The plantation wage issue: Tea and sympathy

By the Economist

Given the acute state of poverty of tea estate workers, there can be little argument on the need to increase wages

Once again the issue of plantation wages has come to the forefront. Usually it is a trade union dispute on wages that is settled after a prolonged strike and negotiations. Like any other trade union action much more than is expected is asked for and much less is offered. Ultimately a negotiated wage is arrived at somewhere in between the demand and the offer. This time the wage increase had much more than the usual governmental interest and watch over. There were no prolonged strikes either. The government that had always been lurking on the sidelines to influence the wage determination acted swiftly to ensure an increase in wages to Rs. 200 per day. It is generally thought that the government intervened and gave a virtual directive to the companies.

There are three critical issues to focus on. First, there is the question of equity. Considering the low wage of the workers in comparison to other agricultural workers; the rising cost of living that is especially high owing to the escalation of prices of essential food items, particularly wheat floor; and the acute state of poverty of this sector, there can be little argument on the need to increase wages. Even with the rise in wage rate, it is contended that estate workers do not have an adequate income to push them above the poverty line. The nominal increase in wages is no doubt already eaten into by the increase in prices of essentials.

There is also a cogent argument for an increase in wages based on the rise in tea prices. This is particular so as the industry is also a beneficiary of the depreciating Rupee. President Rajapaksa was quick to refer to this when he made the point that tea estate workers wage should be increased. Perhaps the industry too responded so quickly to the government demand owing to this, though as usual they pointed to the burden of the wage increase.

The second issue is that of how the wage increase was brought about. It appears to have been nothing less than a “Directive”. In fact the President did say that the estates should increase their wages as tea prices have also risen. His argument would have been stronger had he also mentioned the recent sharp rise of food and living costs as well. The important issue is that the government virtually laid down the salary increases. Such directions have precedents in the past, albeit they may not have been directives as ‘direct’ as this.

Notwithstanding the unequivocal recognition of the wage increase as a just demand, it is equally true that giving directives to the private sector on wages is detrimental, not only to the tea industry but the economy as a whole. Such interventions create uncertainty in the minds of investors as sudden government interference could increase risks and uncertainties of investment. This interference was especially bad as it had political motives to get back to the government the leaders of the estate community.

The third issue relates to the viability of the tea plantations that is inextricably connected with the issue of wages. Regrettably the tea plantations have not fared well with respect to productivity. The recent increases in tea production from 276.9 million kilogrammes in 1997 to 318 million kilogrammes in 2005 was mainly due to increased tea production on smallholdings, that now contribute about 60 percent of total tea output. Estate tea yields are about one half that of small holdings and below yield levels of plantations in other tea producing countries. The age of tea bushes, the inadequate replanting with VP teas, ironically shortages of labour and labour unrest, are among the constraints to plantations producing at higher yields closer to their potential.

The tea industry had had a chequered history since independence. A period if high taxation was followed by the post 1956 era that had an overhang of a threat of nationalisation that cut back investments. Then the plantations were nationalised in 1972-74 and most estates were managed by state enterprises that were run at huge losses. This was somewhat reversed when they were given over for private management. Then ironically the government led by the party that nationalised the plantations “privatised” it. It is said that governments of the past “killed the goose that laid the golden eggs.” What would be the appropriate metaphor to describe this time of political interventions in estates?

What is needed in the long run interest of the plantations and the sustainability of wage increase is a tea estate rehabilitation programmes that looks on the problems facing the industry that are real constraints to increasing production. This would include wage increases geared to improvements in productivity as well as increases in labour productivity. The management systems and cropping patterns required to be revamped in the light of social transformations and economic developments in the country and international market conditions.

There is a growing concern about whether the estates are a viable mode of production owing to both the economic and social transformations that have occurred in the country. A great deal of thought must be given to this issue.

The plantation companies are themselves involved in finding ways and means by which each estate is a profit centre through diversification of activities, including eco-tourism. But what about tea cultivation itself? Much research and study have been done on the current state of the plantations, but as usual little action taken. It is only by the achievement of higher yields on estates that the viability of tea as an estate crop could be achieved. Without such a thrust the tea plantations are on the road to a slow death.