“They must realise that any improvement in productivity will cushion the impact of the very high cost of production in Sri Lanka and eventually will help to sustain the tea industry, through cost reduction and improved competitiveness in the global marketplace,”
“If the industry collapses, it will be the workers who will face the brunt of such a disaster. Already, we have heard reports that some rubber small holders have stopped tapping rubber because it is unviable and they have alternate sources of employment,”
“However this will not be the case for the approximately one million plantation community resident in the plantations, who are enjoying all the benefits provided since they’re employed in the estates.”
Noting that at approximately Rs. 460 per kilogramme, Sri Lanka’s unit production cost of tea is the highest in the world and the country’s unit labour cost in itself is higher than the total unit cost of production of some of its competitors.
Such a development can boost the Regional Plantation Companies’ (RPCs) total revenue and mitigate the unsustainably high costs they are grappling with at present.
The RPC estates are compelled to offer 300 days of work per annum, irrespective of the daily output levels of the workers or the reduced cropping conditions in the fields as a result of erratic and changing weather conditions that are not uniform throughout the year.
During the lean cropping months, the RPC estates have paid full daily wages to the workers although their averages are about 50 percent of the expected averages and during high cropping periods, workers are paid extra for any output harvested above the norm, the Planters’ Association notes.
The RPCs have unfailingly ploughed back earnings to the plantation sector, making substantial capital investments since privatization. They are investing significantly in further improving free healthcare, accommodation and other facilities provided to workers in addition to wages.
“Productivity improvements that increase the viability and sustainability of the estates, which provide livelihoods and employment for the workers would thus be a win-win situation, enabling workers themselves to reap substantial dividends,” the Association emphasizes.
Since labour costs excluding salaries of managers, administrative staff on the estates etc. account for between 67% to 70% of the total cost of production of local plantation companies and as the country has the lowest output per plucker in comparison with its competitors India and Kenya, an incremental increase is highly achievable even after making allowance for lower land productivity, the Planters’ Association reasons.
This is especially true in the case of male pluckers (who represent around 20% of the workforce engaged in harvesting) whose productivity is woefully low – at the maximum 60% to 70% of that of their female counterparts. This is in stark contrast to competitor countries like Kenya in which the plucking average of male workers is substantially greater than that of females, the Association points out.
According to statistics, (The Long-term Profitability & Productivity of SL’s RPCs by Dr. Ramani Gunatilaka) at present the daily plucking average of around 18kg of a local worker is less than half of that of a Kenyan worker (48kg) and is only two thirds of that of a South Indian worker (27kg). Largely due to the significantly higher unit labour cost and lower productivity, at approximately USD 4, the cost of production of a single kilogramme of tea is highest globally in Sri Lanka.
While Ceylon Tea commands a premium at USD 3.6 a kilogramme (USD 1.4 more than tea from Kenya and USD 1.5 more than tea from India) (according to Tea Market Report – June 2014) this is far more than negated by the substantially higher cost of labour and lower productivity resulting in a loss of approximately USD 0.4 per kilogramme. At approximately USD 5.3, the daily wage of a Sri Lankan plucker is almost double that of a Kenyan plucker (USD 2.6) and more than double that of a plucker from South India (USD 2.1). When compared with a counterpart from Kenya and South India respectively, the wage premium commanded by a Sri Lankan worker stands at approximately USD 2.7 and USD 3.2.
In addition to higher wages, local Regional Plantation Companies also incur substantial costs in providing far more comprehensive accommodation, healthcare facilities and traditional and established benefits and amenities to their workers and families than those enjoyed by workers in competitor nations.
“We readily acknowledge that it is unrealistic to expect the plucking average of a Sri Lankan worker to equal that of a Kenyan worker because of many inherent factors prevailing in the local tea sector and neither is that the request of the Regional Plantation Companies,” Rajadurai said.
“What we request for is an extremely reasonable incremental increase of at least 2kg in the daily plucking average per worker, which is highly feasible but would nevertheless go a long way in assisting the companies to break even.”