Sri Lanka plantation industry says wage model unsustainable

ECONOMYNEXT – Sri Lanka’s 150-year-old plantations industry model, where resident workers are paid daily wages, is not sustainable and a more entrepreneur-type, productivity-linked system is the way forward, officials said.

Regional plantations companies (RPCs), which have reached deadlock with unions on a pay hike, propose the industry shift entirely to a productivity-based wage model as the only way to meet union demands to double daily basic pay to 1,000 rupees.

The RPCs are offering to pay 46 rupees for every kilo of tea harvested, where resident labour remains on company payroll with the same benefits like housing and medical care but responsible for plucking tea bushes in demarcated plots.

Workers now get a basic pay of 500 rupees along with incentive payments amounting to a total daily wage of 805 rupees.

Additionally, tea harvesters who are able to bring in harvests above the norm of 16-18 kilos are entitled to ‘over-kilo’ pay of 28.75 rupees for every kilo in excess of the plucking norm.

RPCs propose raising the basic wage by 20 percent to 600 rupees from 500 rupees and other increases that take the maximum total daily wage to 940 rupees.

“The current model is not sustainable,” Sunil Poholiyadde, chairman of The Planters’ Association of Ceylon, told a news conference.

“It is essential that the wage is linked to productivity for the sustainability of the industry and the national economy as whole.”

Sri Lanka suffers from the highest cost of production among tea producers with the largest contributing factor being low labour productivity.

“RPC’s are not denying a wage increase; however there must be consideration for financial viability,” Poholiyadde said.

“Current market dictates and prices at the Colombo auctions have shown a downward trend. Raising productivity is an absolute must which the trade unions accepted at the last negotiations with the inclusion of a productivity incentive in the wage package.”

A PA statement said RPC workers are paid more than the tea smallholder sector and garment industry with 67 percent of the cost of production of tea going to workers.

The tea smallholder sector, accounting for 76 percent of national green leaf production, offers a minimum of 26 rupees a kilo of green-leaf.

That’s without EPF, ETF, maternity benefits, gratuity, holiday pay, attendance bonus pay, profit share, total maternal care, day care and all the other benefits offered by RPCs to their workers.

And that’s in addition to the compulsory 300 days of work offered a year irrespective of the output of the workers, weather conditions, crop availability and the viability of the estates, the PA said.

Rajadurai said there are 420,000 smallholders and their productivity is better. The number of workers on RPC estates had fallen to 150,000 from 350,000 at the time of privatisation.

“Smallholders pluck 30-40 kilos a day and earn over 1,000 rupees,” he said.

“We offered 46 rupees per kilo. If an RPC worker plucks 22 kilos, he has got his 1,000 rupees. The RPCs have already offered workers a mechanism to earn 1,000 and more. They have the potential. We want to encourage the more productive workers.

“If the plantations industry is to continue we should change the model and for workers to be entrepreneurs. Otherwise we have this deadlock every two years.”
(COLOMBO, 26 Octber, 2018)

RPC officials urge sustainable wage increase model