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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Sri Lanka urged to depoliticise tea estate wages

Sri Lanka urged to depoliticise tea estate wages

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Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics

July 09, 2012 (LBO) – Sri Lanka, one of the world’s largest tea exporters, has been urged to replace its ageing politicised wage structure with a productivity linked model, to sustain the viability of the centuries old brew.

Trade unions, backed by ethnic minority political groups, prefer a fixed day’s wage instead of a productivity-linked pay for some 400,000 estate workers. Unions have often struck work, until the government gives in for some of their demands.

Plantation companies have often opposed an adhoc increment as it raises the cost of production, making tea exports more expensive in a competitive global market place.

Last April a 27 percent wage increase came into effect, raising the minimum daily wage to 572.00 rupees (4.36 dollars) from 447.50 (3.41 dollars).

The increment came as the Sri Lankan rupee weakened against the US dollar, pushing tea output costs up by 100 rupees a kilo, lamented Rienzie T Wijetilleke, Chairman Sunshine Holdings PLC.

“The successive wage increases mandated for the tea sector have been regressive,… because mandated increases contain no element for linking wage increases to productivity,” said Wijetilleke, a former tough-talking banker .

“We hope that a model formulated together with the involvement of all stakeholders of the tea sector with the long term in mind, will replace the current ad hoc and politicised wage increases which severely challenge the competitiveness of the industry,” he told shareholders in his annual review.

Sri Lanka’s rupee has fallen by around 10 percent against the dollar, while tea shipments have been hurt by political unrest in the Middle East.

Sunshine’s tea sector made a loss of 501 million rupees during the financial year ended March 2011/12, compared to a loss of 35 million rupees a year earlier.

Bottle Stoppers
A 1.5 percent drop in Sri Lanka’s total export volumes also hurt Sunshine’s packaging segment revenues, its group Managing Director Vish Govindasamy said.

Sales of tea caddies, which accounted for over 50 percent of packaging segment revenue, fell 15 percent to 106 million rupees during the year under review. The packaging unit was also hurt by a sharp escalation in electricity and gas prices.

Sales of biscuit cans doubled to 70 million rupees during the year, but could not offset the losses in the tea-caddies category, he said.

Wijetilleke said the group plans to infuse an undisclosed amount of new capital in the next financial year to expand the packaging segment to tap growing areas like crown caps for the beverage market.

“The environment friendliness of the metal packaging, when compared to the non-recyclable alternative of plastic packs also point to increasing demand in the future,” Wijetilleke said.

Leisure tie-up

Sunshine has tied-up with Singapore’s Nadathur Group, to develop and manage hotels in different parts of Sri Lanka, Govindasamy said without elaborating.

The group’s leisure unit, which includes three boutique hotel styled bunglows, saw profits rise 180 percent to 2.6 million rupees during the year, due to a boom in leisure travellers.
http://lbo.lk/fullstory.php?nid=1833423582

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