No less an authority than Merril. J. Fernando, the Dilmah man, has gone on record saying that ruling tea prices today have reached heights never known in the industry. That for a country like ours which is one of the world’s biggest tea producers enjoying an enviable reputation for the quality of Ceylon tea should, under normal circumstances, be more than good news. But such is not the case. What the country is enjoying on the price swings has been largely lost in the production roundabouts. While prices are high, production in most estates and smallholdings which form the backbone of low country tea have plummeted and the industry is in anything but good shape. Compounding this is a wage demand backed by a trade union `go slow’ and strong arm tactics like preventing produce being transported to the auctions.

Fernando’s comment about price highs in the annual report of his company, Ceylon Tea Services PLC, was not a joyous statement from a business leader who is into all aspects of tea – production, broking and, most importantly, value added exports. On the contrary, he has made the pertinent point that the prices currently enjoyed by Ceylon tea are not matched in other tea producing countries. The result is that it is ``almost impossible’’ to raise prices to retailers and some major brands were exploiting the situation by heavily discounting their prices to widen the price gap between their own brands and Dilmah. Though Fernando has not specifically said so, his message obviously is that the competing brands use cheaper teas from other producer countries in their packs. A single figure illustrates the extent of the problem: present prices of Ceylon tea are more than a dollar per kilo higher than those of our nearest competitor.

While garments and worker remittances home from Lankans working mainly in the Middle East have long outpaced tea earnings, the tea industry remains an important prop of the national economy. Labour wages are the single biggest input into tea and the very high union demands that will be negotiated during discussions beginning tomorrow are vital. Given the present cost of living, nobody can gainsay that the workers certainly need higher pay. But the question is whether the industry can afford what is on demand - no doubt a high starting point placed on the table at the commencement of negotiations leaving room for compromise at a later stage. Hopefully, the talks can begin with an agreement that the ongoing pressure tactics will be suspended for their duration and optimum production in the context of present climatic conditions is sustained. If the blocking of auction bound tea is happening at a significant level, then there is a law and order problem for which the government and police is answerable. Such thuggery is patently illegal and cannot and must not be permitted.

Time was when tea workers agitated for an increased number of working days. Today the plantations face a labour problem of significant proportions. Lot of estate women have taken to domestic service in affluent and middle class homes in preference to working on the tea fields. They find these jobs less demanding than working on the thottams. As they are fed and housed and often enjoy other perks like gifts of clothing etc. from their employers, enabling them to send most of their earnings to their families just like the housemaids working overseas do, they tilt in favour of that option. The male estate workers were largely employed in the construction sector where the work was as hard as on the plantations but wages were better. However the recession in the building industry has hurt them. Hopefully that cloud is now lifting although that will be to the detriment of the labour problem on estates. The rubber plantations are complaining that there is a shortage of tappers and many of the Regional Plantation Companies (RPCs) quoted on the Colombo Stock Exchange are now posting losses.

The bottom line is that accounts of many RPCs do not always reflect the actual financial health of these companies holding long-term management leases of state land. The controlling shareholders often take very high management fees, fattening themselves at the expense of the profitability of the RPC itself. Particularly galling is that such fees were generally a percentage of turnover and not profit so that win or lose, the managers did nicely. This has long been a bone of contention between the companies and their minority shareholders who find that the dividend payout is often less than the management fee. The government has moved to some extent in this matter making those RPCs not coming down on such fees ineligible for low cost development funds from multilateral lenders like the Asian Development Bank. That has had some beneficial result.

Employers have long favoured a price-wage supplement, something that the unions have resisted. The national interest requires that development work on estates, including replanting with high yielding clones. Some RPCs, in good times and bad, have continued with such work investing in both field and factory while others have been less able to afford such investment. The living conditions of some estate workers have improved in recent years with cottage-type accommodation against the previous barrack-like line rooms, water supply, electricity etc. But many thousands still live in primitive conditions. Their lot must be improved and all workers must be paid a living wage. However the industry will resist a blanket wage increase unrelated to productivity. Plantation crops are subject to price cycles and the RPCs particularly will not want to be locked into a wage commitment based on the present high prices despite low productivity largely attributable to climatic considerations. Several factors must be balanced in the equation and a deal that is fair to all worked out. With national elections likely early next year, the government will be tempted to woo the plantation vote and that too is likely to influence how events unfold.