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Plantation wage talks in deadlock

8 April 2015 05:24 am - 0     - {{hitsCtrl.values.hits}}

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Negotiations pertaining to the renewal of the collective agreement between the plantation trade unions and Employers’ Federation had commenced, recently. Unions had put forward a demand to increase their daily basic wage by Rs.350 from their earlier amount of Rs.450 (a 78 percent increase), which appears to be an unreasonable demand. 
The regional plantation companies (RPCs) say that the comparatively lower productivity but higher labour costs, is creating a situation in which the plantation sector is fast becoming financially unviable. PA says labour productivity in Sri Lanka can and must improve substantially for the industry’s survival. That is the present position. A deadlock.



Issues
Increase in productivity hinges on a variety factors, including higher labour output, mechanisation, higher yields from superior clones and scientific management such as proper and timely application of fertilisers and pesticides as well as plucking of new shoots. With their compact holdings and cost-effective operations, small growers have been able to implement most of these conditions more effectively than the big plantations, where the huge scale of operations and major investments have acted as major deterrents.

Reducing the cost of production and increasing productivity are two factors that will ensure that Sri Lankan tea plantation industry is able to survive the fiercely competitive global markets as well as the current financial crisis.



Past performance
Statistics that were available earlier for several countries show that Sri Lanka has not performed consistently in comparison with most competing countries of Southeast Asia as far as productivity is concerned. India had productivity of 1,663 kilogrammes a hectare, Sri Lanka had 1,615 kilogrammes, Vietnam had 1,548 kilogrammes, Indonesia had 1,115 kilogrammes and Bangladesh had 1,108 kilogrammes. Kenya had 2,477 kilogrammes per hectare. 
But, now differences in yield, cost of production and prices have made the profitability of tea vary widely across the different countries. Among the various countries, the highest profitability has been obtained by Kenya (over US $ 2,000/ha), followed by India (over US $ 1,400/ha) with the lowest being Sri Lanka (US $ 1,100/ha) a few years ago and now they say loss. Although the trend remains the same, the actual figures might have changed due to various interacting factors.  
With most plantations finding shortage of labour, the introduction of manual and mechanised shearers is expected to boost labour productivity several fold. From an average output of 50 kilogrammes of plucked leaves per worker, the productivity would surge to 300 kilogrammes with the use of manual shearers and to 600 kilogrammes with mechanised shearers. This is bound to increase labour productivity and reduce cost of production.
But, with the legacy of a large labour force, most plantations would not be able to replace man with machines immediately. Also, given the undulating terrains of tea plantations, application of manual and mechanised shearers may not be possible in all areas. The cost of replanting with high-yielding clones would be huge for plantations.
Plantation sources say that the large social cost for plantation labour in Sri Lanka – provision of housing, electricity and water – as being the big burden that other competing countries do not have. 
They demand that the government provide support for this social cost. While challenges remain before the tea industry in increasing productivity and reducing cost of production, viable and practical avenues should be explored.



Productivity
Productivity is defined in the classical sense, that is, as obtaining more output for the same input. The two major inputs in the tea industry – land and labour – are neither as abundant nor as cheap as they were when the tea plantations were established more than 100 years ago. 
Tea is among the most labour-intensive of all the plantation crops. It has both an agricultural and a manufacturing dimension. According to well-established precepts, 60 percent of the income from tea is agricultural, the balance being of an industrial nature.
 Although both the agricultural and manufacturing activities, with particular reference to labour requirement, have been discussed on a few occasions earlier, it is still considered beneficial to re-examine this subject  with the aim of facilitating an insight into the kind of productivity gains that are possible in an effort to improve the viability of this volatile sector. 



Production and COP
The tea industry is no longer a dominant source of generation of surpluses for economic growth. An  analysis of the performance of  tea, over the last 10 years, indicates that tea production has increased only by 11 percent from 296 kg mn to 329 kg mn over the 10-year period, whereas the COP has gone by about 159 percent over the same period . This figure may be still higher with the previous wage hike. Productivity (Yield/ha) has also not been consistent. Looking at prices over the same period, tea prices have gone up by about 158 percent. But now the situation is different. 



