By Dr. Dan Seevaratnam

Sri Lanka continues to grapple with severe economic challenges that affect all its citizens, including those in the plantation sector. At a time when nearly one in four Sri Lankans has fallen below the poverty line as a result of the Sri Lankan economy’s historic downturn over the past 4 years, it is also clear that an unbearable financial strain has been placed on the nation’s most economically vulnerable communities, including those in the plantation sector.

At a moment like this, Sri Lanka needs stability. All stakeholders must put aside differences and work sincerely for the common good, if we are to ensure that all citizens enjoy dignity of labor and a reasonable standard of living. To navigate these challenges effectively, and arrive at a solution that actually serves the interest of the plantation communities, it is imperative that policymakers adopt a holistic approach that addresses both economic and social dimensions.

The proposed 70% wage hike for plantation workers, currently under review by the Supreme Court, has naturally sparked extensive debate – that is now expanding into other sectors, while salaries for Government servants and the public sector are also being considered in earnest.

While this effort to address the severe economic burden faced by the public through Government mandated wage hikes may be a politically popular decision, it raises critically important questions about whether they will actually do much to improve living standards, especially if such increases end up compromising the economic viability of Sri Lanka’s export industries. The final decision taken in for the tea and rubber sectors will not only directly impact plantation communities, but also provide a signal for how the rest of Sri Lanka’s export sector will move.

Unfortunately, until this point, the history of Sri Lanka's plantation sector has been marred by a series of rash policy decisions tied to the whims of election cycles. From the failed transition to organic agriculture to the bans on glyphosate and oil palm cultivation, these rabble-rousing promises may have supported election victories, but always resulted in severe economic setbacks for the industry. It is imperative that we learn from these mistakes.

Economic impact and sustainability      

The implications of a 70% hike in the tea and rubber sectors comes with significant economic implications. For the tea industry, it would raise the Cost of Production (COP) for tea from its current Rs. 1,150.00 per kg up to Rs. 1,903 per kg.

Such an increase would take Sri Lanka’s tea COP well beyond sustainable levels given that the current General Sales Average (GSA) for high grown for 2023 stands at Rs. 1,072, where the national GSA is Rs. 1,171. The Government had mandated that the increased wage of Rs. 1,700 be paid to the estate workers. While Elkaduwa Plantations had paid this increased wage, it is unclear if they will be able to afford such wages out of their existing revenue.

Much has also been made about the fact that over the last financial year, many plantation companies recorded significant profits. This however totally discounts the fact that over the past decade, these companies recorded marginal profits only during the recent years due to the rupee appreciation.  They were compelled to finance their wage costs through lending from local banks, and over the past 4 years, interest rates have also drastically inflated finance costs.

Moreover, the daily wage paid to workers is a component of a much larger payment that each plantation company will have to make. Taken together with EPF/ETF and Gratuity, RPCs would be faced with a cost of Rs. 35 billion annually, amounting to a significant rise in operational costs when compared to 2023.

The implications for the rubber sector – which has already seen production collapse from 152,000 MT annually in 2010 down to just 64,000 MT - are even more severe. Over the past year, rubber producers received an average of just Rs. 660 per kg of latex crepe 1X rubber. If the proposed wage hike goes through, producers face an insurmountable 120% increase in their cost of production.

Sustaining improvements in quality of life

While wage increases are often seen as a popular quick fix to economic challenges, we must consider the broader socioeconomic conditions in which these hikes are being given, and the potential impact that they will have in addressing the systemic challenges faced by the plantation community.

Quality of life is often measured through several standard indicators. These include not only income levels but also maternal and infant mortality rates, pre-school, primary, secondary, and tertiary education rates. Across all these indicators, it is indisputable that significant gains were made during the era of privatized management in the plantation sector.

These vital improvements were achieved not through driving wages higher, but rather through the implementation of a series of strategic initiatives drawing on the collaborative support of all plantation sector stakeholders to address the most significant gaps in public infrastructure and services leveraging a combination of public, private and international donor funding. To drive further progress, we must study the impact of past interventions and realistically assess how they can be scaled up through strategic interventions.

At the same time, concerted efforts were made to directly educate and empower those from the community on issues of nutrition, basic healthcare and hygiene. Among the most successful were programmes launched across the private sector to combat infant and maternal mortality by providing pregnant and nursing mothers with folic acid, and other key nutrients and ensuring regular check-ups with medical officers.

Other notable examples include the establishment of Child Development Centers were established to provide education and nutrition - which has helped to drastically mitigate issues with mortality and low birth weight. Similar initiatives established to encourage primary and secondary education, vocational training and livelihood development, and community kitchens have all shown remarkable success in providing systematic solutions to systemic issues.

The persistent scourge of alcoholism in plantations

Alcoholism remains a critical, unaddressed socio-economic issue in the plantation sector. Recent studies reveal that approximately 40% of plantation workers' wages are spent on alcohol, with 40-65% being illicit. While legal alcohol consumption decreased by 8.2% in 2023, the illicit trade is estimated to be double the legal market.

The problem has expanded beyond the traditionally affected male population, now alarmingly prevalent among female estate residents. Alcohol consumption has become deeply integrated into daily life and cultural practices, from birthdays to funerals.

According to Sri Lanka Sumithrayo, a government-assisted charity, one in ten school-going children in Tamil plantation communities drop out due to alcohol consumption in their homes. For each alcohol consumer, at least ten family members are adversely affected.

The issue worsens when workers migrate to urban areas, often leading to more intensive labor, illicit drug use, and deepening cycles of debt and poverty. Gender-based violence is frequently linked to alcohol and narcotic abuse, severely impacting women and children.

Alcoholism's impact extends beyond individual health, affecting household finances and diverting funds from essential needs like education and healthcare. This perpetuates poverty cycles and hampers community development. Nationally, foreign exchange is wasted on importing raw materials for illicit alcohol production.

Simply increasing wages without addressing these deeper social issues won't lead to lasting solutions. While wage increases are necessary, they must be linked to productivity for sustainability. Comprehensive educational programs on household cash management and the dangers of excessive alcohol consumption are crucial. These initiatives can help workers make informed financial decisions, improving their quality of life without solely relying on potentially unsustainable wage increases.

By adopting this balanced approach, we can address both economic and social challenges in the plantation sector. We must prioritize sustainable solutions that benefit workers while maintaining the industry's global competitiveness, rather than resorting to politically expedient but economically unsound decisions.