The policy woes of the plantation sector

  • The Ceylon Planters’ Association highlights need for stakeholder consultation-based policy reforms including replacing the wage model from being attendance based to one founded on productivity and revenue sharing

Irrespective of the fact that Sri Lanka’s plantation industry is still greatly contributing to the economy amidst the negative impacts of short-sighted policy decisions and the prevailing economic downturn, the industry is yet to receive adequate support from the Government, especially in terms of favourable policy decisions, in order to recover. At the same time, the support of various stakeholders is necessary in order to implement several reforms for the industry’s survival.

These concerns were discussed at length by the Planters’ Association of Ceylon (PA) recently, where the importance of paying attention to the necessary reforms, such as replacing the attendance-based wages model with a productivity-based model was reiterated.


The present state of SL’s plantation industry

PA Chairman Senaka Alawattegama stressed that the plantation industry is in such a state where significant reforms, especially policy-based reforms, are necessary, as the industry has been severely affected by a number of unwise decisions of past governments and sectoral authorities. “The Sri Lankan economy is experiencing its worst performance in modern history. We believe that the root cause of this dysfunction has been the terminal failure of successive governments to formulate a policy based on robust stakeholder consultation. Unfortunately, instead of giving special emphasis to the views of informed and credible experts and industry leaders, we as a nation have allowed and even encouraged the economic policy to be hijacked by cheap politics, and the results speak for themselves,” he noted, expressing concerns. 

Alawattegama added that over the past three years, the PA was vocal about the unscientific, ad hoc policies that played a major role in bringing the economy to a position of unprecedented weakness and that it had registered its dissent against short-sighted and poorly thought out policies like the agrochemical ban. “We note that this was often done in the face of withering criticism from politicians and organic agriculture experts, and even some segments of the media that accused us of being part of a fertiliser mafia. Despite this unfounded criticism, our message at the time was simple and clear, which is that no country has ever switched to 100% organic agriculture. If Sri Lanka goes ahead with a 100% organic policy overnight, yields will plunge, food security will be compromised, and the exports of plantation crops will decline exponentially for as long as the ban remains in place. We estimated that yields would reduce by at least 20% in the first year from when the bans come into force, and by a further 20% at the minimum if the ban was not reversed,” he explained, adding that sadly, these predictions were accurate and that the situation severely affected the industry.

At present, Sri Lanka’s plantation sector comprises tea smallholders, regional plantation companies (RPCs), and State-owned plantations. The 22 RPCs are the only private sector stakeholders engaged in the production, processing and marketing of tea, rubber, oil palm, and other crops. The RPCs account for over 450 estates, 371 factories and production units cultivating 43.36% of tea, and 23.75% of rubber land. Other RPCs crops account for 33% of RPCs land collectively, and these include coconut, oil palm, cinnamon, and other crops.

It was emphasised that factories that come under RPCs maintain the highest global standards and that Sri Lanka has gained recognition for that. Around 300 RPCs factories have obtained nearly 700 internationally recognised certifications, supporting the premium positioning of the “Ceylon Tea” brand globally. These standards relate to food safety management (e.g. Hazard Analysis Critical Control Points and International Organisation for Standardisation 22,000), the environment (e.g. Forest Stewardship Council and the Rainforest Alliance), and ethical business practices (e.g. Fairtrade).

Noting that RPCs have diversified both horizontally and vertically, the PA said that many RPCs now add electricity to the national grid through renewable energy projects, while others have ventured into high-value crops cultivated by leveraging precision agriculture and other advanced technologies, in order to cultivate berries, hass avocado, and vanilla, which are also diversifying Sri Lanka’s agricultural export basket.

Between 1992 and 2019, RPCs have invested Rs. 81 billion. At present, the cost of production of a kilo of tea is Rs. 960, which the PA said has significantly increased due to the devaluation of the Sri Lankan rupee.

Wage reforms

The proposed wage model reforms were one of the main topics of the discussion. The PA pointed out that from 2000 to 2021, the wages of plantation sector workers have increased from Rs. 115 to Rs. 1,000, which is a 770% increase. Adding that even though currently all RPCs are following the Wages Board directive to pay Rs. 1,000 per day, the PA stressed that RPCs have consistently advocated for reforms to the colonial era daily wage model, in favour of a productivity and revenue sharing model. The benefits of this model, according to PA, include workers being able to earn more than a fixed Rs. 1,000 a day, and workers having the benefit of flexible work hours as well as improved worker mobility where other family members can contribute towards the earning process. In addition, in a context where a majority of the best harvesters have plucking averages between 30-40 kg, the PA said that this means that earnings can be expanded to over Rs. 60,000 per month. 

