Sri Lanka’s plantations have been hit by more than a couple of blows in the past few months and further exacerbated by tensions in the Middle East.
With tea prices down coupled with higher wage costs after the last Collective Agreement between plantation unions and estate management, the plantations have been hit by lower yields and higher cost of production.
As our story last week revealed some plantation companies are considering exiting this sector or handing over management. Particularly affected are the high grown tea estates and among them, companies that are solely dependent on tea. Companies that have a mix of high growns and rubber or oil palms have been able to hedge against losses because the latter two crops have been doing well.
However rubber prices are slowing down its forward pace with oil prices falling, thus reducing the dependency factor of some companies to use it as hedge against tea losses.
Battered and bruised, the next big challenge estates are facing is the annual advance to workers for the October 26 Deepavali festival.
Says Roshan Rajadurai, Deputy President, Planters Association (PA) of Sri Lanka:“This is going to be a big struggle if the Government doesn’t help us out . Estates are having a major cash-flow situation and each would have to fork out Rs 30-40 million totaling some Rs 600 for the 20 plantation companies. “The other problem is when some companies which are doing reasonably okay because of exposure to rubber or oil palms pay the advance, and the neighbouring estate is unable to do so. Tensions then rise.”
He said they were seeking a low interest loan from the Government to tide over this crisis. “But then again after we overcome this … tackling the wage bill for the next three months would be another battle on our hands.”
Sri Lankan plantations have always been a sensitive, politicised and ethno-centered sector whose economy and work ethics have been governed by cultural and religious sensitivities, a close-knit family unit and trade union activism.
While in the first few years of the privatization of the estates, the sector looked attractive to most companies with plans to diversify into other crops, that allure died down later.
A few big corporate houses exited while the others have struggled to succeed. A few others have held on gamely balanced by a conscious decision to contribute to the national economy, sustain a national asset and gains from rubber or oil palm which are used to balance out losses from tea.
Both the workers and employers have different stories to tell. Estate management under the private sector looks for more productivity and efficiency, a failing during the time when it came under the state sector, and often a tussle with the workforce.
Unions, acting on behalf of the workers, say the workforce needs more wages to keep abreast with the rising cost of living. “A kilo of rice in the market costs the same to the worker or the plantation manager. So a low wage is a serious issue,” said a trade unionist. Unionists also complain that since the 1992 privatisation, the estates have not done any or much re-planting as promised resulting in the tea bush being old and not able to provide the same yield, year-on-year.
Estate management responds saying that though the Government is mostly responsible for the social development, invariably it’s the companies that provide these facilities under the ‘womb to tomb’ concept (taking care of the individual from birth to death).
Companies also argue that 44% of the 800,000 estate population made up the workforce in 1992 whereas now it’s 22 % out of 1.2 million people. “Thus we have less numbers working but the social cost is higher for the companies (because this population even though they work outside, live inside the plantations and we have to look after them),” Rajadurai from the PA said. Workers on the other hand ask why companies don’t pay more to workers when tea prices rise and grumble when prices fall and talk about the difficulties. While both workers and the employers have reasonable arguments, some industry analysts reckon that the creation of management companies created additional issues in the creation of profits. Management companies, mostly drawn from the owing companies, were paid huge fees which then eroded the profitability of the owners and reduced dividends to shareholders, and worker benefits.
Given today’s rising cost of production and wage pressures, plantations are no more an attractive investment to the private sector unless some of the land can be turned into other productive ventures – maybe tourism. Newer, more, cost-effective models of this agri-crop are also being looked – not an easy task given the captive labour force, dependant population and highly-unionised workforce.
Plantations and its 2.5 million dependants are the backbone of the Sri Lankan economy and must not be allowed to fail. It is incumbent on the Government and all the stakeholders to make it work for this generation and the generations to come. Initially the Deevapali crisis needs to be overcome. |
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