Corporate tea estates in Sri Lanka are withering
By P.K. Balachandran, Colombo, March 5, 2008 (IANS)

Sri Lanka exported $1.3 billion worth of tea in 2007, the highest in the 141-year history of the crop in the island country. This has brought cheer to Sri Lankans, but tea industry experts see it as a flash in the pan. Sri Lanka produces 304 million kg per year and is the fourth largest tea producer in the world, after China, India and Kenya. But the large estates, which are in the corporate sector, are on the decline, with no prospect of an early recovery, notes N. Yogaratnam, consultant at the National Institute of Plantation Management (NIPM) in Colombo.

"The increase in the export earnings was due to a 16% hike in world prices due to a shortage created by the Kenyan political crisis. It was not because of high performance by the Sri Lankan tea industry. Tea production in Sri Lanka had actually declined by 6% when this happened," Yogaratnam told IANS.

"Kenya and south India have higher productivity than Sri Lanka. In Kenya, it is 2,300 kg per hectare and in south India it is 2,240 kg/ha. Intake (plucking) per worker per day is 20 to 22 kg in Sri Lanka while in Kenya it is 30 to 35 kg," he pointed out. "The cost of production is the highest in Sri Lanka. It is $2.2 per kg here while in Vietnam it is $0.75, and in Kenya and India it is $1.25," Yogaratnam said.

The corporate sector estates have not been replanting as much as they should. Only about 1% is replanted while it should not be less than 2%. However, the small-scale sector, which accounts for 70% of the national production, is a silver lining in the dark cloud. But small scale production has its own limitations in a competitive world market."In the case of small tea holdings, productivity is 1,850 kg per hectare. But the national average, taking into account the corporate estates, is only 1,520 kg/ha," Yogaratnam pointed out.

Unlike the small scale sector, the large scale estates face a heavy wage bill and overheads. Tea estate managements still have an expensive colonial style lifestyle, but the workers today are less slavish and more demanding as compared to colonial times. The politically powerful plantation workers have managed to get regular wage increases through strikes. The last wage increase in 2007 had imposed a burden of SL Rs.90 million ($833,000) on a corporate estate on an average, complained Lalith Obeysekere, chairman of the Plantation Services Group in the Employers' Federation of Ceylon.

"Since the privatisation of the tea estates in 1992, wages have gone up by 350 %, while productivity has increased very little," he pointed out. "Labour issues are critical because labour accounts for 60% of the cost of production," added Yogaratnam. With improvement in educational facilities, more money in their pockets and social changes around them, young tea estate workers are now leaving the estates and finding alternative jobs outside.

"The corporate estate sector loses about 10% of its workers every year, and there are no new entrants from south India to fill the gap as was the case in the colonial days," Yogaratnam said. The structural characteristics of corporate tea estates, and the sector's relations with the Sri Lankan polity are two other key factors shaping its destiny.

"The large tea estates are owned by the government but are leased out to private sector companies for management. The managements therefore do not have the sense of security or commitment of a small scale planter who owns his plantation. "Secondly, successive socialist-oriented governments have given facilities and concessions to the small scale planter but not to the corporate estates. While the small scale planter gets key inputs like fertiliser at a subsidized rate, the corporate estates have to buy at rising market prices," Yogaratnam pointed out. "The future for corporate estates is not rosy. The government should give them a helping hand through subsidies and other incentives," he said.