‘Do or die’ for Sri Lanka’s near 150 year-old plantations
In a ‘do or die’ effort to stem a complete breakdown in Sri Lanka’s near 150 year-old tea and rubber plantations, a new revenue sharing model replacing the old compulsory wage structure has been proposed.
Buckling under an avalanche of debt which together totalled Rs. 4 billion last year for the 20 regional plantation companies (RPCs) with losses estimated at Rs. 6 billion this year, RPCs are proposing a model whereby workers will be paid on their productivity rather than an assured daily wage irrespective of how much tea is plucked or rubber tapped, officials said.
The crisis is unfolding just as the industry prepares to celebrate on a grand scale in 2017, the 150th anniversary of tea since British planter James Taylor planted the first tea bush at Loolecondera estate in Kandy in 1867.
Asked to comment on these developments, a copy of which was obtained by the Business Times, Planters Association (PA) Chairman Roshan Rajadurai confirmed that a proposal has been submitted to the government and trade unions but is yet to be fully discussed with these stakeholders.
“Plantations are facing the worst ever crisis in the past 50 years. There have been cyclical ups and downs in the past but in the present case we have been going downhill for 20 months and there is no silver lining,” he said adding that the crisis is so bad that if tea and rubber prices don’t improve in coming months, some plantation companies are even considering exiting the business.
The Plantations Ministry said last week that it planned to intervene in the market by purchasing tea and reducing quantities in the hope that this would spur demand and prices. Tea traders said that news of the intervention move saw renewed interest in the Colombo auction this week from traditional buyers like West Asia and Russia/CIS states, the country’s two main markets accounting for 75 per cent of tea purchased from Colombo.
With 80 per cent of revenue going to pay wages/COP, the industry finds the current assured daily wage model unsustainable and is thus offering a new model that would sustain the sector for the next 50 to 100 years.
Tea prices have collapsed by over Rs. 100 per kg over the past year with the national tea average currently at Rs. 404 per kg versus Rs. 510 per kg in 2014. This is due to a combination of reasons including falling oil prices leading to less demand in West Asia, conflict both in this region and Russia, unsold stocks, shipping and trading complications due to the war and buyers taking more than seven months to settle payments. Rubber has also lost about Rs. 90 per kg over the past year.
With debts mounting, the collective wages agreement with unions which should have been concluded on March 31 has been delayed. Pressure is now mounting for a solution ahead of the Deepavali festival on November 10 enjoyed by the 193,000 plantations and their families which together total a million people. Unions have been demanding a new daily wage of up to Rs. 1000 under the collective agreement from Rs. 680 per day. However intervening elections and the reduced clout of the unions, particularly the powerful Ceylon Workers Congress, has not seen the usually large scale protests (unlike on previous occasions) against the delay in formulating a new wage pact.
Industry officials say that unions themselves are aware of the crisis and the inability of the plantations to pay more when prices are crashing and costs are rising. “Clerical staff on estates are from the unions … so they are well aware about the inability of the companies to pay a higher wage when the chips are down,” one official explained.
Under the current model, workers are assured of 300 days’ work and a minimum daily wage of Rs. 680 for tea plucked which averages 18 kg per day, much lower compared to 36 kg per worker in India and 50 kg per worker in Kenya.
Increase in productivity is the only way out and under the revenue sharing model, workers would be assigned 1,200 to 1,500 tea bushes per worker (somewhat similar to tea smallholders who own their land) and they could produce any number of kg from that and sell it to the estate. The cost of fertilizer and other inputs would be recovered from the workers at the end of the month. Unlike tea smallholders, the workers however won’t own any of these tea bushes or land.
Mr. Rajadurai says this model is a win-win for both sides since more quality leaf and productivity will help estates cut costs through economies of scale while workers who pluck more than the current average would be able to earn more.
He said that the revenue sharing model will transform workers to entrepreneurs with a better quality of life in addition to flexible working hours.
Industry officials say that CEOs of RPCs have been burning the midnight oil trying to find a solution but have come to a dead end other than the revenue sharing concept which has worked in many countries.
“If anyone has a better way to resolve this crisis we are more than willing to consider, discuss and execute,” asserts the PA chief.
What if the unions don’t accept the proposal? “Then the writing is on the wall … some companies are likely to exit and we may have a problem paying wages,” he said adding that there are already reports of some estates delaying wages.But he and other industry officials asserted that it was in the interest of everyone including the public to sustain plantations because it is not only the lifeblood of the nation but also part of the country’s culture, lifestyle and an asset in terms of ecology, environment and tourism.