Plantations future in jeopardy after ‘forced’ wage hike

The recent ‘forced’ round of wage increases for plantation workers has thrown plantation companies into turmoil and a severe financial crisis, the Planters Association of Ceylon (PA) said.

In a statement it said five or six of the larger companies are particularly grappling with severe financial issues following the increase and believe that their sustainability and development capability has been threatened.

The PA, representing plantation companies, said that plantation companies were literally forced to accept the government directive when the unions leveraged the delicate political situation to seek government intervention for a further wage hike. Now these companies have made a full assessment of the implications on the plantation industry and are concerned that its future has been put into jeopardy by the knee-jerk decision thrust on them.

The profitability of the Sri Lankan tea industry, like any other plantation industry, rests heavily on the movement of global market prices and production costs. High cost of production due to uncontrollable overheads and the emergence of low cost global producers like Kenya, Indonesia and Vietnam etc. were of much concern to Sri Lankan producers and the Regional Plantation companies, trying hard to stay afloat and make ends meet. This (wage hike) intervention was despite a legally binding collective agreement signed in late 2006 and valid until December 2008, following prolonged negotiations, go slows and strikes resulting in considerable losses to the industry and national economy.

Several rounds of discussions with the Minister of Labour Relations and Manpower where the companies pleaded that the industry could ill afford another interim wage hike and the impact it would have on the industry’s future, was of no avail and the final outcome was more a political decision rather than one taken in the interests of Sri Lanka’s plantation industry. The agreement signed in late 2006 increased wages by 33% and guaranteed workers a potential of earning Rs.6,500 per month, well above the minimum of Rs. 5,000 set by Wages Boards for other sectors, based on workers utilising the 25 days of work per month which the plantation companies are obliged to offer.

“Leave aside the wage increase. The sanctity of Collective Agreements has been compromised by violating its term in an unorthodox manner,” said Ravi Pieris, Director General of Employers’ Federation of Ceylon (EFC). “This sets a bad precedent for all other collective agreements.”

Secretary General of the Planter’s Association, Malin Goonetileke said that considering that wages account for 60% of production costs, the impact of this wage hike, thrust mid-stream upon the industry, means an annual additional burden of almost Rs.2 billion which has to be borne by the Companies without any gains in productivity.