Agreeing on change in Sri Lanka’s tea industry October 20, 2009
Posted by southasiamasala in Niewójt, Lawrence, Sri Lanka, Uncategorized.Tags: labour, Sri Lanka, tea plantations
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Lawrence Niewójt
Major changes are under way in the Sri Lankan tea industry. Despite the global economic slowdown, a few weeks ago trade unions and plantation owners agreed to a deal that will give labourers substantially higher wages and encourage productivity gains in the industry.
On 13 September 2009, a ten-day trade union action that blocked the transport of tea from estates ended after the planters agreed to raise workers’ wages by 40 per cent, from 290 to 405 rupees per day. Having rejected an earlier offer that would have bumped up daily earnings only Rs. 40 in the first year and an additional Rs. 30 in the second year of the collective agreement, unionists retreated from original demands for a Rs. 500 daily wage after planters threatened to halt wage payments for October and the festive season. Whilst the tea industry’s three largest unions – the Ceylon Workers Congress (CWC), Lanka Jathika Estate Workers Union (LJEWU) and Joint Plantation Trade Union Committee (JPTUC) – signed the two-year deal, smaller unions such as the Up-country Peoples Front (UPF) and the All Ceylon Plantation Workers Union (ACPWU) remain unsatisfied and have been responsible for isolated disruptions in tea-producing areas.
This deal is set to boost the standard of living for a substantial portion of Sri Lankan society. Overall, the tea industry employs some 247,000 workers and almost a million people reside on the tea estates owned by regional plantation corporations. About 68,000 of these plantation workers come from the island’s Sinhalese community, while the rest are Tamils of Indian origin, so the importance of this agreement for the Tamil ethnic minority cannot be ignored.
News of the deal was also celebrated on the other side of Palk Strait, and last week a delegation of MPs from the Indian state of Tamil Nadu toured Sri Lanka’s central provinces . There they met with Tamil labourers on the up-country plantations and learned about the workers’ living conditions. More significantly, this was the first political delegation from India to tour Sri Lanka after the 30-year-old civil war ended in May 2009.
While tea pluckers appear satisfied with their recent gains, some experts believe that heightened labour costs now make Sri Lankan tea estates uncompetitive in the international market and have sought out other solutions. Ariyaseela Wickramanayake, Chairman of the Mawbima Lanka Foundation that advocates the consumption of locally-sourced products, believes that the wage increase is untenable over the long run. In an interview with Sri Lanka’s Daily News, he argued that the introduction of dairy farming in tea estates and fixing the right price for imported milk products would better serve everyone’s needs. His proposal is straight-forward: if the government provided cows to estate workers they could gain additional income by selling cow milk, thereby providing extra earnings of Rs. 800-1,000 per family. In addition, workers would enrich their diets with more fresh cow milk and gain useful fertilizer. By adding the subsidized amount to imported milk products to realize a higher actual price, the country would be encouraging consumption of local products and save on foreign exchange. Wickramanayake also noted that in a pilot project with 2000 cows the Pelwatta Sugar Company produced 20 per cent of the local milk requirement, and its success has spurred on similar schemes at the Kahawatta and Bogawantalawa plantations.
Although elegant in its simplicity, it’s unlikely that any such programmes would be initiated while lagging export volumes and unimpressive tea prices at the Colombo auctions continue to threaten the underlying profitability of plantations.
Simply put, the labour dispute and accompanying uncertainty regarding how higher costs will affect tea output were bad for business. Ceylon tea has not participated in the strong price rises witnessed in other parts of the world, and exports to key markets such as Iran and the United Arab Emirates have declined dramatically. A study of market reports covering the first seven months of the calendar year showed that, over the same period in 2008, tea prices in Bangladesh (Chittagong auctions) and Indonesia (Jakarta auctions) were up 17.31 per cent and 12.93 per cent respectively, but the Colombo prices were down 4.28 per cent. Sri Lanka’s planters hurt themselves by allowing the previous collective agreement to expire in March and not reaching a new deal quickly.
Beyond the drawn-out union negotiations, in 2009 the Sri Lankan tea industry has also been hammered by unusually dry weather conditions that severely curtailed production. By the end of August, only 182 million kilograms of tea had been produced and a month later the Sri Lanka Tea Board warned that the annual output target of 300 million kilograms may not be met. Lower output levels mean that Lanka, the second-biggest supplier of black tea, will not come anywhere near its 2008 record export earnings of $1.27 billion (US). The drought has hit low elevation tea regions particularly badly, cutting production by nearly a quarter. Meanwhile, output of high elevation teas (produced mainly on corporate plantations) were down almost 14 per cent. Given the impact of drought and the Planters’ Association estimate that the wage hike will add 6 billion rupee to annual production costs, it is little wonder that the planters have already begun asking for government assistance.
The Sri Lankan government has already made some effort to prop up the tea industry, but it will have to do more as the sector adjusts. State assistance has come in the form of a fertilizer subsidy programme for small landholders, low interest rate loans for factory owners, a moratorium on loan repayments for plantation companies and a reward scheme for exporters. This is just the beginning. Expediting the repayment of value-added-tax refunds to plantations – which have been delayed for several months – would be a good start. Furthermore, the Planters’ Association’s calls for government-funded tea planting programmes and upgrades to processing facilities to meet the safety standards demanded by overseas buyers appear to be sensible requests. Although the tea plantations will not get the same kind of subsidies as those offered to apparel exporters and tourist hotels, a bit of help is in the cards.
Having concluded a protracted civil war earlier this year, there is no doubt that Sri Lankans are looking forward to a period of stability and reconstruction. As part of this process, it is in the government’s interest to lend support to an industry that has underpinned its economy for over a century. The landmark collective agreement signed in September 2009 is set to improve the quality of life experienced by plantation labourers, and in particular a substantial proportion of the Tamil ethnic minority. At the same time, by including measures to encourage productivity gains the Planters’ Association has laid the groundwork for a more competitive and modernised tea industry. Since Sri Lanka’s plantations exhibit the lowest productivity of all major tea exporting countries (the wage component is 60 per cent of the cost of production per kilo of tea), such measures are long overdue. In a time of global economic turmoil, when large corporations such as British Airways and Sri Lankan Airlines have asked their employees to work for free, the deal reached between trade unions and plantation owners illustrates that equitable arrangements have the ability of serving both corporate and national interests if we would only dare to give it a chance.
Very informative. It will be interesting to see if improvements in living standards for Tamil plantation workers will lead to a decrease in the number of asylum seekers intercepted in boats off the coast of Australia. Lets hope that things get better for the rural workers over there.