Wage hike for estate workers: The most contentious Budgetary proposal

The 2026 Budget presented by President Anura Kumara Dissanayake was widely praised for its commitment towards reforms and maintaining fiscal discipline. Every Budget has its pros and cons, and the 2nd Budget presented by the NPP Government is no different. However, the proposal to raise the salaries of estate workers has attracted considerable attention and scrutiny out of all the proposals.

The 2026 Budget proposed to increase the current minimum daily wage of Rs. 1,350 to Rs, 1,550 from January 2026. In addition to the salary hike, it has been proposed to pay Rs. 200 as a daily attendance incentive, and the Budget has set aside Rs. 5 billion to fund the payments. Many have questioned the merit in the Government allocating taxpayers’ money to plantation companies that have earned millions of profits. Some members of the parliamentary Committee on Public Finance (COPF) have opined that the payment of such an attendance allowance from the Budgetary allocations to estate workers who are employed by private plantation companies is unlawful.

Confusion has also arisen regarding the eligibility criteria of the Government-funded attendance allowance. 

An article in Daily FT’s sister paper The Sunday Times last week reported that plantation smallholders have not been informed as to how they need to increase the pay as proposed in the Budget. When the newspaper had contacted the Plantation Ministry, the officials had felt the wage was only applicable for workers in Regional Plantation Companies (RPC). They had further noted that as smallholder plantations paid workers in the range of Rs.2000 – 3000, the proposed allowances from the Budget are only necessary for workers in RPCs. But it must be borne in mind that smallholder plantations account for 70% of the country’s total export income.

Despite the controversy, the Government’s proposal has been met with widespread praise from the plantation community. Four MPs in the opposition who represent the Indian Tamil community of Sri Lanka voted in favour of the Budget given the enormous positive reaction to the proposal from the estate sector workers, whose votes are critical at national-level elections. Historically, the JVP – the predecessor to the NPP – has fared poorly among Indian Tamils in the estate sector, and the Government seems to be keen on making inroads into the vital vote base, which has been traditionally sympathetic to the UNP/SJB political forces.

Undoubtedly, estate workers have been systematically discriminated against and mistreated by successive Governments since gaining independence. Even the political leaders representing the community have done very little to improve the living standards of the impoverished estate workers. Substantially high levels of inflation experienced in the 2021 to 2022 period caused a substantial decline in the living conditions of the hard working labourers. As a result, there have been vociferous requests from trade unions and activist groups to address the grievances of workers in plantations.

Meanwhile, analysts have criticised the Government’s decision to grant an attendance allowance as the incentive is not linked to productivity. Another cause of concern is whether the Government would be generous enough to allocate taxpayers’ money every year to finance this move. In the event financial assistance from the Treasury is withdrawn, plantations would have to incur additional costs on their own to ensure the continuity of the attendance incentive which may not be financially feasible.

One of the critical factors affecting the sustainability of the Sri Lankan tea industry is the cost and availability of labour. Mechanisation and automation in both field and factory work have been suggested to overcome the shortage of labour, but there are concerns that machine plucking reduces harvest.

A holistic approach is necessary to address the impediments that stifle the growth of this 150-year-old industry. A pragmatic approach going beyond short-term political gains is required to resolve the labour-related issues of the industry.