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Tuesday June 18th, 2024

65-75 pct of tea industry cost is min wage based labour cost: Sri Lanka think tank

Credits: International Labor Organization

ECONOMYNEXT – Around 65 percent to 75 percent of the cost at the green-leaf stage in regional plantation companies (RPCs) comes from the attendance-based minimum wage system, according to a report released by Advocata Institute, a think tank based in Colombo.

This contributes significantly to the cost of production of Sri Lanka’s tea industry.

The findings emphasise the need for RPCs, and the industry at large, to consider embracing alternative wage models such as the revenue share and outgrower models.

These suggestions are rooted in the context of grappling with soaring production costs, falling productivity, and the impact of the current wage structure on estate workers.

The report juxtaposes the minimum wage model with the more market-driven remuneration approaches observed in the smallholder sector.

It underscores how the attendance-based system, being predicated solely on attendance rather than performance, severely curtails “productivity incentives”.

One of the consequences of the minimum wage model is the persistent issue of low earnings and constrained earning potential for workers, ultimately leading to a labor shortage.

The report flags this shortage as an exacerbated problem, with workers increasingly veering away from agricultural labour, gravitating towards other employment options that offer higher compensation.

Stakeholders within the industry advocate for alternative wage models that lean towards rewarding productivity rather than mere attendance.

A proposed revenue share system departs from the weight-based remuneration of the outgrower model, and aligns workers’ incentives with quantity and quality of tea leaves produced.

This ensures that workers are motivated to prioritize quality, creating a sense of ownership and responsibility. It also drives them to adopt best practices in plucking and processing.

This effort aims at producing superior-grade tea, better market prices and increased competitiveness.

The report finds that the revenue share model comes with challenges; It requires a transparent mechanism for revenue calculation and distribution, presenting a potential administrative hurdle.

Moreover, negotiating fair revenue-sharing percentages that satisfy both workers and plantation owners can be subject to contextual nuances.

The report said that these proposed models draw inspiration from the market-driven ethos observed in the smallholder sector.

In this sector, workers are remunerated based on both the quantity and quality of their output, fostering higher productivity and a dignified approach to labour provision.

The report advocates for alternative, market-oriented wage models to uplift productivity, enhance worker welfare, and bolster the industry’s global competitiveness, in addressing the multifaceted challenges faced by large-scale tea plantations in the country. (Colombo/Dec28/2023)

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Sri Lanka telecommunications bill some clauses ruled unconstitutional by SC: Speaker

ECONOMYNEXT – Sri Lanka’s Supreme Court has found a number of clauses in a proposed amendment to the Telecom Telecommunications Amendment bill unconstitutional, speaker Mahinda Yapa Abeywardana said.

“Clause No 8, proposed section 9A 2 of the bill is inconsistent with Article 12 1 of the constitution, however this inconsistency shall cease if word ‘may’ will be replaced with word ‘shall’ as set out in the determination of the supreme court.”

“Clause No 9 is inconsistent with Article 12 1 of the constitution and only can be passed with special majority required under paragraph 2 of the Article 84. However, the inconsistency shall cease if clause is amended as set out in the determination of the supreme court.

Clause No 12, proposed section 17 10 of the bill is inconsistent with Article 12 1 of the constitution and can only be passed with special parliament majority required under Article 84 paragraph 2. However, the inconsistency shall cease if clause is amended as set out in the determination of the supreme court.”

Sections of clauses 13, 18, 20, 33 and 35 were also in violation of the constitution, and could only be passed by a special majority of parliament. (Colombo/Jun18/2024)

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Sri Lanka to exempt one house from imputed rent wealth tax: President

ECONOMYNEXT – Sri Lanka will exempt one house from a proposed wealth tax outlined in an International Monetary Fund program, President Ranil Wickremesinghe said.

About 90 percent of the people’s houses are likely to be exempt from the proposed tax, he said.

“[O]ne house will be exempt from this,” President Wickremesinghe told parliament Monday.

“It is going to have a very high threshold and I do not think the vast majority of the people in this country should even be worried about their house

“Don’t worry your house will be safe.”

The IMF program document however did not mention an exempt on one house, but did mention a threshold.

Taxing houses and thrift in general could have detrimental effects on people’s well-being housing stock and their willingness to remain in the country without migrating, critics say.

Related Sri Lanka to tax imaginary rents on houses under IMF deal

The mechanism of imputed rents was used because rates on houses was assigned to provincial councils and courts could strike it down.

Opposition legislator Harsha de Silva said the Samagi Jana Balwegaya welcomed President Wickremesinghe’s statement. (Colombo/June18/2024)

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Sri Lanka rupee opens weaker at 304.30/55 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee opened at 304.30/55 to the US dollar on Tuesday, while bond yields were broadly stable, and stocks opened 0.02 percent up, dealers said.

The rupee closed at 304.00/15 to the greenback on Friday, before the long weekend.

In equities, Colombo’s All Share Price Index opened 2.06 points higher at 12,312 while the S&P SL20 of more liquid stocks opened down 0.07 percent or 2.63 points to 3,642.

The market turnover was 3.3 million rupees.

In the secondary market, yields were broadly stable, dealers said.

A bond maturing on 15.12.2026 was quoted at 10.10/30, up from 10.05/30 percent.

A bond maturing on 01.07.2028 was quoted at 11.05/30 percent, up from 11.05/20 percent.

A bond maturing on 15.09.2029 was quoted stable at 11.80/85 percent.

A bond maturing on 01.10.2032 was quoted at 11.95/12.10 percent, down from 12.00/10 percent.

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