Plantation firms rattled by govt.’s wage hike decision

Cabinet Co-Spokespersons, Ministers Bandula Gunawardana and Ramesh Pathirana
Pic by Kushan Pathiraja

By Nishel Fernando
Sri Lanka’s Regional Plantation Companies (RPCs) were in for a rude shock this week when the government announced its decision to increase the minimum daily wage of plantation labourers to Rs.1,000, with effect from March 1, this year. 

“We were completely taken by surprise by this unexpected move. The labour wage component represents 70 percent of our cost of production. Hence, any wage increase would sustainably increase our cost of production. The government has to tell us how to do this. We have to earn enough revenues to pay these wages,” a top Planters’ Association (PA) of Ceylon official told Mirror Business, yesterday.  

According to Forbes and Walker Tea Brokers, the tea auction prices of the Colombo Tea Auction remained static during the first two actions of the year, at Rs.568.96 or US $ 3.16, with considerable declines in the tea auction prices of high-grown and medium-grown teas. 

The PA has called for an urgent meeting today with the Employers’ Federation of Ceylon (EFC) to find out and discuss the modalities of the announced wage hike.

President Gotabaya Rajapaksa pledged to raise the minimum daily wage of plantation labours to Rs.1,000, during the presidential campaign, last year. Accordingly, the Cabinet of Ministers yesterday decided to increase the minimum daily wage to Rs.1000, with effect from March 1, this year.

“We had discussions with the RPCs. We are hopeful that they should be able to pay these wages because we have provided an economic relief package and there’s also a revival programme for the tea sector. 

In addition, we are also going to provide fertiliser for free. Considering all this, the RPCs should be able to pass these benefits to the workers, which would be crucial to have an efficient workforce in the sector,” Cabinet Co-Spokesperson and Plantation Industries and Export Agriculture Minister Dr. Ramesh Pathirana said yesterday. 

The RPCs and plantation sector trade unions last year reached an agreement to raise the daily wage of estate workers to Rs.750, when the previous Collective Agreement expired. The negotiations dragged for months while the labour unions also carried out trade union actions, including strikes.

“Are we subjected to the rules and regulations of the Collective Agreement or mandate by the government? We cannot be subjected to two sets of law. If the government sets the wages, we don’t have to sit and wait and sign the Collective Agreement,” the PA official said. 

However, he noted that without studying the full modalities, it’s difficult to comment on the announced wage hike.  

The RPCs have been pushing for a new wage model based on productivity. Although the trade unions initially had shown interest in such a model, they have backtracked on this position during last negotiations, demanding for a daily minimum basic wage of Rs.1,000.

Pathirana however stressed that the RPCs are fully equipped to grant the announced wage hike to their employees.

“We’ve spoken to the RPCs and we have looked at their balance sheets. Therefore, I’m confident we should be able to negotiate with them to ensure that they pay their employees Rs.1,000 daily minimum wage, from March onwards. 

In the worst case scenario, they (RPCs and trade unions) might have to renegotiate the Collective Agreement,” he told Mirror Business. 

Meanwhile, several RPCs questioned as to how the government would afford the announced wage hike for plantations, which are managed by the state, considering the dire situation of these plantations. 

“The Janatha Estates Development Board (JEDB) and Sri Lanka State Plantation Corporation (SLEPC) are currently suffering without even being able to pay the wages to their employees. I don’t know how they are going to afford this wage hike,” a PA official said. 

Indebted tea factories to receive interest-free loans 

The government will disburse Rs.500 million worth of funds from the Sri Lanka Tea Board’s cess fund as interest-free loans, to provide a lifeline for the country’s indebted tea factories to resume their operations, over the next two weeks.   

“Currently, 140 tea factories are indebted and 65 out of these factories have already closed down. Therefore, we are providing a relief package without collaterals for these struggling factories,” Cabinet Co-Spokesperson and Plantation Industries and Export Agriculture Minister Dr. Ramesh Pathirana told Mirror Business. 

He noted that each factory would receive Rs.3-4 million working capital loans, at zero interest, over the next two weeks.

“With these loans, they should be able to repay some of the debt they owe to farmers and to restart their operations,” he added. 

The Cabinet approval for the working capital loan scheme for tea factories was initially granted during the latter part of last year. 

The government has already finalised a broad debt moratorium for SMEs, including tea factories.