Should Plantation workers be working at poverty level wages ?


by Vijaya Kumar

Special correspondents and bigwigs in the planation industry keep hammering at us that plantation workers in Sri Lankan are vastly overpaid, any increases in pay will be spent on liquor, no increase in pay is possible unless tied to productivity and that workers should agree to a new system where they will become contract workers. Should we believe them?

What isconveniently forgotten is that when the plantations were placed under private management, the trade unions were given undertakings among others that 10% of the profit would be distributed among employees and a collective agreement would be facilitated with the management companies to ensure that workers are paid a reasonable wages. The four cents per cost of living index point allowance paid at that time to workers was removed at the insistence of the companies and a 15% wage increase from Rs. 61.84 to Rs 72.22 per day offered to workers. The mechanism for facilitating a collective agreement took four years to establish but regular negotiations have taken place since then. The present strategy of the companies of refusing to sign a collective agreement constitutes a betrayal of this undertaking and Minister Kiriella should be congratulated for asking the companies to get out if they cannot pay workers a living wage.

The plantations went through a very similar crisis in 1992 when the Iraq - Iran Gulf war, sanctions against Iraq and the break-up of the Soviet Union and the resulting hard currency problems lost us our main markets for tea. It was this crisis interpreted by interested parties as being due to the inefficiency of state management that led to private management of plantations. The "efficient" private management which was expected to transform the industry into profitability appears to have only one solution to estate problems, controlling worker pay. At every negotiation except that of 2013, the RPCs insisted that they could not afford to raise wages and any pay rise must be accompanied by an increase in productivity before they grudgingly settled the issue. The superiority of private sector management is clearly a myth.

The Regional Plantation Companies are no different than the old Agency Houses. The Agency Houses Commission of 1974 showed us that the Agency Houses with its high cost structures and the absence of reserves relied on using its influence to generate state subsidies for replanting, grant rebates, diversion of foreign aid and the pumping of government money to run the plantations profitably – the same is happening today. Private management soon after taking over succeeded in getting rid of the prevailing ad-valorem tax of 50% on tea which the Corporations had paid and is now clamouring to remove even the cess used for the promotion of the plantations. They continue to receive grants and subsidies.

Are workers being paid a fair wage today? The RPCs boast of a ten-fold increase in nominal wages, not real wages, in the 25 year period since 1991. Real wages are obtained when the Central Bank’s, GDP deflator is used to remove the effect of inflation. During the period when the plantations were under state ownership there was a distinct improvement in the living standards of the plantation worker with wages multiplying fivefold between 1972 and 1980 compared with a doubling of the cost of living and increasing 12% more than the cost of living between 1980 and 1992.

Under private management, real wages of plantation workers fell by 23% between 1992 and 2001. In 2004, faced with absenteeism partly fuelled by the low wages, employers successfully pressed for the incorporation of an attendance bonus amounting to 18% of basic wage in the negotiated wage. The bonus was payable only to those workers who worked for 75% of the days for which work was offered each month. The attendance bonus was increased to 41% of basic wage in 2006, reduced to 23% in 2009 and was 27% in 2011 and 31% in 2013. However, even with the attendance bonus, real wages remained below the 1992 wage until the collective agreement of 2009. Wages including the attendance bonus brought the real wage marginally above the 1992 figure only in the collective agreement of 2009 but the wages excluding the attendance bonus did so only in collective agreements of 2011 and 2013. If indeed the RPCs are paying a competitive wage, how does it explain the shortage of workers it faces and the reluctance of workers to compete for the "attractive" job opportunities they offer? The only reason workers continue to work for RPCs is because they cannot continue to occupy estate housing unless a member of the family is employed by the estate and this again is why the RPCs resist the handing over of deeds to estate houses built by workers through estate co-operatives.

On the face of it, 75% attendance seems reasonable but is it so? Estate workers are expected to works 26 days of the month, the only paid holidays being Independence Day, April New Year and May Day. Sundays and Poya days are partly paid holidays in the sense that a worker with very good attendance can get 17 days holiday pay for them at the end of the year. In order to obtain the attendance bonus, the worker has to work 20 days a month which is what is accepted as the normal number of working days in a month in most workplaces.

Today’s wages of Rs 480 per day and Rs 620 per day for those eligible for the attendance bonus, work out to Rs 234 and Rs 303 per person per day in an estate family if we accept the Census figures of a mean of 2.1 persons being employed in a household of 4.3 members in the estates. Given today’s dollar rate of Rs 145, the per-capita income in the plantations would respectively be USD 1.61 and 2.09. The World Bank has identified USD 1.90 as its international poverty line and people living on less than that sum per day are considered to be in "extreme poverty." Isn’t it a shame that the biggest international and Sri Lankan multinational companies like Tata (Watawala Plantations), Richard Pieris (Kegalle, Maskeliya and Namunukula), Aitken Spence (Elpitiya) and Hayleys (Kelani Valley, Talawakelle) are trying to justify paying a sizeable section of their workers, wages that keep them at "extreme poverty" level whiletelling them that they should have 75% attendance to earn 10% above that levels. It can be argued that a strategy of keeping pay below extreme poverty levels making high attendance compulsory to earn a living wage has the elements of forced labour.

