The Sunday TimesBusiness

21st, April 1996



Digging their own graves

Any further increase in costs without a substantial increase in productivity is the surest way of killing the tea industry. This observation of the Presidential Commission on the Tea Industry and Trade is especially pertinent today, as we write on the eve of a threatened strike on the tea plantations. We publish in our columns today extracts from the report of this commission which we believe are of particular relevance at this juncture when a major work stoppage in the plantations is about to take place.

The ills of the tea industry are not of recent origin. It was their protracted existence and, indeed, their worsening over time that gave rise to the appointment of this commission which was required to inquire into, and report on, a host of vital matters concerning the tea industry. Yet it took an inordinate length of time for the report to be made public in a sessional paper, despite it being known that the CWC had threatened strike action in pursuance of its demands. The report of the commission should have been made public as early as possible after its submission because it dealt with all the issues the CWC was agitating about. Also its early publication would have given ample opportunity for the public, and more importantly the management companies (and others associated with the tea industry) to study, and perhaps find solutions to the issues in question in view of the companies impending confrontation with the CWC.

Be that as it may, the commission has highlighted the problems facing the tea industry, particularly the causes which have resulted in tea becoming an uneconomic crop. It has pointed out that the management companies have, by and large, suffered losses in 1993 and 1994. The losses are attributed to The simple fact that the cost of production exceeds the net sale average. The commission asserts that, while the higher costs of production cannot be passed on to the consumer in higher prices (because Sri Lanka is basically a price taker and not a price maker) containing the cost of production is within our sphere of action. And the commission makes the important point that low labour productivity in production and processing is one of the major causes of high production costs, the other being the low tea yield per hectare.

The commission observes that "the labour unions strongly resist higher work norms on virtually all the activities such as planting, pruning and plucking which appear to be below worker capacity".

The intake per plucker, it says, is lower than that in India and Kenya, the reason being that "Plucking norms have remained stagnant in spite of varying productivity of different estates and with estate superintendents having little discretion to adjust these norms".

Low labour productivity has resulted in the cost of production of tea in Sri Lanka to be one of the highest of all tea producing countries in 1991. The situation perhaps is worse today.

The commission points out that there are various methods that can be employed to increase labour productivity such as an upward revision of unrealistic norms, shifting of labour from surplus to deficit areas and systemising plucking rounds. But, it says these changes are possible only if the state ceases to intervene with the management or force decisions on them.

Can such changes be brought about when, despite admittedly low labour productivity, the Ceylon Workers Congress has thought it fit to demand 300 days of work per year and an increase of eight rupees in the daily wage? It is estimated that if the demand is granted it will cost the plantation companies three billion rupees which, needless to say, they can ill afford. Furthermore, it is grossly unrealistic to demand a specific number of days of work in an agricultural undertaking which is subject to the vagaries of the weather.

It is time that the authorities take a long, hard look at the tea industry, especially in the light of the recommendations of the Presidential Commission on the Tea Industry and Trade. There are problems concerning the private bought leaf factories, the tea small holder and the marketing of tea - all of which need to be addressed. But what is of immediate importance is how the demands of the CWC should be treated. They will impinge overwhelmingly on the cost of production. As the commission observes, it is virtually impossible for management companies to make tea a viable industry without cost control. If the management companies do not make profits it would not be worthwhile for them to manage the plantations and to invest in inputs. Are we about to witness the demise of a 148 year old industry which is our No.1 net export earner? Are the workers digging their own graves?

Thondaman's demands can be met if ...

Minister and CWC leader Saumyamoorthy Thondaman has once again locked horns with the establishment agitating the two main demands from the plantation companies. An increment of eight rupees in wages and a minimum of 300 days work for the plantation workforce.

He has moved from estate to estate governing the workers for a one-week work stoppage. Mr. Thondaman is indeed the master of timing, he often says.

"I am like the woman who cooks Thosai or Rotti. You must know when to turn the Thosai over. If it is too early it is raw if it is too late it is burnt. You have to turn it over just on the correct time, he has said.

He has thus timed his strike action in which he considers the most opportune moment. This is the first time that he has resorted to this action after the P.A., which appears to have made the mistake of taking Mr. Thondaman for granted, has come into office.

Perhaps the PA administration was bolstered by the belief that since P. Chandrasekeran of the UPF and CWC rebel S. Sellasamy were with it, no strike action would be successful. When Mr. Thondaman rolls up his sleeves in the plantations and gets down to action, he has few peers in the game.

