COLOMBO (EconomyNext) –Sri Lanka’s tea plantations industry said current losses suffered because average selling prices had fallen below production cost could at least be partly offset if workers improve productivity and pluck more tea.
At the Colombo tea auction, the monthly auction average for April 2015 was only 408 rupees a kilo, representing a loss of 63 rupees a kilo of tea sold by Regional Plantation Companies, a statement said.
At the present level of output, for companies to breakeven the average at the Colombo tea auction should be in the region of 470 rupees, said the statement by the Planters’ Association of Ceylon, which represents 22 Regional Plantation Companies (RPCs).
“Simple calculations, which can be worked out by anyone, clearly show the conundrum faced by the plantation companies at present, following the drastic reduction in the price of Ceylon tea due to external factors,” Chairman of the Planters’ Association Roshan Rajadurai said.
These include the global downturn in commodity prices and volatility in key tea export markets like Russia and the Middle East.
“The revenue earned by the plantation companies is far below our costs and with estate sector wages too being determined externally by politically-motivated negotiations which take no account of ground realities, the industry’s sustainability is at stake,” Rajadurai said.
“It can also be seen that apart from wages, a substantial component of the cost of production relates to benefits and services provided to the estate workers themselves, including the cost of staff employed to provide health and welfare-related services in the estates,” Rajadurai pointed out.
He noted that an increase in labour productivity, reflected in the daily plucking average of tea, in particular could assist in at least partially offsetting losses faced by plantation companies.
The 19 RPCs collectively made a loss of 2,850 million rupees on tea and rubber in 2014, not taking into account biological revaluation of assets which only represent accounting or book profits and arise as a result of plantation companies having to comply with International Financial Reporting Standards (IFRS).
The 22 RPCs collectively employ nearly 200,000 workers.