RPCs wary of revised wage hike demand by Govt. and unions

• Plantation companies reject fresh proposal after Govt. and trade unions oppose three models originally suggested by private sector
• Coronavirus disruptions to trade and consumer markets deal fresh blow to tea industry
• National Sales Average improves to two-year high in Feb.

By Charumini de Silva

Regional Plantation Companies (RPCs) have rejected a revised demand by the Government and trade unions for a Rs. 1,100 daily wage for estate workers as a stalemate persists, with the Government and unions having previously turned down private sector alternatives. 

The Rs. 1,100 daily wage is to ensure that the take-home for estate workers will be Rs. 1,000, in line with the Presidential Election pledge of Gotabaya Rajapaksa. 

When this idea was proposed, the private sector had rejected it while the Government and unions had previously rejected three options aimed at achieving a daily wage of Rs. 1,000 from Rs. 855 at present, in consideration of the original Government request. The original hike amounted to 17%. 

Plantation company sources said that the private sector did not have the financial capacity to pay a straightforward Rs. 1,000 daily wage, hence three models were suggested – out-grower, productivity-based incentives and revenue-sharing. However, the Government and unions have refused to consider either of the models and are demanding an unconditional increase. 

Estate workers’ February salary will be paid today (10 March) and the new wage, if it is to be realised, must come into force from tomorrow with the next monthly salary payment cycle for estate workers falling on 10 April. Last week President Rajapaksa told editors that the new wage would be paid before the Sinhala-Tamil New Year. 

Industry sources told the Daily FT that the Government and unions would have to seriously reassess their refusal given financial difficulties as well as the fresh impact from the latest disruptions caused by the coronavirus to trade and consumer markets in the Middle East and elsewhere.

While maintaining that on average an estate worker does earn more than Rs. 1,000 a day even at present, companies said that the new models suggested do not strictly require extra work by employees. 

“We have modified the requirements so as to achieve the desired Rs. 1,000 daily wage requested,” they explained.

It was claimed that burdening the plantation companies only with this directed wage hike (the industry is governed by a Collective Agreement) was unfair. 

Some industry experts noted that one option which could be considered to facilitate the new wage was for the Government to ask the tea trade to set a base price at the auction of Rs. 855 per kilogram as opposed to the present level of Rs. 500. However, this move may spark fresh concerns and may be tantamount to interfering with demand and supply dynamics at auctions. 

Even before the refusal by both sides led to a stalemate, another idea mooted was for the Government to fund a portion of the hike. However, this looks remote given the fiscal status of the Government in-transition, according to experts.

The basis for a higher daily wage by the Government is that companies stand to benefit from recent cuts or the removal of taxes and levies as part of the stimulus to kick-start the economy. However, plantation companies have maintained that their cost of production (70% of which is labour) was far above the price fetched at auctions. RPCs estimate that the 17% or Rs. 145 hike will shoot up the wage bill to Rs. 12 billion. 

Nevertheless, according to tea brokers, the National Tea Sale Average (TSA) improved for the eight consecutive month and in February rose to Rs. 601.99 per kilogram, its highest in two years. In comparison to January 2020, February NSA reflects a Rs. 13.14 per kilogram increase and Rs. 20 per kilogram from a year earlier.

Forbes and Walker Tea Brokers said February saw gains in NSA for High and Low Growns while Medium Growns saw a dip. NSA for the first two months reflected a Rs. 10 per kilogram increase in comparison to 2019.

According to the present Collective Agreement between RPCs and trade unions, workers receive a daily wage of Rs. 855, which consisted of a basic daily wage of Rs. 700, Rs. 40+ for each additional kilogram of tea leaves plucked and a daily EPF and ETF transfer of Rs. 105.