June 21, 2008 (LBO) – Sri Lanka’s billion-dollar tea industry remains too divided, squabbling over trivial matters, and is losing out on benefits it can otherwise win as other industries have done, a senior trade official said. But, Akbarally warned, the gains from high tea prices could be eroded by soaring costs.
Production costs shot up over 25 percent in 2007 and now the industry has to contend with even greater costs, given increasing oil prices and spiralling inflation, not only in production but in every other link of the supply chain.
“The question is whether even the lucrative prices that Ceylon tea is commanding globally will be enough to absorb costs,” Akbarally said.
“There is no doubt in my mind that unless future wage increases in the plantations sector are linked to productivity, the industry will plunge into self-destruction.”
The tea industry says labour expenses now account for as much as 65 percent of the average production cost.
This was after two wage hikes within just one year which the government forced on plantations companies after coming under pressure from politically-powerful estate labour unions which staged a crippling strike in 2006.
Tyeab Akbarally, chairman, Colombo