The plantation companies too do not seem to have an outgoing dialogue with Minister Thondaman - they either consider him a towering giant, with whom you can discuss nothing or they seem to develop an inferiority complex before him and do not talk to him at all.

Analysing the demands themselves, the plantation companies need to do a lot of homework. For instance, they claim that the output per plucker has gone upto 23kg from 14-15 kg. Is this correct? They claim that yields have gone up by 200 - 300kg after private managements took over. These claims are not only incorrect but totally misleading. Some companies have left behind a trait of mismanagement. This includes non-application of manure, cutting down valuable timber, leasing estate land for potato cultivation, non-payment of bought leaf dues since December.

There are, however, some companies which have been systematically improving the plantations mainly within the coconut triangle.

They have also consumed a massive amount of state funds - almost Rs 8000 million since privatization. Thus obviously all is not well even in this sector.

An eight rupee wage increase coupled together with an increase in productivity in real terms and not illusory terms, only may not be unjustifiable. Surely a deal can be worked out for the lean months where the earning capacity of the labour is low. Anyway the plantation management companies need to monitor the developments in the plantations more closely.

On Tuesday at about 12.30 p.m. Minister Thondaman's office was informed that the government had agreed to a Rs 2/= increase in wages. Minister Thondaman was away in India attending to a matter concerning the Small Industries Department.

His office immediately telephoned him to inform him of the governments offer. His instructions to the CWC was "Continue with the strike. We do not want Rs 2/=."

He has already been informed that plantations Minister Ratnasiri Wickramanayake is negotiating without the CWC with other trade unions for the acceptance of the two- rupee package.

Mr. Thondaman's well-oiled machine has been activated. Plantation workers and unions are being told now not to accept the two-rupee offer. "We are asking for more," they are being told.

So, for the moment, strike plans appear to be proceeding as scheduled. My bet is that he will get when he wants.

By our Plantations Correspondent

Wealthy and healthy stars

Quite a few hospitals will dot the landscape by the end of next year, most being joint ventures with foreign collaboration.

Local private hospitals have already made representations to the authorities, seeking to ensure that they would not be out of business.

So, it is likely that all private hospitals, both foreign and local, will be subject to strict regulation by the government including stipulation of maximum fees that could be charged and a "grading" system akin to that which is seen among hotels.

Bank rescue

When a local big bank was trying to put up a new corporate headquarters, some shareholders started grumbling.

There were queries as to where the money would come from and some shareholders even indulged in a spot of panic selling of the bank's shares.

But now all seems well and the money is likely to come from a property development company that is to be set up...

Fresh attempt

A prominent private sector businessman, very much in favour with the greens, is not so happy now.

The telecommunications network in his agency post offices isn't operating anymore. And they say there have been some disconnections due to unpaid bills.

The man is down but not out. He wants to reach the top again, this time without much help from the powers that be.

Lankan firm promises CFC-free refrigerators

One of Sri Lanka's refrigerator makers has said that it will stop using ozone depleting substances or CFCs (Chloro -Flouro-Carbons) ahead of the internationally agreed deadline - perhaps making it the first company in South Asia to do so.

"Machinery for CFC elimination has already been ordered and is due in Sri Lanka by August 1996" Regnis Lanka Ltd. said in its recently released annual report. "We intend switching over to non-CFC substances by the end of the year, thus completing the phasing out programme well in advance of the scheduled date."

Regins uses the chemical CFC12 as the refrigerant in the cooling systems of its refrigerators. In addition CFC 11 is used in the manufacture of insulation materials. According to Montreal Protocol regulations CFCs have to be phased out by the year 2006, the company said.

"We are closely monitoring all developments in this field and are working with the United Nations Development Programme in ensuring the smooth transition to alternate technology" the company added.

Regnis has also exported two shipments of locally assembled washing machines to Fiji via its associate, Singer Australia and intends to move into local manufacture of components. "This will be a costly exercise since the machine comprises at least 30 different plastic components of various parts", it said.

Regnis was also working towards achieving ISO 9000 certification.

During the 12 months ended December 1995, Regnis Lanka has posted a turnover of Rs 265mn up from Rs. 218 a year before. After-tax profits have climbed to Rs.11.5 mn from Rs. 10mn the year before. The company has an issued capital of Rs. 20 mn and net assets have climbed to Rs 48mn from 41.6mn in 1994

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