Factors influencing productivity
Harvesting. Commonly referred to as plucking in tea parlance, this activity is overwhelmingly labour-intensive, despite the tendency lately in some areas of the tea growing regions to use shear harvesters during the heavy cropping period when labour is scarce. Plucking accounts for about 70 percent of the workdays on estates and about 40 percent of the total cost of production. The main factors that influence plucking are: 
Yield -- a higher level being attained by adopting better agricultural and management practices leading to enhanced plucking output; 
Plant density -- fields with less plants (about 8,600 per hectare in the ‘seedling’ tea) having a lower plucking potential than those with more plants (about 12,500 per hectare in vegetatively propagated tea); 
Leaf variety -- the small-leaved ‘China’ variety yielding less than the large-leaved ‘Assam’ variety or the hybrid medium-leaved vegetatively propagated plants; 
Climate and topography -- higher elevation, steep areas, prolonged drought, etc., serving as constraints to plant growth, field productivity and, hence, plucking output; 
Age of plant -- older bushes yielding less than the new and replanted fields; 
Leaf standard -- the traditional “two leaves and a bud”, while ensuring quality, does not generate as extensive a crop as does plucking the third leaf -- a practice that is now gaining ground -- or even coarse plucking, which substitutes quantity for quality; 
Plucking frequency -- for instance, a seven-day interval involving about 52 rounds a year resulting in a different level of yield -- and profitability -- than a five-day frequency involving about 73 rounds; 
Wage rates and incentives -- a properly designed incentive system, in particular, resulting in less leaf going unplucked and at the same time, enhancing workers’ earnings; 
Worker productivity -- embraces a wide spectrum of factors such as earnings, motivation and socio-economic influences. 
Fertilizing. Given the required soil conditions, there is a high degree of correlation between field productivity and the application of inorganic fertilizer, as recommended by the Tea Research Institute that is in operation. Apart from adhering to the recommended dosage -- roughly, 1 kilogramme of nitrogen for every 10 kilogrammes of made tea -- the industry is now looking more closely at establishing precise linkages with fertilizer prices (subsidies for which have, by and large, been withdrawn) as well as the price of tea itself. 
Weeding. Technical opinion now is that weeds in the tea fields are to be controlled, not eradicated. It is, therefore, a question of weed management with an eye on the cost-benefit line of the operation. 
Pruning. The average life of a seedling tea plant is well over 50 years, with hybrid types having a life of around 40 years. Pruning is important for maintaining the tea bush in the right form and height for growing and plucking.
Other field operations. These include soil conservation measures, control of pests and diseases and sundry activities. The labour requirements -- mostly men workers -- do not vary significantly with field productivity, being about 15 percent of the total workdays absorbed on an average tea estate. 



Replanting
The slow pace of replanting now is very striking. As against a targeted rate of 1.5 to 2 percent per annum, it is only about 0.4 percent in Bangladesh and India and 0.7 percent in Sri Lanka. The activity, which involves uprooting of old bushes, rehabilitation of soil, planting of tea and maintenance of the young field till maturity, is overwhelmingly labour-intensive; about 70 percent of the cost involved over the five-year period is on labour.
From the point of view of individual managements, the reasons for the slow pace of replanting are economic -- high investment and negative returns. But replanting has to be seen in a wider national perspective. By enhancing field productivity, replanting also generates much higher employment per unit area than the old seedling fields. An element of state intervention and assistance to give a fillip to this activity will have a multi-dimensional impact on the long-term development of the industry.
Meanwhile, industry efforts have been directed at the filling of vacancies with a view to increasing the plant density per unit area without suffering any loss of crop. To the producer, this is the most cost-effective field development option and it also has the advantage of absorbing underemployed workers, the labour component of infilling being, as in replanting, about 70 percent of plant cost and maintenance. 
Several yardsticks are available to the tea industry by which to judge production efficiency and its effect on reducing costs, the most important of which are discussed below. 



Plucking productivity
This is the quantity of green leaf harvested per workday, the objective being to increase it without detriment to quality. The average for the South Asian countries in making allowances for the type of plucking, elevation and regional differences in kilogrammes of green leaf per day per worker, India – North, 24; South, 25, Bangladesh, 20, Sri Lanka – corporate sector, 15; Smallholdings, 24. 
By comparison, the Kenyan average is 40 to 50 kilogrammes of green leaf per day per worker, although it must be added that this includes an element of assistance by family members, especially in the smallholdings, which adds to the individual plucker’s efforts. According to a recent study of the African tea-producing countries, estates in Zimbabwe are registering a plucking productivity averaging as high as 68 kilogrammes.



Land-labour ratio
The main parameters determining the productivity of a tea estate, particularly in respect of its day-to-day operations, are the levels of labour utilization and the labour per unit area appropriate to the different levels of yield.  
As an example, the workdays required for an estate with a yield of, say, 1,500 kilogrammes per hectare is reported to be around 657, with an average of 2.74 workers per hectare. In practice, however, the latter parameter varies from country to country and from district to district within the same country, the average for India being 2.5 and for Bangladesh 2.
 In Sri Lanka, there is a marked variation between estates and smallholdings. In estates, there are as many as three to 3.5 workers per hectare, whereas in smallholdings there are said to be as few as about 1.5, although family employment has also to be taken into account to reflect the true position. In the East African estate sector, the average number of workers per hectare is reported to be two, despite the higher yield.
In conclusion, if the tea industry has to choose between improving prices and controlling costs, the former is the more difficult option particularly in a global environment where transnational corporations are exerting greater influence on the buying operations. The latter option, therefore seems to be the more practical alternative. Although wages and input costs perse are bound to rise, they could, within limits, be balanced in terms of unit costs of production through enhanced productivity – not just that of labour but also the other factors of production that contribute to the growing. 


(Dr. N. Yogaratnam can be contacted at treecrops@gmail.com) 
 
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