Tea Plantations At Crossroads: Rs 1000 Wage Hike & Emerging Dilemmas – Part II

By Professor A.S. Chandrabose &  Dr. R. Ramesh –SEPTEMBER 20, 2021

Higher Wages and Labour Cost

As far as the estate workers are concerned the wage is their major income source and initially, wages were decided based on the Wage Board Ordinance of No 27 of 1941. Accordingly, the determination of wage rates for estate workers was decided at the wage board which was embodied by the representatives from the employer, employee and the government. Nevertheless, this was reformed at the time of privatization by introducing the CA in 1992 which was embodied only by the representatives from the employer and employee. The representatives of the CA were supposed to meet on alternative years to make decisions mainly on wages revisions. The members of the CA had met on around ten occasions since its inception and decided the wage for the workers. As such, the daily wage rates agreed during the CA meetings from 1996 to 2021 are as follows:

Table 2. Daily Wage Decided at the CA -1994 to 2021

As shown in Table 2, the daily wage has increased from Rs. 83 in 1994 to Rs. 1000 in 2021. This is an increase of slightly over 12 times during the 27 years since 1994. Of course, it is an increase from a two digit figure to a four digit figure in 2021. The estate management used to provoke workers by talking about these trends in their estate’s public forums. However, the impact from the upward trend on the worker’s purchasing power and how it has reduced the income disparities between the rural and estate sector in the country is questionable. The reports of the Consumer Finance and Social Economic Survey -2003/04 (CFS) and the House Hold Income and Expenditure Survey (HIE) constantly provide figures on the income distribution of the Urban, Rural and Estate sector  in the country. As reported in the CFS 2003/04, the monthly income in the Urban sector was Rs.17,368 while the corresponding figures for the rural and estate sectors were  Rs.10,060  and Rs.4,899 respectively. The figures in the HIE 2016 report indicate that the mean income in the Urban sector was Rs.22,297 while  in the rural sector it was Rs.15,508. However, the estate sector income was Rs. 8, 666; almost half of the rural sector income. Thus, it is clear from this fact that though the estate management has been benevolent in wage increases to the workers in the estate sector, worker income is not on par with their counter parts in the rural sector of the country. Moreover, income is the primary tool to measure the incidence of poverty in the country. Henceforth, it is also imperative to perceive the level of poverty among estate workers by taking their income in to consideration. According to the survey carried out by the Census Department in 2016, the percentage of people living in poverty was 1.3 percent in the Urban sector while in the Rural sector it was 3.3 percent. Yet, in the Estate sector it was as high as 6.8 percent. Apparently, the above facts indicate that the wage increase for estate workers during the last 27 years did not uplift their level of income or reduce the prevalence of poverty of these workers. 

It is interesting to note the statement that was made towards the end of the wage negotiation in 2009. Accordingly, the  RPCs  and  their  representatives had repeatedly stressed  that  there  was  no  requirement to further revise  wages  since  workers earned around Rs.10,000 per month and they went on to state that the poverty level in the estate sector had declined on par with the national average. Ostensibly, the RPC constantly made contradictory statements during the wage negotiations and went on to state that ‘higher wages lead to higher labour cost ultimately making the estate a loss making businesses’. This allegation that has been constantly reported by the RPC is challengeable.  A well know scholar Dr. Janaka Ratnasiri in his recent publication on the tea sector provided substantial evidence about the profit margin of the RPC. According to him, there are about 325 tea exporters and originally, only the designated companies exported tea but later, the factories as well as RPCs have engaged in tea exports considering the high profit margin. According to the Central Bank’s Annual Report (2019), the average auction price of tea was Rs./kg 546.67, while the average export price was LKR/kg 822.25, leaving a margin of Rs./kg 275.58. The total tea (made tea) production in 2019 was 300.13 Mkg, while the quantity exported was 292.65 Mkg. Thus, the exporters had made a gross profit of Rs. 80.65 Billion in 2019. His complete article can be accessed here (4.9.2021). Apart from this, the tea workers also come out with some calculation of the production. As such, 4 kilogram of made tea could be made out of 17 kilogram of green leafs (existing norm for daily wage) and the market price of one kilogram of tea is around Rs.600. Thus, a worker contribution (4 x Rs.600) is around Rs.2,400 per day and insisting that demanding only Rs.1000 which is only 41 percent of the production per day is not unreasonable.

Apart from wage increments, the arguments put forward by the RPC on the cost of production are illogical and to some certain extent misleading about the country’s the tea sector.  Apparently, the calculation of cost of production (COP) should be an independent study. If it is carried out by the producer, the end result definitely will be biased towards the interested parties in the business.  Hence, it was very difficult to trace an independent study that has been conducted thus far to calculate the COP of tea in the country. The latest figures on COP of tea were indicated in the Institute of Policy Studies’ (IPS) publication on the analysis of ‘Sri Lanka Living Wage: Estate Sector (TEA)’ published in 2017. As per this study, the labour cost during the 2014/15 period was 63 percent (per kilo of made tea) of the COP of tea. The IPS had used figures in relation to the cost of labour in the COP for this study from a publication of Census and Statistics Department, citing a website link. However, the link is undated and currently inactive so that the credibility of the analysis made from information in this undated and inactive link is questionable.  Furthermore, the study also made one more observation in relation to the labour cost of the COP of tea in comparison to other major tea producing countries; India, Kenya, Bangladesh and Vietnam, and went on to state that the relative labour cost of tea production is highest in Sri Lanka. Hence, the validity of the statements in this context is also problematic. In addition to this, the Statistical Information on Plantation Crops publish by the Ministry of Plantation Industry (SIPC) also provides figures on the total COP of tea, but it has not given a breakdown of labour cost, therefore, the information provided by these publications cannot be used for any analysis of labor cost in COP of tea in the country. According to the SIPC, the per kilogram cost of production of made tea has rapidly increased from 2005 to  2015 due to the cost of green leaf, transportation cost for green leaf, power, factory labour, packaging materials, machinery maintenance etc. The above factors had negatively affected the cost of production of the tea industry during that period. However, there was a decrease in COP by 3 percent in 2015 -since then, again COP had gradually increased until 2018. This indicates that there is no valid information available on public domain in relation to COP so that some of the arguments over COP are not valid and reliable and can also be challenged.

Low level of Labour Productivity

The low level of labour productivity is the dominant allegation by RPC management in Sri Lanka. The RPC frequently compares the level of tea productivity with that in other countries to show the inefficiency of tea workers in the country. In 2018, the average productivity of tea in Sri Lanka was 1500 kg/ha/year, however, it was considerably higher in India (2227 kg/ha/year) and Kenya (2104 kg/ha/year). However, we do not know if the tea bushes in these countries are similar to the tea bushes planted in Sri Lanka.  For an example, In addition, the maintenance of tea bushes, the soil condition, the technics used for plucking tea, the type of training undergone by the tea workers etc. also impact tea productivity.

It is a well-known fact that the labour productivity is typically measured as a ratio of output per labour-hour, and input. Labour productivity and human resources go hand in hand.  Motivation, training and development, industrial relation, appraisal of employees, safety and health, and employees’ welfare are some of the human resource factors relevant to labour productivity. We do not have sufficient evidence of such motivation programmes initiated by the RPCs for their workers –some of the welfare programs are persistently decreasing in the last few years. The Plantation Human Development Trust (PHDT) has reported about the motivation progarmmes conducted for selected estate workers. The duration of the programme is mostly, for one day or half a day and the content of the programme is not easily available. Therefore, it is very difficult to assess the impact of labour motivation carried out by the estate management in the context of labour productivity in the estates. 

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