Tea Plantation Sector In Sri Lanka Economics Essay

The tea plantation sector in Sri Lanka has a history of approximately 150 years. Tea plantation commonly refers to as tea estates and it become as a dominant crop of the estate sector4. The commercial planting of the tea was introduced by James Taylor in 1867 and emerged as the main plantation crop in the country after coffee was destroyed by the rust leaf diseases. In the following years thousand of land was opened to tea cultivation after clearing the virgin tropical rainforests, and the central highlands were entirely planted in a monoculture manner with tea (Jayasuria 1998). As a result of this commercialization of tea industry by the colonial era, the country became as a primary exporting economy. The liberalization in the early 1980s had changed the structure of the economy and the cash crops become as a secondary importance in export earnings next to the garment industry and migrant remittances. Today, Sri Lanka contributes to the world tea supply of 11.5 percent, keeping the fourth largest producer in the world after China, India and Kenya (Tea Board, 2010). As shown in the table 3.1 the total land extent utilized in the tea plantation is about 212,715 hectares by 2007. The tea cultivated area on the island represents about 3.0 percent of total country’s land. With the expansion of land usage on tea, the tea production also expanded by 30 percent during the last two decades.

The tea industry is even today dominant in the county’s economy. It is one of the major sources of foreign exchange earning in Sri Lanka. As shown in the table 3.2 in 2008, the tea industry accounted for 15.6 percent of the country’s foreign exchange earnings. It also contributed 1.2 percent of the Gross Domestic Products (GDP). The tea industry on other hand has been provided huge contribution to the labour market generating large amount of direct and indirect employment opportunities. The sector even today provides more than 1.5 million direct and indirect employment opportunities. Of which 243,047 workers are attached to the tea plantation sector [] as a direct

Table 3.1 Expansion of tea during last two decades

Year

Production

(Mn.Kg)

Total land extent (Ha)

1990

233.1

207,147

1992

178.9

207,147

2000

305.8

188,970

2005

317.5

212,715

2007

304.6

212,715

Source: Statistical abstract 2009 and Agricultural survey 2002, Department of census and statistics in Sri Lanka, Annual reports 2008,2005 ,Central bank of Sri Lanka

Table :3.2 Tea industry: contribution to the economic development

Year

% Share of total export

Composition of GDP

Tea plantation workers as a % of total workforce

1990

24.9

N/A

6.8

2000

12.6

1.4

4.3

2005

12.8

1.3

3.2

2008

15.6

1.2

3.0

Source: Development Strategies, Welfare Regime and Poverty Reduction in Sri Lanka, IPS 2008, Annual reports 2008,2000 Central Bank , Sri Lanka, Labour force survey 2009

employees and it is approximately 3 percent of the total workfare in the Sri Lanka. Around 230,000 worker families (including both tea plucker and rubbertapper) with a population of about 900,000 live in tea and rubber estates (MNB 2006). However, over the last two decades, labour force in the tea plantation sector has declined of more than 45 percent from 541,971 workers in 1980. The relative contribution to the GDP and total employment has declined gradually over the years making some difficulties.

4.2 Labour in the tea plantation sector

The plantation system in Sri Lanka is enclave and it covers all institutional arrangements around the production, processing and marketing of tea. The system is mainly characterized by pervasive social system stratified along with the ethnic lines as a result of imported residential labour from the South India. Vast usage of local lands, foreign or local ownership with rigid management is other notable characteristics of the tea plantations.

The tea plantation industry is labour incentive and most services needed high number of labour for a better production. Due to the socio-political issues, the indigenous labour in the country refused to work as a labourers at the beginning. Since then, the British colonial administration turned to India which was already a source of cheap labour and imported labours form south India. Initially labour was imported on a contract basis where they returned to the India after completion of contract. With the gradual development of industry, the existing labour supply mechanism was changed and had begun importing families including their children as a residential labour for plantation estates and planter provided huts inside the estate with free of charge. As housing is provided within the tea estate bounders it started to give new concept of residential labour. Presently, tea plantation population is descendants of this labour that continued to be imported into country till 1940s (Gunetilleke 2008). Even today, majority of tea plantation workers are Indian Tamil and most of them are working as a tea pluckers. The heads of the households both male and female are workers in the tea estates. As well as their working aged children also have recruited and works as tea pluckers.

