Weary plantations urge trade unions to be reasonable

Planters Association of Ceylon (PA) which represents Regional Plantation Companies (RPCs) urged the trade unions yesterday for a reasonable approach to the ongoing plantation sector daily wage negotiations
PA reiterated that any ad-hoc increase of estate sector wages with no link to productivity would have dire consequences on the industry.
The association pointed out that one rupee increase in labour wages increases production cost of tea by approximately 52 cents per kg. Accordingly, if the demand of the unions for a daily wage of Rs1, 000 (which represents a Rs.312 increase from present) is met, production cost of tea per kg would skyrocket by Rs.162.24, making the tea produced by the RPCs completely uncompetitive in the global market.  
The Colombo Auction price for High Grown Tea has dropped by Rs.66 per Kg since last year and currently most of the RPCs are incurring a loss of over Rs.50 per Kg of tea, which has been the situation since January 2014.
If the demanded wage increase is given PA pointed out that the cost of production of the RPCs, which is in the region of Rs.450 per kg at present, would exceed Rs.610. 
Since the total sale average of tea at the Colombo Tea Auction in the last week of November 2015 only amounted to Rs.409, the loss from a single kg of tea produced by RPCs would increase from around Rs.50 to Rs.70 at present to over Rs.200, making operations completely financially unviable.  
Added to this, a high percentage of the tea remains unsold at the Colombo Auctions and the tea trade indicates that there is a serious drop in the orders for tea in the forthcoming quarter too.  
Furthermore, due to the labour-intensive nature of production (RPCs collectively employ around 193,000 workers), one rupee increase in the daily wage of an estate worker would increase the annual expense incurred collectively by the RPCs on labour wages by Rs.66.6 million. 
Therefore, if the demand of the trade unions for a daily wage of Rs.1, 000 is met, which represents an increase of Rs.312 from the present daily wage, it would increase the annual expense incurred on labour wages alone by the RPCs by a staggering Rs.20.8 billion.  

It is unthinkable that given the present circumstances that the tea prices would increase to cover this additional expenditure in order for the RPCs to have the ability to pay their workers.
PA pointed out that due to plunging prices as a result of political, economic and military issues in key export markets which account for over 70 percent of exports of Ceylon tea, the RPCs are finding it difficult to even meet the existing wage obligations – with both tea and rubber price levels at present being lower than at the point at which the last estate sector wage hike was given in 2013, where the tea prices have dropped by Rs.66 per Kg and rubber prices by Rs.115 per Kg.

RPCs suffered a collective loss of approximately Rs. 4,000 million on tea and rubber in 2014.
“It is indeed extremely difficult to understand the position of the unions in continuing to unreasonable and impractical demand for an unconditional 45 percent wage increase in the estate sector daily wage during a time when the industry is in its worst crisis where the companies are borrowing a colossal amount of money from the banks to pay the current labour wages,” PA Chairman Roshan Rajadurai said.
Since the privatisation of the estates in 1992, the labour wages have increased 13 fold, although the tea prices have increased only by 6 fold in the same period.

RPCs have previously provided significant wage increases to workers in many years including 36 percent in 2004, 27 percent in 2006, 40 percent in 2009, 28 percent in 2011 and 20 percent in 2013. 
While the unions themselves have recognized the issue with regard to lack of labour productivity, pledging to improve the same in the last wage negotiations, no substantial improvements have been recorded. 
In Sri Lanka the daily plucking average of tea is around 18kg – which lags significantly behind that of competitors such as Kenya (48kg) and Assam in India (28kg), despite wages in Sri Lanka being substantially higher.

Meanwhile, PA said certain proposals in the Budget 2016 rub salt in the wound.
According to PA’s estimates, the government’s decision to withdraw the fertilizer subsidy and the impact of banning of the use of the weedicide Glyphosate along with the newly introduced charge for cash withdrawal for worker wages will add further Rs.5.3 billion to the total expenditure of RPCs.