Tea dispute may drive up price of cuppa
By Feizal Samath
COLOMBO - Tea lovers may soon have to pay more for a cup of their favorite
beverage if plantation workers in one of the world's major tea-producing
countries win their demands for an almost 75% increase in daily wages.
Employers have refused to accede to the workers' demand in their latest
face-off - part of a series of negotiations that have dragged on for months and
failed to end conclusively on September 14.
"We were unable to finalize a deal," said O Ramiah, secretary-general of the
Joint Plantation Trade Union Centre (JPTUC), although he is "hopeful of
concluding an agreement" at the next meeting of the two sides.
The JPTUC is one of three unions involved in joint negotiations
with the Employers Federation of Ceylon (EFC), which represents the 22 private
tea plantation companies that account for 40% of Sri Lanka's tea production.
The 60% balance comes from more than 22,000 smallholders or private individuals
who have small plots of less than one acre. The unions represent 50% of the
organized workers on estates.
The standoff has severely affected the country's main commodity export, with
losses in the industry mounting. Data provided by EFC officials, who requested
anonymity, show that the companies involved have lost more than 1.5 billion
rupees (US$13 million) since September 2, when workers resorted to
non-cooperation, with action ranging from strikes to work slowdowns.
Their collective action began after nearly five months of negotiations
faltered. They have been negotiating with the EFC since April, when the
three-year wage agreement forged in 2006 ended. Plantation wages in Sri Lanka
are fixed and finalized in a rolling agreement that is re-visited once in three
years.
"This is the toughest collective agreement that we have tried to reach," said
Ramiah. Union leaders, who echoed his sentiment, blamed it on the international
financial crisis that broke out last year and the high financing costs borne by
companies.
Tea workers are demanding a daily wage of 500 rupees against their current
daily take of 290 rupees, or a more than 72% increase, arguing that their
present wage is not enough to feed their families.
A
government
survey in 2006-2007 of household income and expenditure found that one in
three people in the plantation sector live in abject poverty. They make
up the poorest and most unskilled laborers in the country.
Sri Lanka's tea plantations consist of over 220,000 workers and a dependent
population - mainly their families - of close to one million. About 68,000 of
the total workforce come from the majority Sinhalese community while the rest
are Tamils of Indian origin, whose descendants were brought by British colonial
rulers many decades back to work on plantations in Sri Lanka.
Tea estates were owned by British companies until the early 1970s when the
government seized and nationalized plantations. In the late 1990s, the policy
was reversed, with the estates being sold to private companies while the
government retained a small stake.
According to K Velayudam, secretary-general of Lanka Jathika Estate Workers
Union, which is involved in the negotiations, the companies are offering the
workers 405 rupees, of which 285 rupees will make up the basic daily wage and
the rest will comprise attendance and productivity incentives.
But the unions say tea workers get only 7,000 rupees a month compared with
those in other sectors such as the garment industry, who get at least 10,000
rupees.
Malik Fernando, director of Dilmah Tea, which own estates and is Sri Lanka's
biggest tea brand overseas, said productivity is the biggest issue in the
plantations. "If they produce more, then we can pay more and cut our costs," he
said.
Sri Lanka's wage component of 60% of the cost of production (COP) per kilogram
of tea is considered the highest among tea-producing countries. Wage costs in
India, for example, work out to 40% of COP. Tea producers in this country as
well as in Kenya, China and Bangladesh - among the world's major tea producers
- make bigger profits than their Sri Lankan counterparts.
The long-drawn-out negotiations come at a time when tea prices have soared due
to a host of factors, including drought in the producing countries, a slowdown
in purchases last year by buyers due to the global economic meltdown, and a
fluctuating US dollar.
Tea prices in early September averaged 428 rupees per kilogram at the Colombo
Tea Auction, up 23% from 321.83 rupees per kilogram during the same period in
2008. Prices fetched by other producers were lower than those of the capital,
which generally also gets a better price because its tea quality is higher.
Globally, tea production is seen falling by over 80 million kilograms this
year. Sri Lanka produced only 157 million kilogram between January and July
this year compared to 199.6 million during the same period in 2008. This
translates to a shortfall of 42 million kilograms.
According to Dilmah's Fernando, the impact of the proposed new wage hike -
though yet to be finalized - would cost a company between 25 million and 30
million rupees more on the monthly wage bill. "It would raise the cost of
production by 70 to 80 rupees a kilo," he said.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
