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Sunday March 26th, 2023

Sri Lanka can up exports, workers can get inflation linked wages on small holder model: PA

ECONOMYNEXT – Sri Lanka’s large tea farms say workers who have opted to use a small-holder based model linked to tea prices and plucked leaf are earning more money which is automatically linked to global prices and inflation.

The current model is based on a daily wage where workers are under a supervisor on set hours of working which the plantation claim to be a ‘colonial’ era relic. But under the smallholder model which has emerged, workers have flexi hours and are paid on the volume plucked.

Senaka Alawattegama, Chairman of the Planters Association representing manager of commercial tea farms say already about 20 percent of the workers have opted for the model and are earning around 50,000 to 60,000 rupees a month with some going to around 80,000 rupees.

Tea plantations are paying more per kilogram than smallholders he said.

“In addition, we pay EPF and ETF,” said.

When the price per kilogram is linked to the auction price, workers get an inflation or dollar linked wage as well as output.

Workers have started to move to the inflation and production linked model on their own, he said. Each worker is assigned a plot to work on.

More than 20 of the output now come from workers in the new model, he said.

“If workers are paid based on how much they pluck and how much that harvest receives at auction then their compensation would be dynamically adjusted,” according to the Planters’ Association.

“Had we implemented such a system – in line with what RPCs had proposed even during the last wage negotiations, there would have been no need for the State to intervene in wage setting.

“Instead, wages would be linked directly to the price and quantity of tea sold at auction.”

Roshan Rajadurai ex-Chairman of the Planters’ Association says young persons who have worked in cities and come back after getting married are opting for the new model.

One attraction is there is no supervisor (kankani) and they can work independently managing housework and children. The estate continues to provide childcare.

When working in a ‘gang’ more skilled workers under peer pressure not to pluck more than their seniors and also cannot finish up their work and go home early, as those on the new model are doing, Rajadurai said.

The PA claims that in the small holder sector a worker usually plucks about 30 kilograms a day. In India it is 40 kilograms.

Under the smallholder model a person plucking 18 kilogram could get 50,000 to 60,000 rupees, according to the Planters. But workers typically pluck 20 to 30 kilograms.

The most skilled workers can pluck 35 kilograms. (Colombo/Feb02/2023)

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Sri Lanka seeks to settle India ACU debt, credit lines over 5-years

ECONOMYNEXT – Sri Lanka has requested India to settle payments due to the country under the Asian Clearing Union mechanism and credit lines given in 2022 over 5 years, Indrajit Coomaraswamy, an advisor the island’s government said.

Sri Lanka is negotiating with India to settle the money over a 5-year period, Coomaraswamy, a former central bank governor told an online forum hosted by the Central Bank.

“Our request from the Indians is to settle it over five years,” he said. “That I think is still in the early stages of negotiation. The same with the one billion line of credit.”

Sri Lanka’s central bank owed the ACU 2.0 billion US dollars to the Asian Clearing Union according to a year end debt statement, issued by the Finance Ministry.

Sri Lanka owned India, 1,621 million dollars according to ACU data by year end, excluding interest.

India has given a 1 billion US dollar credit line to Sri Lanka as well a credit line for petroleum.

Sri Lanka in March 2024 has paid 121 million US dollar out of a 331 million US dollar IMF tranche to settle an Indian credit line.

Indian credits were given after the country defaulted in April 2022 as budget support/import when most other bilateral lenders halted giving money. (Colombo/Mar26/2023)

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Sri Lanka coconut auction prices up 1.16-pct

ECONOMYNEXT- Sri Lanka’s coconut auction prices went up by 1.16 percent from a week ago at an auction on Thursday, data showed.

The average price for 1,000 nuts grew to 83,219.45 from 82,260.58 a week earlier at the weekly auction conducted by Sri Lanka’s Coconut Development Authority on March 23.

The highest price was 92,500 rupees for 1,000 nuts up from the previous week’s 90,600 rupees, while the lowest was 76,500 also up from 70,000 rupees.

The auction offered 900,010 coconuts and 583,291 nuts were sold. (Colombo/Mar 26/2023)

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Sri Lanka in talks for billion dollar equivalent Indian rupee swap

ECONOMYNEXT – Sri Lanka is in talks with India for a billion US dollar equivalent Indian rupee central bank swap, to facilitate trade, Indrajit Coomaraswamy, ad advisor to the government said.

“The amount is still uncertain it could be up to the equivalent of a billion US dollars,” Coomaraswamy told an online forum hosted by Sri Lanka’s central bank.

The money will be used to facilate India Sri Lanka trade, he said.

India has been trying to popularize the use of Indian rupees for external trade and also encouraged Sri Lanka banks to set up Indian rupee VOSTRO accounts.

However the first step in popularizing a currency for external trade is to get domestic agents, especially exporters, to accept their own currency for trade, like in the case of the US or EU, analysts say.

India’s billion US dollar credit to Sri Lanka given during the 2022 crisis is settled in Indian rupees (transaction need).

However the Indian government itself has chosen to denominate it in US currency for debt purposes (future value).

In most South Asian nations, receivers of remittances are willing to accept domestic currencies, leading to active VOSTRO account transactions.

Sri Lanka is expected to repay a 400 million US dollar swap with the Reserve Bank of India next year under an International Monetary Fund backed program for external stability and debt re-structuring.

Central bank swap proceeds sold to banks, which are then sterilized with inflationary open market operations, can trigger forex shortages and currency crises, analysts warn.

Sri Lanka went to the International Monetary Fund after two years of inflationary monetary operations by the central bank’s issue department (money printed to suppress interest rates) triggered the biggest currency crisis in its history and external sovereign default.

Sri Lanka had gone to the IMF 16 times with similar external troubles except for the April 2003 extended fund facility under Central Bank Governor A S Jayewardene which was a purely reform-oriented program with the World Bank (PRGF/PRSP) program at a time when he was collecting reserves with deflationary monetary policy and perhaps the lowest inflation since the Bretton Woods collapsed. (Colombo/Mar26/2023)

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