The plantation community is mainly concentrated in the Districts of Nuwara Eliya, Badulla, Ratnapura, Kandy, Matale and Kegalle (Ministry of Estate Housing, Infrastructure and Community Development 2005). Most of Plantation labour force is located in central part of Sri Lanka within a Sinhala population living in the surrounding areas. Though these communities scattered throughout area, they live inside estate as a bunch without mixing with others. Rigid working condition, language and cultural differences, widen gap between communities. Thus most of plantation workers do not have much opportunity of interacting with other communities.

After independence in 1948, the Sri Lanka had taken many stapes to legalize immigrant plantation workers. Accordingly, the citizenship and voting power were restored for this immigrant community in 1988. This has been become as a landmark of their life and the plantation workers who are of Indian origins had a chance to nominate their own members in to the parliament. These entitlements have opened the door to enter the main stream as others.

However, tea plantation workers are tightened by the rigid hierarchy. The organizational structure is divided in to five layers; the owner, management, staff, sub-staff and labours. Mostly clerical and white colour workers and above are consider as a staff members. The lower level supervisors, gang leaders and watchmen all caught as sub staff of this hierarchy. The others labours specially tea pluckers pertain to the bottom of the plantation hierarchy and generally do not include in upper class. Nevertheless, kangany [] was played a critical role in the plantation system. He was the sole source of labour supply to the plantations in the early period of the plantation ( Wikramasinghe).Letter, these imported and recruited labours were organized in to the gangs under the headships of this kanganies and they became as a recruiting agents for planters. This kangany system became very critical element in the plantation system. He was the leader, spokesman, banker, goods supplier and worked as an intermediatory plantation management and the workers (Wikramasinghe). Even now some parts of this system exist such as gang leaders who makes link between management and labours. It is tightly applied to control current labours in deference face.

Wage system of the tea plantation workers

One of the most apparent features of the plantation is large number of female workers. Women are believed to be more effective for tea plucking from beginning of the industry. The women have been assigned to plucking tea and men assigned for cutting trees, weed and spray chemicals .All plantation workers work as daily waged labours from the beginning of industry.

The wage administration system of the tea plantation sector was used as a tool for reducing personal mobility in the colonial era (Wikramasinghe). The historical plantation management implemented large cash advances, instead of the monthly basis payment. This system had been tied the labours in to the estate. Even now, this system is used in the tea plantation for keeping labour in the plantation estates steadily.

Before early 1930s the daily wage rate for the workers was recognized by the wage board. This wage board had computed daily wage by using the criteria which sown in table 3.4.

This criteria still persists and is used for determining daily wage of the labours. However, after the privatization in 1992, some of plantation managements get rid of many of these responsibilities. After passing the legislation in 1978, the wage anomaly between male and female plantation labour was despaired that existed in the sector since beginning. As shown in the table 3.5 the daily wage for both male and female worker is Rs 285.0 and it is excluded incentives and attendance allowances.

Table 3.4 Criteria that used for computing daily wages of the tea plantation worker

Particulars

Percentages

In cash

85

Housing and welfare

10

Medical

05

Total

100

Source: Improving Livelihood of the Resource Poor shekh, 2005

Table 3.5 The present Criteria that used for computing daily wages of the tea plantation worker

Sri Lanka Rupee

Particulars

Male

Female

Basic wage per day

285

285

Incentive

90

90

Attendance allowance

30

30

Total

405

405

Source : Author, based on the Field survey

Generally, tea plantation women start their job at 7.30 am and work until 4.30 pm and a worker has to pluck an average of 20 kg tea leaves to qualify for the basic wage per day. The worker who can pluck more than the daily requirement of 20 kg is supposed to get and additional payment for the extra Wight. Nevertheless, only the workers who worked more than 23 – 25 days per month are eligible for obtaining incentive and attendance allowances. It is also noted that, the male workers work only six hours day. Therefore it is clear that there is a deferent between male and female wage rates.

As sown in the table 3.6, the labour wage rate of the tea plantation sector is still lower than the rubber and paddy sectors. In particular, daily wage rate of the female tea puckers are 2.7 dollar per day and lower than males in the all sectors. Even today, in pursue of the average wage rates, the wage differences between male and female tea plantation workers are appeared. Further, wage rate gap between the men and women has been expanded yearly in the tea plantation sector sectors. Therefore, the inequality of the wage has been severely compromised poor households of the plantation sector where represented high level female contribution in the labour force.

