Sri Lankan Tea Sector in Crisis

The Sri Lankan tea sector is going through rough times. The tea plantations were nationalised in the 1970’s in an effort to run the estates under one umbrella. but with failing output, they were offered back via public auctions in 1992. Various conglomerates such as Keell’s, Aitken Spence and Hayleys saw an opportunity to vertical integrate tea production for sale and became major share holders of some of the estates on offer. Now tea estates in private hands go under the name of Regional Plantation Companies (RPCs) which now own 93% of all tea estates in the country. There are currently 20 RPCs and 3 government controlled tea estates.

Under private management, productivity increased but still is much less than other tea producing countries. For example the average yield in Sri Lanka is 1,700 tons per hectare, whereas in Kenya and India they manage to have a yield of over 2,000 tons per hectare.

Besides increased costs in transport and fertilizer, increased labour costs have been a major concern. Union officials are demanding protection of workers’ rights, insisting on higher wages. The daily wage of a worker is currently 620 rs, and the trade union wants this to be increased to 1,000 rps per day. One of the major factors is that workers pay is currently based on presence – turning up for work, as opposed to being based on productivity. A change to a productivity system is requested by management but then other non tea picking duties such as weed control, tea bush maintenance, transport and packing have also to be taken into account.

Regional Plantation Companies

The RPCs have also been accused of not investing in their estates, and asset stripping. Evidence of this is that some tea bushes are over 100 yrs old, whose tea production are a lot less than younger ones.. It is beleived that 2% of the land should be planted with new plants every year to maintain a good rate of production with a view to looking at the future.

RPCs have also been accused of a failure to invest in other types of industries to compliment tea, such as farming and other crops. Responsible for education and health services of their labour, there is also a belief that young workers should be able to progress through a management system thereby giving an incentive for the youth to want to be employed in the sector.

The RPCs on the other hand claim to have turned around tea estates under their control from loss making to profit making, have contributed to the government with payments of over Rs 7 billion through renewals of leases, and have already increased wages by 40%.

So whilst finger pointing seems to be the order of the day, with supposedly mismanagement and higher costs of labour and production, the main crisis is due to the fall in the price of tea. Tea has fallen about 66-67 rps per kg since 2014.

There is a levy that contributes to a tea fund for the marketing of the Ceylon Tea. Putting this to good use to recapture markets lost would be a good way to kick-start tea production as would a wage system based on productivity. That is not to say that this would solve all the problems, but may go to a long way to helping it.