Will the plantation sector survive?

nuwaraeliyaAddressing a gathering in Pussellawa the minister of Higher Education and Highways Lakshman Kiriella said that the plantation companies can well afford to pay the Rs. 1,000 a day wage that the plantation workers have been asking for, and that the companies that refuse to pay it should hand their estates back to the government as there are plenty of investors who are willing to take over those properties and pay the workers Rs. 1,000 a day. This was broadcast over the Swarnavahini noon news bulletin on Monday. Lakshman Kiriella was the Minister of Plantation Industries in the UNP government of 2001-2004. This time around, he holds the Higher Education and Highways portfolio.

The Minister of Plantation Industries is Navin Dissanayake but the estates come under the Minister of Public Enterprises Kabir Hashim. So, one would expect pronouncements about the plantations sector to be made by either Dissanayake or Hashim. In this instance however, it is Kiriella who has made the controversial pronouncement. The ‘scientific’ management of the good-governance government is puzzling at times. Many a scribe has wondered on what scientific principle the Higher Education and Highways ministries were coupled together and why Navin Dissanayake who is the Minister of Plantation Industries has no estates under him. Even more puzzling is the scientific basis for the wage increase that minister Kiriella is demanding for the estate workers.

The plantation trade unions did demand a daily wage of Rs. 1,000 during the recent parliamentary election campaign. The Planters’ Association which represents the plantation management companies has already pointed out that to increase the daily wage from the present Rs. 620 to Rs. 1000 would be an increase of 62% and that such an increase in one go would be ‘inconceivable’ in any industry. The 22 plantation management companies collectively employ over 180,000 workers and the daily cost of employing a worker is Rs. 700 with EPF and ETF. This is without the cost of other commitments such as gratuity, holiday pay, attendance bonuses, etc.

On the tea estates the daily plucking average of an estate worker is around 18 kg. In comparison, the daily plucking averages in Kenya is 48 kg and in the Indian tea growing state of Assam its 28 kg. Even this 18 Kg average in Sri Lanka often drops to 14kg to 12kg during the dry season and in wet weather. The daily plucking average of 18kg converts to 3.87kg of made black tea. There are almost as many workers involved in weeding, fertilizing, pruning and maintaining the estates and in factory work and when all these workers who are involved in the production of tea are taken into account, the output per worker is 2.12kg of made tea. Thus the labour component in the cost of production of made tea is 67% to 70%. The rest being incurred on other inputs including chemicals, material, fertiliser, fuel and on staff.

The tea and rubber markets have been facing the worst crisis in decades due to a collapse in international prices and the large estates have been reporting losses. Wages in the plantation sector tend to be politically determined unlike wages in the rest of the private sector. Prices received at both rubber and tea auctions are now lower than in 2013 when the last wage hike (of 20%) was given to estate workers, indicating that even the present wage is unaffordable to the plantation companies.

The plantation companies recommended a revenue sharing model for the remuneration of estate workers similar to the model already in place in the tea smallholder sector. The smallholders provide tea green leaf to the factories and are paid 68% of the price realised by the made tea at the auctions. The remaining 32% goes to the tea factory. The Planters’ Association states that “The Revenue Sharing Model is widely used in the plantation industry across the world and even in Sri Lanka it has yielded positive results. The country’s 400,000 tea smallholders, who produce nearly 75% of the nation’s total amount of green leaf, function on a similar basis and have more than doubled the extent under cultivation between 1992 and 2012…”

An alternative method suggested by the PA is for the basic wage to be fixed at Rs. 500 for a minimum daily plucking average of 15kg and each additional kilo plucked will be paid for at Rs. 40 enabling a worker who plucks 25kg of tea leaves to earn Rs. 1,000 a day (including EPF and ETF). The PA has been stressing all along that “An unconditional increase of the daily wage to Rs. 1,000 is impossible at present since key export markets to which more than 70% of Ceylon Tea is exported – Russia, Middle East and Ukraine – are in crisis due to military conflict, economic sanctions and depreciation of the Russian currency etc. What is surprising is that Minister Kiriella has chosen to make this demand for an increase of estate wages to Rs. 1,000 a day at a time when the plantation sector is experiencing its worst downturn in decades.

It was not so long ago that the plantation companies said they are unable to increase estate worker wages by Rs. 2,500 a month in tandem with the salary increase recommended by the government for the private sector as a whole and now the government wants the plantation companies to increase wages to Rs. 1,000 per day! Even though the plantation sector is experiencing a downturn, the garment manufacturing sector is booming and bullish about the future. Furthermore, the garments sector employs more workers than the plantations sector. So it’s surprising that the government has not asked the garment sector to increase the wage per working day to Rs.1,000. The difference is perhaps that the estates have voters who deliver block votes but the garment factory workers don’t deliver block votes. (Island)

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