Sri Lankan plantations reject demand to double daily wage despite costly strike

ECONOMYNEXT – Sri Lanka’s plantations industry said they would not give in to demands by labour unions to double daily wage to 1,000 rupees, despite a strike causing a 240 million rupees collective loss each day.

The Planters’ Association of Ceylon (PA), which represents listed regional plantations companies, said in a statement workers could easily achieve daily earnings of 1,000 rupees with just a one kilo productivity increase.

A worker has potential to earn as much as 80,000 rupees a month under a revenue share model linked to productivity that the RPCs have proposed.

The PA said tea prices were falling sharply and cost of production, already the highest among tea exporting countries, was much more than prices fetched at the Colombo auctions.

“All Regional Plantation Companies pay their employees’ through what is earned as revenue; however the demands of Trade Union leaders far exceed this capacity.”

The full statement follows:

In the wake of indefinite strike action declared by Trade Union (TU) leaders from 4th December onwards, the Planters’ Association of Ceylon (PA) firmly reiterated the position of its membership – that a 100% increase in daily basic wages as demanded by the TUs simply cannot be sustained by the industry.

“All Regional Plantation Companies pay their employees’ through what is earned as revenue; however the demands of Trade Union leaders far exceed this capacity. At this crucial moment, we urge all stakeholders, especially those whose daily living depends on this industry, to consider the fatality of this industry and those dependent on it if impractical, untenable decisions are taken.”

“The RPCs have already advanced multiple productivity- linked models that could easily enable workers to earn beyond Rs. 1,000 per day. This time’s RPC proposal is a 20% increase in the basic wage escalating it from Rs 500/- to Rs. 600/- . A 33% increase in the Attendance Incentive (AI) up to Rs. 80 plus the Productivity Incentive (PI) and Price Share Supplement (PSS), all totaling Rs 940/- per day, amounting to an average increase of Rs. 3,375 per month per worker.”  
“Additionally, tea harvesters who are able to bring in harvests above the norm will continue to be entitled to an over-kilo pay of Rs.28.75 per kilo in excess of the plucking norm which could easily expand their earnings beyond the Rs. 1,000.”

The PA noted that current TU demands are devoid of any incentives which could in effect curtail the earning potential of the worker by locking them into a system that only provided for a basic daily wage. 





In the interim, the PA estimated that the ongoing strike action would cost the industry approximately Rs. 240 – 250 million in losses each day in the tea and rubber industry. At a time when the industry is already suffering from depressed international market conditions, and the ongoing withdrawal of the much needed chemical weedicide from the domestic market, the PA cautioned stakeholders against resorting to measures that would further weaken the industry.  

Why a 100% increase in wage is unviable

Extreme demands for a 100% wage hike could only be sustained if the average sale price of Sri Lankan tea at the auction was to increase up to Rs. 850 per kg. As at November of this year, the average sale price of tea stood at Rs. 558 per kg while the Cost Of Production (COP) is Rs. 630 per kg.

At present, Sri Lanka’s Cost of Production (COP) in tea is the highest in the world and has debilitated the RPC’s revenue generating ability. Notably, 70% of Sri Lanka’s COP is solely the cost of labour. 

 Moreover, RPCs would have to absorb a staggering Rs. 20 billion increase in wage and gratuity costs if the basic wages are increased by 100% to Rs. 1,000.    

The PA further noted that the price of Sri Lankan tea in international markets has continuously dropped by approximately Rs. 20 each week over the recent past while almost 35% of tea produced went unsold at the last auction.  

Rubber COP stands at approximately Rs. 360 per kg where the average selling price is just Rs. 230 per kg.

The dire need for all to appreciate and adopt a modernized, progressive approach to wages:

The PA once again reiterated the urgent need for the industry to immediately move away from the daily wages system instituted in the colonial era and progress towards a modern wage model. By this, the employees’ aspirations could be met through a productivity-based model which would only require tea harvesters to raise their annual average output by a single kilogram.

“The PA’s membership cannot agree to a demand that would jeopardize an entire industry that involves not only growers but tea factory owners, exporters and the entire value chain.

Moreover, we urge employees to examine carefully the facts placed before them. In RPC estates where a revenue share model has been successfully implemented, workers are now earning between Rs. 50,000 to Rs. 80,000 each month. The current wage model is not sustainable, and those arguing for it must be made to understand the immense earning potential that is open to them if they will work in partnership with us,” the PA emphasized.

The PA concluded its statement by noting that a transition to a productivity based model would provide the harvesters significantly greater earning potential and  urge Trade Unions to see this potential and do what’s best for the estate communities.
(COLOMBO, 06 December 2018)

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