Table 3.6 : Average dally wage rates in the informal sector

US Doller9

Year

Tea

Rubber

Paddy

Male

Female

Male

Female

Male

2002

2.3

1.9

2.6

1.8

2.6

2003

2.4

1.8

2.6

2.0

2.8

2004

2.9

2.1

2.9

2.2

3.5

2005

2.9

2.1

3.0

2.3

3.3

2006

3.1

2.2

3.1

2.3

3.5

2007

3.4

2.4

3.6

2.5

4.2

2008

3.9

2.7

4.4

3.3

5.0

Source: Based on Annual Reports of Central Bank, Sri Lanka, 2003, 2005, 2009

Labour welfare and its development

Mostly the historical plantation system operates as a closed system with forcing to confine to the boundaries of the plantation estates. In particular, the plantation community and their welfare were separated from the mainstream of the country. During the colonial era, the plantation management provided most of welfare services needed by the labour such as education facilities, free medical services, child care services and essential consumer goods. Moreover, the management provided rent free housing [] for the workers to keep them within the estate boundaries as residential labour. Therefore, all workers depended for their needs from womb to tomb on state management (MNB 2006). This welfare provisions for the plantation community has been positively influenced for their well-being. It is also apparent that the health indicators of the plantation sector were recorded better condition rural sector (Gunatllake, 2008).

During the period 1990 – 1948 the education facilities of the plantation sector significantly developed and widespread throughout the plantation areas. The number of the officially recognized plantation schools grew from 43 in 1904 to 968 in 1948 (Little 2007). Nevertheless, most of plantation managements provided Hindu temples, maternal wards and a midwife for maternal and child care (Wikramasinghe).

By 1976, more than 300 plantation schools were integrated to the national curriculum in Sri Lanka. The government also strengthened the human resources capacity of the plantation schools by increasing Tamil teachers up to 4843 in 1994 (little, 2007). Health system of the tea plantation sector was timely changed. By 2000, twenty estate hospitals from a total of 54 hospitals and some maternity wards/dispensaries had amalgamated in to the mainstream of the health system. However, rest of medical institutions is still maintained by the estate management.

Besides, Plantation Housing and Social Welfare Trust (PH&SWT) was made in 1992 to develop existing social welfare condition of the plantation community. In 2002, the name had changed as plantation human development trust (PHDT). The institution mainly is sustained by the levy of the RPCs. The PHDT had implemented several donor funded projects with collaboration of foreign agencies, namely i) social welfare programme phase ii ( 1993-1997) with Dutch and Norwegian funds ii) plantation development support programme (1997-2005) with Dutch and Norwegian funds iii) Plantation reform project I and II (1996-2002) with ADB and JBIC funds , iv) Tea estate assistance programme – JICA and CARE (2003-2006) and v) plantation development project ( 2004-2008) with ADB and JBIC funds ( PHDS 2010).

4.4 Key landmarks of the policy changes for tea estate ownership

The policy changes and implications of government which have been focused the plantation has strongly affected the plantation community from beginning of the industry. In particular, some of these policy changes become as extra ordinary landmarks of the plantation sector and has influenced in changes the ownership of the plantations. Especially these policy implications have been strongly affected manufacturing process as well as labour component of the tea plantations. These policy changes are commonly categorized in to three major periods: i) the colonial period ii) the nationalization period iii) re- privatization period.

After introduction of commercial cultivation in 1876, many of companies transferred their investments toward the tea industry. Most of these companies ware foreign (sterling) companies which registered under British law and rest ware local (rupee) companies where registered under Sri Lankan law. The all tea plantations were owned by these two companies until 1972 and all properties ware also managed by them. In the colonial period, the British colonial administration was acquired local owned land through a series of acts and ordinance without paying any compensation to the indigenous land owners. The dependence on the indigenous labour was also minimized and stated to import south Indian labours through the colonial period. However, through these process many of socio economic problems raised, particularly sustainability of the rural farmers had seriously affected and most of their traditional economic activities ware marginalized.

Table: 3.7 Major changes in the management of tea plantations

Stages of change

Ownership of immovable property

Management of property

Colonial administration (1860- 1972)

Foreign and local companies

Foreign Agency/ owner

Land reform phase I and phase II

Post land reform

(1972-1992)

Land reform commission

Co operatives, Usawasama/ JEDB/SLSPC

Janata Estate Development Board (JEDB) and Sri Lanka Etate Plantation Corporation (SLEPC)

JEDB/SLSPC

Privatization phase 1 : privatization of management (1992-1995)

JEDB/SLSPC/Regional plantation companies (RPC)

Managing agents selected from the private

Privatization phase II

Sale of 51% of capital share to private sector (1995 – up to now)

