Tea plantation crisis – Possible solutions


During the last few days, media reports showed tea plantation workers taking to the road demanding their basic daily wages be increased to LKR 1000. In fact, they have been demanding this over the past several years. Several tea factories in the up country were also reported to have put up their shutters as the workers were keeping away from work. The Wages Board had declared that workers in the tea industry be paid a basic salary of LKR 545 a day, on which the EPF is computed, and LKR 135 as allowances, making a total of LKR 680 a day.

One noteworthy factor is that while in all other places of work, whether public or private sector, EPF is computed on the total salary payable including allowances and overtime, this facility is denied to workers in the tea industry. The other factor is that although the salary is described as a daily wage, workers generally do not put in a full day’s work. They may report for work around 07.30 am and start plucking around 08.00 am as they have to walk up to the plot they are plucking, which may take half an hour or so. By about 01.30 pm, they return to the weighing shed after plucking their norm for the day which is around 22-24 kg. They have the option of working after lunch, but most of them do not do that as their philosophy is to work to live, rather than live to work. Depending on the number of days they work, they may earn between LKR 10,000 and 12,000 a month. If they fall sick and have to stay away from work or for any other urgent matter, there is no earnings for the absent days.

The employer, whether a Regional Plantation Company (RPC) or a small holder, pay the workers out of the money they receive for the amount of made-tea sold to the auctions monthly by the factories. The price fetched for made-tea at the auctions depends on the demand from buyers overseas. The export broker companies purchase the made-tea at the auctions and pack them with or without blending and export to the buyers’ countries. There is a significant difference between the price fetched at the auctions and the price received from exports, as given in the Central Bank Annual Report (see the table).

It is seen that there is a difference of about LKR 182 per kg between the auction price and the export price, and with the average amount exported being about 294 million kg during 2015 - 2017, the small exporter community stand to make an average profit of about LKR 53.5 billion annually during this period. They may pay a small fraction as the cess levy and other taxes to the government, leaving an enormous amount of earnings to share among themselves, while the worker gets only a pittance of around LKR 10,000 a month.

It is also interesting to note that during 2015-17, Sri Lanka has exported on an average 95% of its tea production, and the balance sold in the local market. While the tea is purchased at the auction at about LKR 500 a kilo, the average retail price of made-tea in the local market is almost double, about LKR 1000 a kilo. Thus, the packers, wholesalers and the retailers are sharing the LKR 7.8 billion generated in the local tea market.

In response to the demands made by workers, the RPCs and the factory owners maintain that with the earnings they make from the money fetched at the auctions, they are unable to raise the workers’ pay (Island, 26.11.2018). The Plantations Ministry should, therefore, intervene to initiate discussions among RPCs, factory owners, trade unions and the exporting companies to come out with a formula to share the profits earned from the exports and the local market in a more equitable manner; enabling the workers who form the backbone of the industry are paid a decent livable salary.

The factory owners have another option of increasing their revenue by manufacturing value added tea such as instant tea, ready-to-drink tea beverages and also CTC tea, which are in demand in the western countries. In the local super-markets one can find RTD tea packs imported from Switzerland, containing tea from Sri Lanka and water from Switzerland. Cannot the reverse process be done here, exporting RTD tea packs from Sri Lanka to the rest of the world? But Sri Lanka opts to manufacture more of orthodox tea targeting the Middle East countries (where the economies are not so stable) and Russia, without attempting to break into markets in western countries having stable economies with value added products. Such products are in demand there and could fetch a better price and bring a higher revenue to the country, part of which could be passed down to the workers.



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