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By Charumini de Silva
The plantation industry yesterday raised vehement objections to the Government’s unilateral decision to increase minimum wages for tea and rubber sector workers by an unprecedented 70%.
Holding a collective media briefing, the Planters’ Association of Ceylon (PA), Colombo Rubber Traders Association (CRTA), Ceylon Tea Traders Association (CTTA) and tea exporters voiced their concerns about the potential devastating impact on the sector.
They warned that without linking wages to productivity, the industry will face further market losses and declining production quality, ultimately harming the very workers the wage increase aims to benefit.
They also urged the policymakers to prioritise long-term economic stability over short-sighted decisions and to consider the industry’s proposals for a productivity-linked wage model. Planters’ Association of Ceylon said the Government’s decision threatens to cripple every segment of the tea and rubber industry, putting at risk the livelihoods of over 3 million peopledependenton the sectors.
PA Chairman SenakaAlawattegama revealed that the association had proposed two alternatives as a solution, offering an allowance of Rs. 5,000 for 25 days of work, similar to what is offered to public sector workers by the Government and implementing a productivity-linked wage structure.
According to him, minimum daily wage increase they have proposed is Rs. 1,380 with a 50% increase for an over kilo wage hike.
“However, three rounds of discussions with President Ranil Wickremesinghe along with Labour Minister ManushaNanayakkara ended in failure,” he said.
“Despite insisting on the significant challenges due to rising cost of production and to be competitive in the global market, the discussions with the Government failed,”Alawattegama added.
Planters’ Association Media Spokesman Dr.RoshanRajadurai stressed on the financial strain the wage hike would impose on the industry. “The cost of production for tea and rubber is set to rise sharply, with estimates indicating a minimum 45% increase in the cost per kilogram of tea. This will render Sri Lanka’s tea and rubber industries uncompetitive in the global market,” he said.
He noted that the wage hike will also place an enormous burden on RPCs, which will face an annual increase in excess of Rs. 35 billion, inclusive of EPF/ETF and gratuity payments.
Dr.Rajadurai reiterated that they will take steps to look after their interests if they are forced, implying plans to take legal action against the Government decision.
“The Government cannot hold us accountable when it is forced on us. We have to safeguard our legal rights. We will seek legal advice and take necessary action in the time to come,” he affirmed.
He also said that even prior to the recent wage hike, the tea and rubber sector workers were already paid the single highest minimum wage across all 48 regulated by the Wages Board, including; tea smallholders, garments, tea export trade, manufacturing industry, nursing, pre-school teachers and security services.
“With the latest minimum wage hike being compelled from the industry, tea and rubber wages will now be 2.4 to four times greater than any of the other sectors regulated by the Wages Board,” he pointed out.
Dr.Rajaduraialso noted that RPCs are listed companies on the Colombo Stock Exchange and any attempt at expropriation by the Government would contravene Securities and Exchange Commission (SEC) rules, the Companies Act and other related statutory provisions.
For over a decade, the Planters’ Association has advocated for a productivity-linked wage model or a revenue share model, which aligns worker compensation with productivity and revenue earned at auction. This approach incentivises productivity while ensuring a fair and sustainable wage system.
“Under the previous wage structure, workers on a revenue share model earned more than the newly gazetted minimum wage. Already around 30-40% crop comes in based on the revenue-share model,” he added.
The proposed wage increase threatens to push the cost of production in the RPC sector to a minimum of Rs. 1,400 per kilogram, while the current average sale price is below Rs. 1,200 per kilogram. This imbalance jeopardises the financial viability of the industry, which is already struggling to break even.
“Despite our best efforts to advocate for a more sustainable wage system, we are forced to operate under economically impractical conditions,” he lamented. “This not only threatens the survival of the industry but also the livelihoods of millions who depend on it,” he said, adding the current daily attendance-based minimum wage model is outdated and does not reflect the realities of the modern plantation industry.
He warned that any disruption to production or quality standards could harm export markets, diminishing export revenues and competitiveness.
Highlighting the high costs of fertiliser, energy and other inputs, which have further strained the industry, Dr.Rajadurei explained productivity per worker is significantly lower than in countries like India and Kenya where they pluck 34 kilos and 60 kilos per day making it difficult to compete.
Citing previous similar ad-hoc decisions taken by successive Governments on matters such as the glyphosate ban and the fertiliser ban, he said they have already had detrimental effects on the industry, leading to substantial production as well as market losses.
“We warned the Government about the negative impacts, but our concerns were not heeded,”Dr.Rajadurai recalled.
He pointed out that these arbitrary decisions resulted in a sharp decline in tea production from 340 million kilos to 250 million kilos last year. Given the current statistics, it seems the crop will decline further this year.
“We are being punished for doing well for the industry, economy and people,” he said.
The industry stakeholders insisted on the importance of sustainable economic policies to ensure the plantation industry’s survival and the country’s overall economic stability.
The PA also noted that the current approach of the Government in attempting to coercively set wages for the private sector, and interfere in management of the sector from key Government figures represent a stark violation of the terms of the IMF agreement, which is crucial for Sri Lanka's economic recovery. This decision is very clearly driven by short-term populist politics aimed at securing electoral victories rather than fostering long-term economic health of the industry, and securing the interests of workers.
The IMF's $3 billion Extended Fund Facility (EFF) for Sri Lanka is contingent on several stringent conditions aimed at ensuring fiscal consolidation including reduced intervention in state-owned enterprises (SOE). Historically, state control over enterprises has led to inefficiencies and financial burdens, as evidenced by the failures of numerous state-run businesses in Sri Lanka.
Historically, the Government has consistently failed to manage State-Owned Enterprises (SOEs) effectively, leading to steep losses and in many instances, near total collapse. By the time of privatisation in 1992, State-owned plantations made continuous losses that had to be heavily subsidised by the Government up to Rs. 5 billion per year which was borne by the Treasury.
A further Rs. 8 billion was owed by the JEDB and SLSPC to the Bank of Ceylon and Peoples’ Bank as a result of a $ 300 million lending facility which was extended to the state plantations by the World Bank. While these funds were intended for the improvement of the plantations industry, there were no significant improvements and the plantations did not have the ability to repay the debts, and the Government was eventually compelled to absorb this debt.
Pix by Lasantha Kumara
