Hot Mix

Plantation companies are keen to push through a long over due productivity pegged wage formula when estate worker wages come up for negotiations in June 2004.

The June negotiations will be a deciding factor for the plantations companies survival as they prepare for a tough year ahead.

Work on possible productivity pegged alternatives are already in the works, officials from the Planters Association told Lanka Business Online on Tuesday.

On the other hand, initial indications from the estate unions, who drive the bargain on behalf of the workers with the plantation companies, are that they will want to kick off negotiations earlier than in June.

The current political impasse, possible elections and the stagnant peace process could also affect the wage negotiation.

Asia Siyaka Commodity Brokers say if Sri Lanka is heading for elections, then the wage negotiations would be further politicised, making it difficult, as seen in the 2002 talks to find a common ground between the parties.

Factions within the unions have also indicated that they could ask plantations to match the governments minimum Rs 1,250 salary hike bestowed on public servants in 2004.

Meanwhile, industry analysts forecast a weather whacked hot year, which translated means is good conditions for improving the quality of tea but bad for selling the traditionally hot beverage.

While quality teas should fetch a marginally higher price, slower demand due to a rise in humidity levels and temperature will negate the possibility of premium pricing.

This boiling situation coupled with a wage increase for tea and rubber estate workers will add further pressure on the estates to reduce production costs, cut back on investments and distract management strategies to post a positive bottom line (profit).

The last wage came in late August 2002 after months of commotion, political interference and a production loss of about Rs. 600 mn.

However, plantation companies who folded under the pressure of striking workers imposed a two year moratorium on estate unions before the next wage increase could be negotiated.

Wages were renegotiable within the period only if the 12-month National Sales Average (NSA) for tea increases by over 25 per cent.

The August 2002 wage increase saw tea estate workers wages go up to Rs 147 from Rs 121 previously.

Companies incurred an average of Rs. 160.00 per tea plantation worker before the wage increase.

Rs. 160.00 included the daily wage of Rs. 121.00 and other payments and facilities paid for by the plantation companies.

Each rubber estate worker cost plantation companies an average of Rs. 134.00, including the daily wage of Rs. 98.00.

A number of plantation companies said they would be pushed to the brink of collapse if they agreed to the wage increase, but had very little choice but to move along with the decision.

Plantation company officials say, virtually stagnant wholesale prices, increase production costs and a marginal loss in volume in 2002 and 2003 has put the estates in a bad patch.

Plantation officials say they have done everything to contain a further rise in production costs including a revision in the management fee charging structure which is now mooing towards a formula based on the profits made by each plantation company as against on the turnover.

Industry analysts say the plantation companies have managed to contain the cost of production by adopting all possible best practices.

However, analysts now fear that unless the June negotiations finds a permanent solution to the wage problem, the plantation companies will have too few options left to contain the adverse effects of a wage increase.

Shafraz Farook: