Plantation Workers : Proposed wage hike and related matters

Dr Parakrama Waidyanatha

President Ranil Wickramasinghe’s pronouncement at a recent political meeting with the plantation workers, that their wages would be raised from Rs 1,000 per day to Rs 1,700, naturally more than delighted the workers. It was, however, clearly a vote catching exercise! The workers would have been even quite contended with a smaller increase of about Rs 200! By contrast, the plantation managers are shocked by the sudden decision without consulting them, and many say that with marginal profits they are making, it is impossible to agree to such a huge increase, and the repercussions of implementation of this decision could be catastrophic! Some companies even claim that they will have to cut back on operational costs by reducing labour employment. As also pointed out by Dr Pethiyagoda in his article, on the same matter, that appeared some day ago in The Island newspaper, such a wage increase decision should have been ideally made in consultation with the Wages Board of the Labour Department following a meeting of the worker representatives and plantation managers. However, there is no argument that the estate workers, many yet living in squalor and poverty, need better wages and living conditions. The potential for generating substantial profits from plantations is there, if plantation managers had done what was needed, and as seen from the information below, giving a livable wage should have been no problem!

A simple calculation shows that that with EPF, ETF and gratuity components the total daily wage increase should amount to about Rs 1167. An approximate calculation of operational costs for tea made by a colleague of mine, an expert in the tea industry, is given in the Table 1 shown here.

With the enactment of the Land Reforms Act of 1972 all foreign company owned plantations numbering to over 500 estates were nationalised and handed over to the state owned State Plantations Corporation (SPC) and Janata Estates Development Board (JEDB) for management. However, on realising that the management of plantations and returns were unsatisfactory, 450 estates were handed over to 22 plantation companies and the remaining 55 estates essentially in the mid country were retained by the JEDB and SPC, handing over 11 of them to the then newly established state –owned Elkaduwa Plantations Limited.

The mid country tea estates were historically running at a loss for a long period as a result of low prices obtained for their teas compared to the upcountry and low country teas. This had led to poor crop management resulting in heavy soil erosion and fertility losses leading to poor yields. Some plantations such as the Mobray Estate, Hindagala, Kandy District, were abandoned or fragmented and sold. Many holdings in the mid country which were diversified essentially into pepper and other spices are making substantial profits.

(See Table 1: General charges: salaries, vehicles and building upkeep, holiday pay, gratuity, head office costs. Field operations: fertiliser and application, weed management, pruning, etc.)

The more recent profit /loss information of the two state enterprises, SPC and JRDB was not available in the public domain. Published data were available online only up 2020 as shown in Table 2.

This means that the government had to dole out large sums to maintain the plantations. Regrettably both companies yet have large extents of old seedling tea as a result of their very low replanting rates which is even below the national average of 0.6%; the recommended rate being 2%. However, a news item in The Island newspaper of 21st Sept. 2022 reported a Rs.100 million profit forecast for the year by the Chairman/JEDB. Similarly, the SPC too is now apparently making marginal profits largely as a result of diversification into forestry and other investments. This should have been done decades ago! On the other hand, the Elkaduwa Plantations Limited which for many years was running at a loss has, in recent years, been making profit as a result of improved crop management, crop diversification and investments in tourism; and recently had a ceremony giving out the newly increased wages to employees.

It is very encouraging to note that the seven plantation companies that had ventured out into oil palm cultivation are making substantial profits of which Watawala which has the largest extent of oil palm is making nearly 75 % profit from it! In April 2021, the former President was driven by unprofessional advice against oil palm and moved to ban it. He even ordered uprooting the existing crop and also totally banned palm oil imports! However, palm oil import ban was lifted a few late later, but the policy to ban oil palm cultivation still exists. The decision was to expand coconut cultivation to meet the national oil demand, without realizing the serious limits to it. The Coconut Research Institute has shown that with global warming and increasing temperatures in the dry zone coconut growing areas in the dry months, such as in some parts of the northern districts, there is poor fruit set. These lands are ideal for expansion of cashew cultivation which yields huge profits.

One of the main objections to oil palm cultivation is that it consumes excessive water causing dryness in soil. However, this is a faulty observation , and as shown in Table 3 the soil water consumption of coconut and oil palm are comparable and much less than that of rubber or tea. .

As regards return on investment, oil palm is far ahead of the other plantation crops as shown in Table 3. The commodities prices may be higher now , but the relative picture is yet depicted in Table 3. (Source: Solidaridad: ‘Myths and Truths Of Oil Palm’ (2022)

The national annual vegetable oil demand is about 250,000 MT over 70% of which is met from palm oil imports, the local contribution from palm oil and coconut being only 6% and 10% respectively. In fact the seven or eight plantations that diversified into oil palm are making substantial profits. For example, the Watawala Plantations PLC, the leading palm oil producer, with over 3,000 hectares of this crop is gaining about 85% of the profit from it. Clearly, the SPC and JEDB and even other plantation companies should, diversify some of the lands into this crop, at least to produce the national vegetable oil requirement and save the associated foreign exchange. There is also growing interest especially among rubber smallholders to grow oil palm and it is reported that more than 500 of them have already ventured out to do so because of poor returns from the rubber. So oil palm could be the game – changer!

With the little diversification into forestry and other ventures, it is heartening to learn that SPC and JEDB are now making at least marginal profits. The Tea Research Institute’s calculations shown on Table 4 show that even growing Gliricidia which can be done at minimal cost would be more profitable than maintaining old seedling tea! Had these corporations ventured out into diversification earlier the losses could have been avoided. (See Table 4 Source: Tea Research Institute.)

The state- owned coconut based plantation companies, Kurunagela (KPL) and Chilaw are making huge profits not only because of good coconut prices but because of intercropping, crop diversification, cattle farming and other ventures. KPL which like the SPC and JEDB was running at a loss in 2005, with change in management, made huge strides in income generation over the years and has made over Rs 500 million net profit in 2023, a substantial share of it coming from investments in other ventures than coconut.

In conclusion, there is no argument that the workers should be amply paid, and this could be done with visionary resource management and good agricultural practices that could yield profits. Impressive vision and mission statements as also beautiful photos in annual reports are inadequate! The government should take immediate action to privatise state owned plantations as well as privatised poor performing ones and hand them to proven performers.