Wage hike to incur Rs.15 billion more losses to RPCs
The 125 year-old tea industry has been dealt a severe blow following the recent wage hike that is set to contribute to further losses to the plantations and at least Rs. 15 billion annually to the Regional Plantation Companies (RPCs) which are now readying to protest against the “unfairness of this methodology.”
As against obtaining a pay based on productivity, trade unions had demanded that workers be paid Rs.1000 that should be included in the basic pay. As RPCs continued to insist that the workers can earn even more through a new model of an out grower system, the unions resisted and finally last Monday amidst objections from the RPCs, the government appointed members had voted in favour of the trade unions at the Wages Board committee. This ensures estate workers with daily wages of Rs.900 plus Rs.100 supplement budgetary allowance and EPF/ETF contribution of Rs.150.
The wage hike under the Wages Board model will create an additional hit of Rs.15 billion per year to the RPCs on top of the losses already incurred as the tea industry faced a Rs.6 billion loss and rubber Rs.2 billion in 2019, former Planters Association (PA) Chairman and Hayleys Plantations Managing Director Dr. Roshan Rajadurai told the Business Times.
He noted that in 2020 the annual high grown average prices of tea was Rs.580 although cost of production was higher at Rs.615. In this respect, losses are estimated for 2020 at Rs.2.5 billion.
Dr. Rajadurai pointed out that the PA had offered trade unions a relevant, modern and appropriate working mechanism but this had been rejected.
At the last Collective Agreement meeting between the plantation companies, the trade unions and the Labour Minister, the RPCs had reached agreement with the minister to pay estate workers Rs. 725 including Price Share Supplement of Rs.50 and another Rs.225 as Attendance Incentive and Productivity Incentive that amounted to Rs.1000 according to the current model they were working on.
He noted that this new set up is good for the colonial times and today people prefer to become entrepreneurs with least supervision “and this is the modern trend and this is a job they know so well”.
Having offered workers the opportunity to be independent they continue to take to the “undignified daily wage earner” model, he said.
Plantation workers brought down specifically to cultivate tea bushes in Sri Lanka by the British to this day continue to reside on the estates that their fore fathers toiled on but now they are moving out to other jobs while ensuring that their sustenance is met by returning to the estates that they continue to call their home.
As RPCs retain a workforce of 125,000 on the estates that provides space for one million lives that will enjoy a higher basic wage but new conditions of reporting to work on time and with no inducements for productivity the RPCs fear the quality will fall and with a surplus of teas on the global market Sri Lanka will stand to lose further this year as demand will drop.
Asked how the RPCs intend on carrying out their operations he pointed out, “We will manage and cut the coat according to the cloth, and if we cannot fertilize we won’t and if we cannot upkeep we cannot,” adding that eventually a “vast majority of people will suffer.”
As the cost of production on the estates soar and as prices continue to slip despite improved rates last year the December prices were at Rs.580 but cost of production will increase under the present circumstances to around Rs.848 per kilo that would result in further losses to the RPCs, Dr. Rajadurai explained.
He highlighted that already in 2019 a number of companies had exited the plantation sector like John Keells, Watawala and Hatton Plantations.
In this respect, the PA together with the Employers’ Federation of Ceylon (EFC) will lodge a protest and insist that wages should be proportionate to revenue earned.
“We are only contesting the unfairness of this methodology,” he said pointing out that this will eventually become the minimum wage.
Past Chairman of the Sri Lanka Tea Factory Owners Association Harith Ranasinghe told the Business Times that they too will protest against the wage hike and proposing that the basic should be increased by 10-15 per cent and the balance based on productivity basis.
He noted that they will incur an increased cost on the basic wage by 85 per cent if they are to pay Rs.1000 to workers at their factories.
Factories have been shutting down in the recent past or operating on an ad hoc basis as they were unable to bear the cost, Mr. Ranasinghe said adding that this new wage increase will “have a huge impact and we might become an unprofitable organisation.”
He queried how wages could be static when the revenues are accrued by the fluctuating prices determined at the auctions.
Mid-sized private tea estates will also face a crisis as they point out that they are compelled to purchase everything for the estate at a price and in this respect, a further increase in wages was not conducive.
Galle Kalutara Estate Owners’ founding Secretary Ushantha Samarasinghe speaking with the Business Times on Thursday said that they have an issue on the productivity of these workers adding that pay should be based on productivity. He is part of the mid-sized private tea estates that own lands in extent of 5-100 acres.
Under the given circumstances he pointed out that they will be compelled to move out of the tea business and engage in cinnamon as this is less labour intensive.
He further explained whether authorities wanted to pay the workers by destroying the companies that pay them and that in this kind of set up wondered if investors would be agreeable to run these plantations.
“If we are not heard then we need to go to cinnamon and tourism,” Mr. Samarasinghe said.
Federation of Tea Smallholders Associations President Kehel Gunaratna told the Business Times that they too will be compelled to increase their wages by at least 20 per cent but that they will be able to manage this situation.
At present they pay Rs.30 per kilo and is linked to productivity and so this will not become a problem since they already pay workers this amount, Mr. Gunaratna explained.
He pointed out that since they engage workers as partners and share one-third of the revenue with the workers they will not be affected much.
However, they too will have to increase prices since now the RPCs will pay a wage higher than their’s under the new wage model and in this respect they will have to increase rates to attract workers to their estates.
Smallholders that also includes the mid-sized plantations contributes to 75 per cent of the total production of Ceylon tea with the RPCs making up for the rest of the 25 per cent.
But if the companies fail, the tea industry worries whether this could spell the downfall of the tea plantations in a country that has already made a name for producing one of the best quality teas that is akin to killing the golden goose that laid the golden egg!