Far-reaching changes to the operating model of Sri Lanka’s plantation sector, which goes beyond the worker remuneration mechanism, are essential for the industry’s survival, growth and sustainability, the Chairman of the Planters’ Association of Ceylon, Roshan Rajadurai said last week.

Issuing a statement, the Planters’ Association of Ceylon – which represents the Regional Plantation Companies (RPCs) – insisted that workers who earn a daily wage under the present paternalistic/dependent system must be transformed to entrepreneurs functioning as part of an Autonomous Social Business Enterprise.

“Towards this end, it is essential to change the worker remuneration system from the current archaic attendance-based wage to a mutually-beneficial productivity-based wage or a revenue sharing model in which the worker has total control over his/her earnings,” Rajadurai points out.

Roshan Rajadurai
Roshan Rajadurai

Re-nationalisation threats
He noted that it is unfortunate that efforts are being made to coerce a wage increase via the present outdated model, using threats to nationalize the industry.

“The solution is not re-nationalization, but to allow the private sector to manage in a proficient manner, by especially removing undue political influence in the estate sector wage negotiations,” Rajadurai said.

He said that the authorities should realize that threats are counter-productive as the RPCs clearly do not have the ability to increase wages via the present model, which has been explained repeatedly.

“Political pressure in determining wages in the private sector sets a negative precedent which extends beyond the plantations to the country’s entire private sector. Such pressure only serves to further undermine the industry by reducing the confidence of the investors,” Rajadurai highlighted.

Global crisis
The Planters Association Chairman explains that as a result of a worldwide decline in commodity prices and other external factors beyond control, including volatility in a vast majority of our key export markets, prices of both rubber and tea have plummeted.

From January 2014 to November 2015, price of tea at the Colombo Tea Auction and the local price of rubber have fallen sharply by approximately Rs. 66 and Rs. 115 per kg, respectively.
“Earlier we could at least set off losses on tea via profits earned from rubber but the crash of rubber prices has eliminated that option. Further, Russia, the Middle East and Ukraine that account for over 70% of exports of Ceylon Tea are all experiencing serious economic and political issues which have led to fall in auction prices as well as substantial quantities of tea remaining unsold at the auctions,” the Planters Association Chief said.

Wage talks
He claims that although the RPCs have offered a practical and a workable mechanism that would enable the productive workers  to  meet  the desired wage expectation, no progress has been achieved in the estate sector wage negotiations despite the Collective Agreement   had  already  expired  at  the  end of
March 2015.

“Unfortunately, from the perspective of the RPCs, neither the unions nor the many other stakeholders and commentators appear to have understood the dire need for changing the present model for estate workers. The RPCs have been consistent in their stand that it is not a matter that we are unwilling to grant a pay increase to the workers but it is simply that we are financially unable to grant any increases in the same old model under the present radically changed trade circumstances,” Rajadurai opined.

Not a Rupee more
He points out RPCs simply cannot grant even a single Rupee via the present system and most certainly cannot afford the Rs. 1,000 daily wage – which represents an increase of 61% – which the unions are demanding. Further, if the demand of the trade unions for a daily wage of Rs. 1,000 is met it would increase the annual expense incurred on labour wages alone by the RPCs by a staggering Rs. 18 billion per year.

“Due to the labour-intensive nature of the industry, labour costs constitute 67% to 70% of the cost of production of a kilogramme of tea. An increase of labour wages by a single Rupee would increase production cost of tea by a minimum of Rs. 0.60 per kg. The Rs. 1,000 demand of the unions therefore, if met, would raise our production costs by nearly Rs. 230 per kg and significantly increase the unbearable losses that we are incurring already, making it very difficult to manage plantations,” he elaborated.

Explaining the key features of the proposals made to the unions, Rajadurai said they are suggesting a complete overhaul of the present operating model in the plantation industry, in which the worker, who now is dependent and his/her earnings potential is restricted by the attendance-based wage.

“To stop workers from moving out of the sector, we need a change to the system and must transform them to entrepreneurs who are proud of their profession and part of an Autonomous Social Business Enterprise,” he emphasized.