Decades back under regimes governed by J.R. Jayewardene, Ranasinghe Premadasa or Chandrika Kumaratunga, a strike in the tea plantation sector would send ripples across the nation. It would not only get lead story or front-page publicity and dominate TV and radio channels but ministers and officials would be scrambling to negotiate a settlement with the [...]

The Sunday Times Sri Lanka

Tea: Challenge to sustain a 150 year-old tradition


Decades back under regimes governed by J.R. Jayewardene, Ranasinghe Premadasa or Chandrika Kumaratunga, a strike in the tea plantation sector would send ripples across the nation.

It would not only get lead story or front-page publicity and dominate TV and radio channels but ministers and officials would be scrambling to negotiate a settlement with the likes of the legendary Savumiamoorthy Arumugan Ramanathan Thondaman and his unin brothers. Every kilo of tea not exported for whatever reason was priceless then.

Those were the days. This week when workers resorted to a go-slow protest campaign, there was hardly a murmur in the media or political circles until later in the week. The event was first reported insignificantly in the inside pages of newspaper while front-pages were dominated by the ranting and raving of politicians and their ilk. The fact that 23 tea factories were forced to close due to lack of green leaf supply plus a symbolic sit-down protest by the abrasive Arumugam Thondaman (the elder Thondaman’s grandson and which to many was just a political stunt ahead of the elections), didn’t stir any feelings or serious concern in official circles.

Not unusual, given the Government’s step-motherly treatment to the country’s premier commodities export from the time former Treasury Secretary P.B. Jayasundera believed this struggling special sector should not be given any handouts or support and must survive like the garment industry for example.

Tea is today facing one of its most critical stages. The biggest problem faced by regional plantation companies (RPCs) is that the ministers and politicians involved (there are many just like musical chairs in the past few years) don’t have a clue about the real situation. While losses are mounting – Rs. 3.4 billion jointly by the companies last year – coupled with a crisis in buying markets like the UAE, Russia and Ukraine, the issues have been increasing over the past year.

What has failed, unfortunately, to receive the attention of policymakers is that the ages-old model of a resident workforce cared for by the plantations doesn’t work anymore in an era where children of plantation workers are, receiving a better education (a positive development), moving out with some graduating from local universities and becoming medical doctors among other noble professions. Inspite of these changes, the ‘womb to tomb’ model created by the entry in 1867 by James Taylor, a British planter, to plant tea remains unchanged albeit at huge cost to RPCs.

The crisis is real today and there are no long-term answers apart from efforts by the industry to create a lease model and productivity-linked wages. A few companies have begun farming out tracts of lands to workers under lease contracts where the workers supply leaf to the factory as a land owner, in addition to being employed as a daily wage worker. This model has shown good results but is still in the experimental stage.
Both sides – RPCs and workers represented by trade unions – have reasonable reasons on the inability to pay increasing wages or workers having a right to higher wages. While both arguments are compelling the RPCs have a better case for state support due to the reasons given below. The reality is that continued work depends on the survival of these struggling companies.

Unions are asking for a daily all-inclusive wage increase of nearly Rs.1000 per worker from Rs. 650 earlier.

The Planters Association (PA) representing RPCs, on the other hand, has, in the past year leading up to the beginning of March 2015 negotiations of a new Collective Agreement, canvassed support from the public – through an extensive media campaign of articles and media conferences – explaining the cost factors and the inability to meet the rising wage bill and the need for more state support.

RPCs say that while the daily wage may be Rs. 650, the actual cost to companies is Rs. 1026 when adding EPF, ETF and other allowances.
They also say that while tea production increased only by 11 per cent over the past 10-year period, the COP (production cost) has gone up by about 159 per cent in the same period. Productivity is at a low 18 kg daily average per worker compared to 48 kg per worker in Kenya while daily wages are higher in Sri Lanka than in Kenya. Tea prices have fallen to Rs. 364 per kg in May compared to Rs. 421 last December.

The list of woes continues. RPCs say the state has saved over Rs. 13 billion since plantations were privatised in 1992 (passing the burden to the private sector). That was the annual cost incurred in loss-making plantations and the reason to hand over management to the private sector. In addition the Treasury spent over Rs. 5 billion to subsidise those estates earlier. “The state is saving so much money and the burden is now on us. Why not share the burden? Smallholders who don’t have such costs are getting benefits; we are not,” said PA Chairman Roshan Rajadurai, adding that the RPCs have not only invested billions of rupees in capital expenditure over the years but also paid Rs. 6.5 billion in lease rental to the state.

Why private sector management of plantations has failed is due to the inability from 1992 to diversify (one of the main reasons for the private sector to look at tea and rubber lands as a viable business proposition) due to bureaucrat blockages and political interference in land use. Furthermore bulk tea still constitute the main export with less than 5 per cent of tea being exported as an added value item.

Suppiah Ramanathan, President -Lanka General Services Union and other trade union leaders representing the plantations reject the concerns of the companies saying that tea prices are cyclical, have good times and bad times, as has been the case for many decades. “Low tea prices are not a new phenomenon and companies are hiding under this to deprive workers an increased wage,” he argues.

Plantation companies agree saying that the upside and downside of commodity prices is one of the reasons why agriculture is a daily wage sector.
Nevertheless the sustainability of the tea and rubber sector is at stake given the high cost of production and prices not keeping in line with costs, productivity trends and lack of diversification. Furthermore the land is not as productive as it was 100 years ago.

Whatever the odds and travails and as it heads towards the 150th anniversary celebration next year, this industry is set to continue for another century.

It is thus imperative that all stakeholders – smallholders, workers, companies, policymakers, administrators, trade unions, plantation-support groups and funding agencies – come together at a roundtable to prepare a roadmap for development into the next century where generations to come would still enjoy lush, carpeted green fields maintained by workers with a decent wage as Ceylon Tea sustains its position as the world’s best brew.

Until then while this ages-old tussle goes on between the RPCs, the state and the unions, workers will inevitably be caught in the middle and at the mercy of whoever decides their fate, just like the unpredictable weather that decides good seasons and bad seasons on tea slopes.

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