Plantation Association says can’t afford worker wage hike: Offers productivity linked model

June 25, 2015 (LBO) – Sri Lanka’s planters association said that they have offered a productivity based wage model than just increasing the wage which will incur further losses for the companies, so that high performing pluckers would earn more. “All over the world tea wages are based on productivity,” Roshan Rajadurai, Chairman of The Plantation Association of Ceylon said. “So we have proposed a model, so that a majority of workers can earn a substantial amount of wage than they are doing now,” “So the matter is under discussion,” “But the bottom line is that we cannot continue to afford a wage increase without any link to productivity.” Sri Lanka tea workers requested for a wage increase as the collective agreement between plantation association and trade unions has expired. Sri Lanka pays approximately 620 rupee as daily wages to an estate worker and with employees’ Provident Fund (EPF) and employees’ Trust Fund (ETF) obligations. The daily cost borne by a plantation company in employing an estate worker is 700 rupees (excluding other commitments such as gratuity, holiday pay and attendance bonuses etc.). Comparatively lower labour productivity but higher labour costs, is creating a situation in which the plantation sector is fast becoming financially unviable with tea exports to key markets also facing difficulties. Sri Lanka exports 75 percent of it's tea to Russia, Ukraine and Middle East. “This year unlike any other year, we are having a long cycle of downward price movement, while the cost keeps improving and wages remain constant,” Rajadurai explains. “So this amount of a loss we cannot absorb,” “Traditionally when there is a disturbance locally, foreign prices have gone up and that beneficial given but this year unfortunately commodity oil prices have gone down which created havoc in the market and added to that Russia and Ukraine.” For instance, while a Kenyan worker who plucks an average of 48kg receives roughly two US dollars a day, a counterpart in Sri Lanka who plucks 18kg, slightly above a third of the former amount, receives approximately 4.6 US dollars per day – more than double the amount received by a Kenyan worker – despite the significantly lower output. Even in Assam in India, where the major portion of Indian tea production is located, the comparative daily labour wage is close to 2 US dollars whilst the daily output is in the region of 28kg, data shows. “We need to look at a model that benefits both parties, because our wages are far higher than the competing counties in the world,” Rajadurai said. “However the productivity is low,” “We need to look at something that will keep the industry going, maintain and sustain the industry,” “Small holders have been very successful because they are not based on a daily wage and their capacity to earn is much higher.” Based on the records of the Planters’ Association, collectively, 19 Regional Plantation Companies (RPCs) made a massive loss of nearly 2,850 million rupees on rubber and tea in 2014. With low prices due to external factors coliding with high production costs, at present most of the RPCs are reporting losses of 70 - 50 rupees per kilogramme of rubber and tea sold respectively. About one million people reside on estates in Sri Lanka which accounts for 36 percent of the cultivation lands. Total revenue from the RPCs added to the local economy without any value addition is around 77 billion rupees from Tea, Rubber & Oil Palm Plantation crops at estate level.