In order to hide the crime committed by these multinationals against the estate community, employers shamelessly try to confuse the issue by comparing salaries with those of workers earning monthly salaries as in garment and hotel industries and with those earned by rural agricultural workers, probably ande cultivators. If the RPCs are prepared to pay a monthly salary equivalent to that paid to garment workers, I have no doubt estate workers would gladly accept it. The RPCs boast of their contribution to the welfare of estate workers (housing, education, health) but their expenditure on these activities is marginal, most of it being met by the Plantation Human Development Trust (PHDT), government funding or foreign aid. Some of the RPCs are even in default of the annual one day’s pay per worker contribution to the PHDT. The meaninglessness of the RPC’s much advertised Corporate Social responsibility (CSR) can be shown by the fact that none of them have done anything to help the 88 families in Meeriyabedde for the past 15 months.

Planters Association officials consistently point out that liquor expenditure in the estate sector at Rs 125 per person or Rs. 530 per household per month is two and a half times that of the rural sector. Although the Census statistics does not show a breakdown of this expenditure for the estate sector, national figures show that liquor makes up only 50% of the liquor, narcotics and tobacco sector with 30% being expenditure on betel chewing, one of the few pleasures of an estate plucker, and the remainder on cigarettes. In any case these statistics are distorted by the heavy expense on liquor by estate management both at their bungalows and clubs as shown by whisky/brandy which are included. How else can one explain the 2.4% of estate housing with five rooms and solar power as an estate sector fuel shown in these statistics?

The RPCs claim that they cannot afford any pay rise. While it is true that international economic conditions have depressed commodity prices, is it the workers or the management who have to answer for this. Although profits were reduced this year, most companies made profits. Watawala for example showed Rs 391m profit compared with Rs 497m last year. Elpitiya, Rs 398.5m as against Rs 413 m, Hayleys Plantations101.3m as against 117.7m while the three plantation companies of Richard Pieris made a total profit of Rs.94 m compares with Rs 590 m last year. However one does not know whether these figures are understated. Transfers to the parent company of "management fees," effectively understate profit at the plantation level. Watawala estate (Tata) estate transferred Rs 92 m in 2014 but has decided against charging it in the future. Substantial sums are transferred as management fee by Elpitiya plantations (Rs 49 m), Kegalle (Rs 16.6m but Rs 74.3 m in 2014), Maskeliya (Rs 151m) and Namunukula (Rs 45.2m but Rs 89.5m in 2014). Also many of the transactions are with other companies in the group at prices which are not necessarily fair market prices. Suitable pricing permits management companies to reduce plantation level profits. For example, of the Rs 6.85m goods Watawala sold this year, nearly 30% or Rs 1.83b was to related parties, while the same was true for more than a third of its Rs 286 m purchases. In spite of being unable to increase worker pay, remuneration to directors at Watawala increased from Rs21.3m in 2013 to Rs.34.8m in 2015 while for the Richard Peries companies, it increased from a total of nearly Rs 2m to Rs 2.7 m. Unfortunately, Elpitiya accounts are contradictory, while Hayleys consolidates all its accounts. The complicated inter-firm relationships between subsidiaries of our big companies need an army of accountants to disentangle their accounts to determine the actual profit at plantation level. The ten year history of most plantation companies reveal a wide variation in profit and loss from year to year and part of the problem is that management has not planned for eventualities, but distributed their profits. However the most surprising aspect of profitability is that we see no RPC clamouring to be allowed to give up their leases because of the problems they face in running the estates.

Increasing productivity is a desirable objective but when workers are paid near extreme poverty wages, tying wage increases to productivity increases will only ensure that they can never rise out of their extreme poverty. Productivity also does not appear to be part of the equation for Director remuneration which rose from Rs 766,000 to Rs 1.17 m at Maskeliya Plantations during the past two years although the company increased its losses from Rs 92 m to Rs 184 m. In spite of all the talk, workers have contributed to a substantial increase in productivity during the 24 years of private management. The 18 kg norm which the RPCs mention used to be 18 pounds or 8 kg in the pre-nationalization era. The yield per hectare which averaged 1,300 kg before and after nationalization is now well over 1,600 kg. Today the RPCs are producing substantially more tea with much less workers on less land but like Oliver Twist, they keep asking for more.

The large companies running the plantations should hang their heads in shame as they are presiding over a system which keeps workers on a subsistence income barely above extreme poverty levels in a country which boasts of middle income status. One wonders whether this is tolerated because estate management at all levels is exclusively male while the workers are predominantly women.

Nationalization of tea estates was facilitated by the naming and shaming of its foreign owners by the British Press. It is now time to name and shame today’s new plantation raj, but if we do not do it now, we may find ourselves drawn into the NGO campaign mounted in Britain to boycott Indian tea, based on the exposure by the BBC of the atrocious treatment of tea workers in Darjeeling.

Vijaya Kumar is President of the Lanka Estate Workers’ Union


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