However, it was noted that the proposed wage model does not receive adequate support despite it being a better wage model than the existing one and that therefore, paying more attention to it and the relevant parties’ active participation in discussions on the same is crucial. It was pointed out that in a context where inflation has risen significantly, such a productivity-based wage model would allow workers to earn more, which in turn would improve the quality of their lives. The PA stressed that the proposed productivity-based wage model will only change the system through which the wages are calculated and that the introduction of such a system will not have any impact on the other benefits given to the workers including welfare benefits. 

“The productivity-based wage model is the only way forward,” PA Media Spokesperson Dr. Roshan Rajadurai noted, adding that continuing the archaic attendance-based wage model is not beneficial to workers at all. Meanwhile, Alawattegama pointed out the importance of wage-related reforms: “The reason we bring up these issues is not simply to dwell on the past but rather to highlight the importance of taking informed stakeholder feedback on board when formulating policies that have a direct and significant impact on our sector. In discussing wage-related reform, it is therefore essential that we avoid the mistakes of the past. Just as the PA consistently maintained its position on the 100% organic agriculture policy, we have been consistent in calling for sweeping reforms to the colonial era daily wage model and moving towards a productivity-linked model. Even prior to the onset of Sri Lanka’s unprecedented economic challenges, we have been clear that such wage-related reforms were the only realistic way for the industry to progress. Today, in the face of skyrocketing inflation, the sustainability of the current Rs. 1,000 combined with a Rs. 150 daily wage is again being discussed. Currently, all that the trade unions are discussing is a further 100% increase to a Rs. 2,000 daily wage based on the same colonial-era model, although even they are starting to understand the value of a productivity linked model. The RPCs too are in agreement that wages need to be increased, but as we have consistently maintained for more than a decade, a productivity link is the only way forward. This too is not a new position, but given the rise in inflation, and the urgent need to enhance Sri Lanka’s export earnings, while providing workers with a sustainable livelihood, a productivity-linked model is now more relevant than ever.” 

Explaining the rationale for a productivity-based wage model, he said: “The rationale for productivity-linked wages is simple. If workers are paid based on how much they pluck and how much that harvest receives at an auction, then their compensation would be dynamically adjusted. Had we implemented such a system in line with what the RPCs had proposed even during the last wage-related negotiations, there would have been no need for the State to intervene in wage setting. Instead, the wages would be linked directly to the price and quantity of the tea sold at the auctions. Such a system is already in practice in 20% of the RPCs’ estates and 100% of the tea smallholders’ estates. If implemented on RPCs’ estates, instead of the Rs. 1,000 daily wage, workers today would be receiving an average of Rs. 50,000-60,000 per month if they harvested only the minimum of 18 kg.” Plucking norms in the tea smallholders’ sector stand at approximately 30 kg, while India records an average of 40 kg, and Kenya an average of 60 kg. Under a productivity-linked wage, the PA said that workers typically harvest between 20-30 kg at the minimum, where the most productive workers have plucked as much as 35 kg. Alawattegama noted that this would provide earnings between Rs. 3,000-35,000. 

“In addition to increasing worker earnings, improved labour productivity, which is currently the lowest in the world, would result in a reduction of the industry’s overall cost of production, which is the highest in the world. It would also increase the total export earnings of the country, both by increasing the absolute volume of tea available for export and by improving the quality of the leaf harvested, in turn enabling improved prices as well.  All of these improvements would come at a time when every US dollar counts more than ever. In addition to increased earnings, the productivity linked wage will also give workers exponentially greater control and flexibility over when they work, for how long, and how intensely based on the targets that they set for themselves. Such a model will be a complete and long overdue departure from the colonial era daily wage model.”

He further reiterated that the PA’s membership remains completely committed to maintaining and improving all of the extensive benefits provided to its workforce, including all of the comprehensive pre- and post-natal care, early childhood development programmes, and the various other valuable benefits it continues to provide to our workforce and the extended estate sector community. He added that wage reform is their top priority at the moment.

Released in February 2023