RPC

Regional Plantation Companies

Source: Nerangana Gunatillake, CEPA, Sri Lanka 2008

The second period of tea industry was begun after introduction of land reform policy in 1972. The growing criticism on foreign dominated companies, pressure from the rural peasantry and continues declining of production ware the main reasons for the nationalization of tea plantations. The land reform (amendment) law No 35 was introduced in 1975 and all privately owned sterling and rupee plantation estates were nationalized. In 1958 and 1976 the State Plantation Corporation (SLSPC) and Janata Estate Development Board (JEDB) were established respectively. After, the management of undertaken plantations was handed over to the above government owned institutions for increasing production through value addition.

In 1992, the third and majour structural change occurred with the privatization of tea and rubber sector. Poor productivity, lack of capital accumulation and weak management activities of the plantations had influenced for the re privatization. The re privatization process happened in two stages. Initially, the management of the plantations was transferred, while retaining the national ownership of lands. In the beginning, 449 out of 502 state owned plantations were grouped into 23 states owned Regional Plantation Corporations (RPCs) and entered to the agreement with private companies on a profit sharing basis for a five year period. However, this short- term agreement generated many problems such as disincentive for longer-term capital investment, difficulties for profit maximization and increasing productivity. Therefore, in February 1995, the government decided further restructuring to allow private sector participation in RPC ownership.) Thereafter, in June 1995, shares in the RPCs were begun to sell to the private sector through the Colombo Stock Exchange. The Public Enterprise Commission ( PERC) was given overall responsibility for this privatization .Fifty one percent of shares were sold on an all or nothing basis for the period of 50 year.(ADB,2004). In particular, this process was the largest agricultural privatization in the world ( Wikramasinghe 2003).

Gender and poverty incidence

Gender inequality is one of the main factors that have been influenced to the household poverty. The women are highly vulnerable to the poverty than the men. It is identified that the idea of feminization of poverty is determined commonly on the three combinations as; (1) women have a higher incidence of poverty, (2) women’s poverty is more severe than the case of the men, and (3) poverty among women’s headed household is increasing compared to men headed household (Nilufer Cagatary,1998). Further, wage differences, division of labour within the household and level of freedom are basic spheres of the gender inequality (Sen 1995).

Table .2 Average dally wage rates in the informal sector (Rs)

Year

Tea

Rubber

Paddy

Male

Female

Male

Female

Male

2002

222

188

249

172

249

2004

304

218

304

229

361

2007

375

263

389

277

456

Source: Annual Report 2001,2006 Central Bank of Sri Lanka

In Sri Lanka context, it shows huge gap between the men and women on wages in the informal sector. Especially, the wage gap between the men and women have been widening yearly in the tea, rubber and paddy farming sectors. The wage deference in the tea plantation sector has widened three times from 2002 to 2007. Therefore, this inequality has been severely compromised poor households of the plantation sector where represented high level female contribution in the plantation sector labour force.

Moreover, return of the woman worker is much lower than the return to man’s labour. Though women work more competing with men, they have often less command over income. Therefore, women headed labour households have economically and socially insecure and more vulnerable to the poverty. Referring to the literatures (HIES report,2007,CEPA) women headed households in the plantation and urban sector are predominant sprawling of 33.2 percent and 9.3 percent respectively in the poverty threshold.

Key donor assisted projects and contribution for welfare development of the tea estate community

Project name

Period

Institution Amount

objectives

Achievements

social welfare programme phase ii

( 1993-1997)

Dutch and Norwegian funds

ii) plantation development support programme (1997-2005)

Dutch and Norwegian funds

Plantation reform project

(1996-2000)

JBIC (Loan )

To provide long-term loans to RPCs that

had difficulty raising investment funds in order to improve productivity and management of RPCs,

productivity

of tea increased by 13% in 6 years

Tea development project

1999-2007

ADB (Loan )

Tea estate assistance programme –

(2003-2006)

JICA and CARE

to strengthen Social Security network through capacity building of “resident groups/ institutionalized groups in the plantation sector

Tea development project

2004-2009)

ADB

as well as, around 75 n 85 percent of this workforce is represented by women.

Year

Tea

Rubber

Paddy

Male

Female

Male

Female

Male

2002

2.3

1.9

2.6

1.8

2.6

2004

2.9

2.1

2.9

2.2

3.5

2007

3.4

2.4

3.6

2.5

4.2

2008

3.9

2.7

4.4

3.3

5.0