The goose and the golden egg

Labour Minister Nimal Siripala de Silva has accused the plantation industry of attempting to sabotage the 1,000 rupees a day wage award by resorting to court action. A pile of cases have been filed in the courts challenging the wages board award and when these will be determined is not yet clear. The case was called on Friday but not taken up at the time of writing and had later been postponed for Tuesday. Equally unclear is whether the challenge that has been mounted by regional plantation companies (RPCs), tea factory owners and other interested stakeholder will succeed or not. If it fails, will plantation workers get the promised thousand rupees with arrears? What will the employers do in such an event? The whole picture is murky with both sides having dug their heels in. The demand from the workers is very long standing and has seemingly been under negotiation forever. The industry response from the RPCs is that they just can’t afford to pay this wage and keep the estates viable.

Other noises too have been heard. Among the more ridiculous of these is that the government will take the estates back if the employers do not fall in line with the 1,000-rupee wage. Post land reforms, the big estates were not sold to the RPCs or anybody else. The Sri Lanka State, And hence the people, retains the ownership of these properties. What happened was that two state-owned entities, the Sri Lanka State Plantations Corporation (SLSPC) and the Janatha Estates Development Board (JEDB), were entrusted were entrusted with their management. Former Finance Minister Ronnie de Mel was fond of often saying that “the magic is in the management.” Unfortunately where the nationalized plantations of this country were concerned, there was no “magic” in their management. The result was mounting losses and near-total disarray.

That was when post-1977, the decision to privatize the management of the plantations was taken. During President Premadasa’s tenure, the plantation assets were grouped into regions but, with an abundance of good sense, they were not allocated region-wise to what were termed the Regional Plantation Companies that took the management contracts. This was because of climatic factors like rainfall, or the lack thereof, that determine performance of plantations. Therefore the different RPCs were entrusted to manage a mix of estates in different climatic zones; and this logic has proved impeccable. There was, and there is, in this country strong opposition to divesting national assets to private interests and President Premadasa brilliantly overcame this hurdle. He did not call what was being done “privatization” but coined a new word “peoplization” to describe the process then underway. To top it all, he gilded the lily by giving the plantation workers a 10 percent stake in each of the RPC’s free of charge. He believed that this would give the workers a sense of ownership of their workplaces.

That did not work out quite as intended. The RPCs were listed on the Colombo Stock Exchange and their shares, like those of any other quoted company, were freely tradable. That resulted in most, if not all, workers selling their shares to ready buyers. While there were small windfalls for a large number of people, the proprietorial sense that President Premadasa was aiming at did not result. The plantation economy as most people know is highly dependent of climate and prices. As a result it is cyclical with frequent ups and downs. Editorialists, once upon a time, were fond of writing “tea needs sympathy while rubber has lost its bounce.” Right now, fortunately, the green leaf price of tea is around a remunerative 100-rupee level and rubber which was deep in the doldrums is picking up.

Tea is a particularly labour intensive industry with about 70 percent of the cost of production being the labour component particularly of harvesting. The employers tried as best as they could to persuade the unions to accept a productivity based wage model enabling the demanded Rs. 1,000 to be earned and even topped by bringing in more leaf than the prevailing norm. But the unions, some might say stubbornly, resisted this formula presented as a win-win proposal, There is no escaping the reality that worker productivity in our tea fields falls far short of those prevailing in other big tea producing countries like India and Kenya. But the highly unionized labour, conscious of the political muscle they command, have flatly refused to take this route. Their unions with the ability to deliver block votes at elections are able to effectively influence the various contenders as they have done time and again.

The cost of a wage increase to the employer is not only the basic wage. There are various other costs like EPF/ETF, holiday pay, gratuity, maternity benefits and more involved. Over and above that, a very large number of persons who do not work on the plantations live on them occupying estate housing and benefiting from the plantation-paid infrastructure. This builds up to a formidable figure which, according to the RPCs, the industry cannot afford. On the flip side of the coin are management expenses and fees payable to the controlling shareholder. This has sometimes been waived during lean times but not always. Mr. Arumugam Thondaman, at one round of negotiations with an RPC, once told the employer on the other other side of the table, “You pay your CEO a million rupees a month and grudge the worker 1,000-rupees a day.” But the employers say that management costs absorb only about 8% of the COP.

Given the current cost of living and prevailing wage rates outside the plantations, the demanded wage is obviously not unreasonable. Against that the worker too must contribute in productivity terms to ensure that his livelihood provider is viable. A dead goose cannot lay golden eggs.