Two leaves and a bud

Tea: Once Sri Lanka’s biggest foreign exchange earner until a few decades back when it was overtaken by migrant worker remittances, apparel exports and tourism. However, it still is a valuable sector in Sri Lanka’s economy given the value of the supply chain, employment and caring for estate worker communities.

This year is a significant year as it marks 200 years since the arrival of Indian workers to the plantations. There are 20 more years remaining of the leases extending for 53 years (ending in 2043) where government estates were handed over to the private sector for management, resulting in the emergence of Regional Plantation Companies (RPCs). These leases are expected to be renewed when the time comes.

The tea industry’s biggest challenge these days is finding workers on the estates as able-bodied men and women are seeking other jobs outside the estates, though they continue to live within the estates.

To get more information on the industry and its current status, I spoke to Dr. Roshan Rajadurai, spokesperson of the Planters’ Association on Thursday morning.

“How is the tea market and prices,” I asked.

“Prices are lower this year compared to last year with the export price averaging US$3 per kg. There is a significant impact on the cost of production owing to the fuel hikes, rise in electricity and other added costs,” he said.

Bad weather this year means more fuel use. It’s a vicious cycle, he said, adding that there are tough times ahead as low grown farmers are not using enough fertiliser due to high costs.

There is oversupply in world production with Kenya selling tea at $1 per kg whereas Sri Lanka’s average is $3 per kg. The cost of production locally is Rs. 1,000-1,200.

“What about the current daily wage model of operations? Is that the best model going forward,” I asked.

“We need to move to a revenue sharing and productivity based model where more plucking of tea means more income for the workers. We are losing workers on the estates. We can’t last for another 3-4 years with the current model. We need to change and change fast,” he said. Under the revenue sharing model, workers can earn well over Rs. 1,000 on average per day. Currently, earnings are in the range of Rs. 40-45,000 per month with some earning as much as Rs. 60,000-65,000 with increased plucking.

There has been a slight impact on the industry owing to the wars in Ukraine and Palestine. He said a recent financial analysis done on the role of management companies since the takeover has shown that the estates have done well under the lease arrangements. At the time the estates were leased to the private sector, the government was spending Rs. 5 billion to subsidise estates.

“We should be rewarded for having eased this burden on the government,” he said, adding that millions of rupees have been earned by the government through the lease rentals.

Recently State Minister of Plantation Industries Lohan Ratwatte referred to the expiry of the leases in 2043 and said these are being reviewed, adding that President Ranil Wickremesinghe has said the existing arrangement will be reviewed. Mr. Ratwatte said extending the leases would be subject to assessment of their performance as well as effective utilisation of existing land etc.

At a recent meeting with tea industry stakeholders, President Wickremesinghe had suggested that the companies discuss with workers an increase in their daily wage which is currently administered under a collective agreement between the workers and the companies.

Over 70 per cent of tea, mostly low grown, is farmed by smallholders who are facing a severe shortage of labour. Smallholders have requested approval from the authorities to engage workers through the National Youth Services Council and retired armed forces personnel to be employed on the estates not as pluckers but using plucking machines after suitable training.

According to industry sources, the tea industry chain involves a number of stakeholders – over 400,000 tea smallholder farmers who account for over 70 per cent of the tea production, 21 regional plantation companies, about 600 tea manufacturers who are the sellers of tea as well, more than 300 tea exporters/buyers and eight brokers who conduct the weekly tea auction.

On Wednesday, the Tea Exporters Association (TEA) raised concerns over the implementation of VAT on the tea trade. Sri Lanka’s tea industry which was exempted from VAT until now, will be subjected to an 18 per cent VAT from January 1, 2024 which is detrimental to the industry, it said.

“While it is understood that in order to resurrect the country’s financial stability, the tax net and VAT has to be widened, the high VAT on a commodity of which over 90 per cent is produced and sold purely for exports, wherein all of the VAT will need to be refunded to stay competitive in the world market, the imposition of VAT on tea has caused grave concern amongst the tea industry stakeholders,” the TEA said in a statement.

“While the country needs to reform its taxation, the VAT on export commodities at such a high rate of 18 per cent only to be refunded after going through a lot of administrative procedures in the private sector as well as the government sector seems to be unproductive,” it said.

As I reflected on these issues, I could hear the margosa tree conversation through the office room window. “Te wattaka hitapu Kamala den avith innawa parey pahala thiyena Perera gedera weda karanna. Api eyata kiyanna oney apey sakachcha walata sambanda wenna kiyala (Kamala from a tea estate has come to work at the Perera household down the lane. We must invite her for our meetings),” said Kussi Amma Sera.

“Mama kalpana karanne wathu wala inna kattiya aei colombata enne weda karanna kiyala. Mama hithanne egollanta athiwenna weda thiyenawa kiyala wathu wala, honda padiyakata (I wonder why residents in the plantations come to work in Colombo? I think there is enough work in the estates for them and at a higher earning capacity),” said Serapina.

“Mata hithenne eka kamkaruwata dena garuthwaya nisa kiyala. Wathu wala weda karana goda denek den rassawal hoyagena pita rata yanawa nethnam wena ansha walata yanawa (I think it’s about the dignity of labour as many are leaving the estates to go abroad or work in other fields),” said Mabel Rasthiyadu.

As I pondered over these issues, it was time to wind up the column with the hope that the two-leaves-and-a-bud tea industry would continue to thrive, amidst its challenges, over the next few decades. Furthermore, nothing can erase the beauty of the tea estates, resembling a verdant green carpet, when you drive past them in the upcountry regions.