New Planters’ Association Chief upbeat about tea industry’s potential

Tuesday, 7 January 2014 00:01 -     - {{hitsCtrl.values.hits}}

Regional Plantation Companies (RPCs) contribute Rs. 71 billion a year to the local economy from plantation crops alone, Planters’ Association of Ceylon (PAC) Chairman Roshan Rajadurai revealed in an interview recently. Rajadurai spoke at length about the PAC’s vision moving forward, as well as the RPCs considerable contribution to the national economy. RPCs have poured a total of Rs. 55 billion in terms of capital investment into the industry from 1992 to date, the Chairman said. The big picture; pre-privatisation Originally, the plantation industry was proving to be a drain on state resources, until the Government took a strategic decision to hand over the management of plantations to the private sector. Currently, more than 1.1 million residents in plantation communities are cared for from “womb to tomb”, being provided with every amenity from health to welfare and social activities, he said. In addition, hundreds of villages, small enterprises and other ancillary services in Plantation Districts are dependent on the robustness of the plantation industry. This focus has led to significant improvement in qualitative health and socio-economic indicators, Rajadurai said. For instance, infant mortality on the estates before privatisation was at 29 deaths per 1,000 births. By 2008, the infant mortality rate had fallen to just 10 per 1000. This improvement was seen across the board, with neo-natal deaths falling from 21 per 1000 births to just 3 per 1000 and stillbirths falling from 51 to 15 per 1000 births. In addition, the wages for a plantation worker was Rs. 60 per day prior to privatisation, or the equivalent of the national Net Sale Average (NSA ie. The average price of a kilogram of tea sold at the Colombo Auction). However, as of 2013, the labour wage is at Rs. 620, which amounts to 145% of the NSA of Rs. 450. Contributions to the estate workforce Despite this, the RPCs remained deeply conscious of the fact that the long term viability, continuance and sustenance of the industry is intrinsically linked to the wellbeing of the plantation community. For this reason, the RPCs have worked hard to provide their workers with housing, while providing for expenses like social welfare, common amenities, community services, health and medical expenses and primary childcare and education. Since most of the workers live within walking distance to their work places on the plantations, transport costs are also eliminated. For non-plantation sector employees these costs alone amount to 40% of the basket of goods in the Consumer Price Index, Rajadurai pointed out. In addition, female estate workers can make use of the well-equipped childcare centres which are managed by fully trained Child Care Officers to ensure their children are well looked after while they are working in the field. These measures are implemented despite the fact that plantation companies operate in a globally competitive marketplace, where more than 95% of our national product is exported overseas. Currently, the Sri Lankan daily labour wage is almost double that of the wage in competing countries like India and Kenya in Dollar terms, Rajadurai pointed out. Issues faced Operating in a challenging environment, the RPCs did not retrench workers nor withdraw emoluments and amenities even during very challenging periods such as the global recession and during times of extreme weather. Labour wages amount to 67% - 70% of the total cost of production compared to material costs which are roughly 16%, medical and welfare costs (6%) and other miscellaneous costs (5%). All these investments have to be counterbalanced solely by the profits made at the auctions. Contrary to popular perception, the RPCs do not make profits through the sale of the final retail product but only at the prices gained at the auction, if at all, Rajadurai said. A further challenge is the sharp decline in the prices of rubber, as much as Rs. 70 compared to last year, he added. In order to offset this, RPCs are currently looking to enhance the land value by strategically diversifying their crop base in order to optimise the economic potential of the land under their care. “Oil palm is emerging as a crop for the future, as it has the potential for high economic return, and we are looking to achieve optimal economic land usage,” Rajadurai said. The way forward Despite operating in a volatile industry, the Chairman was positive about the potential the industry has in going forward. Tea exports account for 15% of total exports overall, second only to the apparel industry. Yet as Verite Research points out, tea has managed to maintain its exports share, unlike apparel, and even showed an increase in the challenging period from 2007 to 2010. It is important to note that Sri Lanka also improved in terms of price per kilogram of tea during 2013 whereas competitors like India and Kenya have had price drops compared to 2012. Rajadurai attributed this price increase to Sri Lanka’s strategic focus on producing tea of exceptional quality with a strong brand image for its diversity and environmental friendly and sustainable production process. “Our vision is for inclusive gain-share and development towards the sustainability of the plantation industry as a whole. All the stakeholders need to work in a collaborative spirit, with trade unions working with management to optimise productivity. Already there are signs of more positive collaboration across the board, from trade unions to workers,” Rajadurai said. The Chairman of PAC Rajadurai added that he was deeply appreciative of the Ministry of Finance pledging a 6% concessionary rate of interest on credit for development, which he felt was a sign of confidence in the RPCs ability and future potential to play a key role towards contributing to the overall development and the economic well being of the country.