. It is now owned by Indians. It produces 40,000kg of green leaf and 10,000kg of black leaf each day from what is the biggest factory in the Nilgiri hills, the main tea-growing region of south India. Nearly 8% of sales are Fairtrade. It exports 85% of its tea to Germany, Japan and the US, among other markets.

In 15 years the Fairtrade premium has bought a new school block with computers and laboratories, several school buses and a doubling of children in schools. Workers on tea estates are automatically housed but when they retire they often become homeless. The premium has paid for an enhanced pension that enables former workers to build a new home. It has also paid for a doctor at the local hospital and for modern medical equipment, which is used by people from miles around.

Chamraj is thriving but the same cannot be said for the south Indian tea industry. For most of the past decade prices have been so low many businesses have gone under.

The director of Chamraj, Titus Pinto, said: "Sixteen tea companies were abandoned in Kerala and a few gardens [estates] in the north. Owners just vanished because they couldn't produce tea and sell above the cost of production. So there was no money coming in.

"And the workers lost their jobs. The workers couldn't afford to send their children to schools. So children who were supposed to be at school started working, sometimes at very low salaries. The workers were deprived of some of their benefits [but] they were not made homeless. They could stay on the properties but they couldn't leave because they had no money to go and buy a house somewhere else. So they were trapped."

More than 15 million people in the developing world rely on tea for a living but currently only 10% of what is sold in the UK is Fairtrade. The next year will see the beginning of an ambitious strategy to see half of tea bought in Britain become Fairtrade.

"Even though the price of tea has risen since 2002, producers today still receive only half of what they did 30 years ago for their crop," Harriet Lamb, the foundation's executive director, said. "The reality is that the tea trade continues to keep the poorest people in the supply chain – the growers and pickers in developing countries – in poverty. Without the promise of a fair price for their harvest, tea producers have little hope of change in the future."

The tea industry in south India

South India produces 200m kilograms of tea, with half going for export. In the past, the region exported much tea to the Soviet Union and then to the newly created Commonwealth of Independent States but, in the late 1990s, the rouble currency crisis and attendant economic fallout meant orders dried up. Since then, south India has been on a mission to improve the quality of its tea to penetrate American, European and Chinese markets.

This piece originally appeared in The Guardian.

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