Pay up or quit!
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Pay up or face the consequences! That was the chilling message from Labour Minister Manusha Nanayakkara threatening to pull the plug on the long-term leases of plantation companies which fail to follow the mandatory wage hike for plantation workers.This was after President Ranil Wickremesinghe announced the wage hike at the May Day rally of the Ceylon Workers’ Congress in the central hills, in an election promise to workers.
Nanayakkara’s comments drew an angry response from plantation companies with one CEO saying it smacks of bullying tactics and childish statements, stating that the leases cannot be thrown away just like that. The leases of the plantation companies run till 2045.
The ire of the plantation companies to the demand for a 70 per cent wage hike to a daily wage of Rs. 1,700 was also shared by my jolly-mood economist friend, Sammiya (short for Samson) when he called on Thursday morning. He was, of course, not in a jolly mood today.
“I say, what nonsense is this minister Nanayakkara talking about. How can you cancel leases just like that,” he asked.
“This is not only damaging to the plantation industry but also foreign investors and would-be investors where the government is seen as a bully threatening to take over any asset if it doesn’t meet its demands,” I said.
“Furthermore, the minister must understand that the plantation companies only represent 25-30 per cent of tea and rubber estates, while the balance is owned by smallholders. Are they going to take over private estates too if they fail to abide by the wage increase,” he asked.
“These are foolish election stunts which have also happened in the past,” I said, adding that there were times in the past where the government threatened to take-over the company-managed estates.
While there is no doubt that workers, in fact workers across Sri Lanka, need a pay rise to keep up with the rising cost of living, and in this case plantation workers need a wage hike, it boils down to whether the plantation companies can afford a high 70 per cent (from a daily wage currently of Rs. 1,000). Something less may be more affordable to the companies.
The government needs to seriously do its homework, in this case its own cost analysis, as to the affordability of such an increase. If the companies cannot afford it, what can they do? Run the estates at a loss and be in eternal debt?
As I walked to the kitchen to get my morning mug of tea which had been prepared, I could hear the conversation of the trio under the margosa tree and they, ironically, were on the same page – that is discussing the wage hike in the plantations, particularly smallholdings in the south of the country.
“Dakune wathu wala weda karana magey nedeyo kiyanawa watup wedi karoth hondai kiyala. Eh mokada, jeevana viyadama hari wedi nisa (My relatives working in the estates in the south say the increase in the wages is a welcome move because they are struggling with the cost of living),” said Kussi Amma Sera. It seems like all three ‘amba (mango) friends’ had relatives working in small tea fields in the south.
“Matanam ahenney egollo kanassallata pathwela kiyala wathu aithi aya wena wagawanta maru wei kiyala siyyata haththawaka padi wedi kirimak karanna beri nisa (What I am hearing is that workers are worried that the owners of these estates might shift to another crop as they say they can’t afford a pay rise as much as 70 per cent),” noted Mabel Rasthiyadu.
“Matath ahenawa kattiya bayayi kiyala rassawal nethi wewi kiyala (I am also told the same thing that workers are worried they might lose their jobs),” said Serapina.
This week the regional plantation companies under the banner of the Planters Association (PA) strongly objected to the mandatory wage hike, a matter that might end up in courts if there is no amicable settlement of this issue.
The companies have proposed a lower wage hike and said, repeatedly, over the past years (and this week too) that survival of the plantations as costs rise lies in a shift to a productivity-linked wage model or a revenue share model, which “aligns worker compensation with productivity and revenue earned at auction”.
Already wages in Sri Lanka are much higher than its competitors — India, Bangladesh and Kenya.
In the 1990s, the plantations were handed over to the private sector because of longstanding inefficiencies, wastage and high operating costs. The PA said that by the time of privatisation in 1992, state-owned plantations made continuous losses that had to be heavily subsidised by the government by up to Rs. 5 billion per year which was borne by the Treasury.
According to the PA’s calculations, if the wage hike of Rs. 1,700 is adhered to, the monthly wage will rise to Rs.42,000 from
Rs. 25,000 and the production cost per kilo to Rs. 1,443 from Rs. 993.
Another problem is that the daily plucking average per worker in Sri Lanka is low at 18 kg, compared to 40-60 kg in Kenya and 60 kg in South India.
The PA said as a result of the decision, the cost of production for tea and rubber is set to rise dramatically, with estimates indicating a minimum 45 per cent increase in the cost per kilogram of tea, making Ceylon tea and rubber uncompetitive in the global market.
“This (wage hike) decision is very clearly driven by short-term populist politics aimed at securing electoral victories rather than fostering long-term economic health of the industry and securing the interests of workers,” it said, adding that companies are listed in the Colombo Stock Exchange and “any attempt at a second and immediate expropriation by the Government will therefore contravene Securities and Exchange Commission rules, the Companies Act and other related statutory provisions”.
Planters said the productivity-linked wage model not only incentivises productivity but also ensures a fair and sustainable wage system for workers. Already workers under revenue share under the previous wage structure, recorded earnings in excess of the minimum wage that was recently gazetted, they said, adding that the current daily attendance-based minimum wage model is outdated and does not reflect the realities of the modern plantation industry.
Finishing my column, I walked to the kitchen for the second time to fetch a ‘maalu paan’, wondering whether the wage hike crisis will end amicably or lead to possible protests and strikes from plantation unions which would be detrimental to workers, the companies and the country.
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