Rs.10 billion salary bill for plantations after wage hike

Tuesday, 21 June 2011 00:50 - - {{hitsCtrl.values.hits}}

By Shezna Shums

The plantation industry is facing a wage bill in excess of Rs.10 billion after the recent salary increase, said a top industry official.

President of the Planters Association of Ceylon Lalith Obeysekera warned, “It will cost in excess of Rs. 10 billion to the companies.” Obeysekera noted that this hike in the basic wage would be a “phenomenal cost,” as there were 55 to 60 million man hour days in the plantation sector and every Re. 1 increase would work up to Rs. 55-60 million for the plantation companies.

The new collective agreement signed between the Federation of Employers of Ceylon and the Plantation worker unions saw the basic wage of a plantation worker increase from Rs. 285 to Rs. 380.

This agreement will be effective for the next two years and will apply to over 600,000 plantation workers in the tea, rubber and other plantation sectors. The stakeholders in the plantation industry agree that the increase although meagre was necessary.

HVA Holdings Chairman Rohan Fernando opined that this was a good agreement and that it should work well. He said the plantation companies should try to reduce waste and improve efficiency in order to cushion the cost of production with the current basic wage increase and that the industry would not suffer as this was a relative cost increase.

“We should look at improving quality, reducing waste and increasing efficiency and I believe we should look at rewarding efficiency,” he added.

Tea Exporters Association Chairman Jayantha Keragala noted that there was a necessity for a wage increase and that this was a reasonable price formula; however he stressed that the issue of productivity had not been brought into the pricing formula.

“We feel that productivity should have been considered as this is a unit cost. The wage increase is necessary and the agreement is fair,” he maintained.

In Sri Lanka the cost of production is a major issue and unlike in other countries mechanical plucking of tea leaves cannot be done here and there is always a fear that plantations will go in for cash crops with the ever-increasing prices.

“In time to come we may be less competitive with the country’s increasing costs,” Keragala noted.

Ceylon Tea Traders’ Association Chairman Aravinda De Silva added that when it came to commodities, the platform depended on demand and supply and prices depended on demand and its value held by the buyers.

Looking at it from the companies’ view point, the bottom line will ascertain the effect of the basic wage increase, he said, adding that Sri Lanka was known to have a high cost of production for tea.

De Silva highlighted that the Colombo tea auction sees some of the best prices for tea, but that the prices were determined by the supply situation. “Productivity is the key aspect and about 65 per cent of the tea sector consists of small tea holders,” he noted.

“A higher wage increase is an eventuality and this new collective agreement was well negotiated as we did not see any strike action by the plantation workers. As for the impact of the increase of the basic wage, only time will tell,” De Silva concluded.