Upholding the spirit of privatization essential to unlocking the true potential of RPCs

By Planters’ Association of Ceylon Chairman, Senaka Alawattegama

Despite the remarkable resilience of our people, industries and enterprises, Sri Lanka’s
economic outlook in 2023 – along with approximately 1/3 rd of all countries according to the IMF –
appears bleak. Worse yet is the fact that this economic fall from grace was entirely predicted for
many years, even prior to the onset of the COVID pandemic.
The fact that Sri Lanka’s policy makers chose to do nothing to avoid economic catastrophe
despite being clearly, forcefully and repeatedly warned about this inevitable outcome has been
a source of shock to many.
But to those in the plantation industry who have been grappling with systematic ineptitude from
policymakers for decades, their consistency in making the wrong decisions is an all too familiar
pattern that only helps to illustrate the root cause of these issues, namely the absence of
credible and informed stakeholder consultation in policy making.
One of the best examples of this dynamic has been the disastrous decision to convert Sri Lanka
into 100% organic agriculture overnight. Implemented with zero consultation or consideration of
the interests of the industry and its stakeholders, almost every expert agrees that this decision
was the proverbial straw that broke this nation’s back.
Nearly 500 million missed opportunities
From the time it was first announced, the plantation and agriculture sector, including tea
smallholders and Regional Plantation Companies (RPC) alike were unanimous in their
opposition and scientific criticism of this policy.
Yet instead of taking these accurate perspectives into account, logic was discarded in favour of
agri-policy derived from election podiums, leading to a total ban on the importation of all
synthetic agri-chemicals. Based on the performance of Sri Lankan tea alone, we now have a
minimum dollar value to illustrate the size of that mistake.
Today the Sri Lankan tea industry has been set a target of US$ 1.5 billion in precious export
revenue. A shortage in supply of quality Greenleaf means that Sri Lankan tea has also benefited
from some of the highest dollar prices on tea exports since 2017. Coincidentally, Sri Lanka’s
export earnings from tea at that time stood at approximately US$ 1.5 billion, meaning that our
current target is simply to do as well as we did in 2017.
However, despite having regained the same favourable prices that we enjoyed in 2017, in 2022,
our nation was only able to produce approximately 250 million kg of tea, where in 2017, we had
produced 307 million kgs. The result is that we only generated just under US$ 1.1 billion in tea
exports last year, as compared with US$ 1.5 billion in 2017. The shortfall was worth
approximately US$ 466 million – funds that could have been utilized for the purchase of fuel,
gas, and medicines and other essential items.
Given the rapidly deteriorating global economic climate that we all face in 2023, all Sri Lankans
must now appreciate that as a nation, we have no margin of error left. In that spirit, on behalf of
all RPCs, we wish to once again reiterate our industry’s core policy priorities over the coming

Wage reform towards productivity-linked earnings
The debate surrounding wages has been a longstanding one, and has once again come under
the spotlight with the increase in the cost of living. Two years ago, our industry was compelled
for the first time since 1992 to enter into litigation as a result of the ill-advised decision on the
part of Trade Unions to abandon the terms of the Collective Bargaining Agreement by involving
the Wages Board to pay a daily wage of Rs. 1000 per day.
Despite challenges faced within the industry, we must reiterate that we have been able to
honour our commitment even at present, to pay the said amount amidst certain factions having
falsely accused RPCs for not doing so.
While certain parties demand limiting the pay to Rs. 1,000, The Planters’ Association of Ceylon
have time and again advocated for a model that will allow a worker to earn beyond this. We
believe it is long past time to move away from the archaic colonial era daily wage model and
into a system that will incentivize workers based on performance. A productivity linked wage
model has seen a positive impact on many estates and has proven its effectiveness among tea-
small holders who contribute to 70% of the tea production in the country.
Typically on estates where it has been tested, harvesters have, on average, increased their
output from 18kg to 24kg and have earned over Rs. 65,000. While some trade unions and other
groups continue to offer knee-jerk opposition to these reforms, workers with actual first-hand
experience with the productivity linked wages are overwhelmingly in support of them.
This is because, on average, they have the potential to increase their earnings by 80% -100%
relative to the current fixed daily wage of Rs. 1,000 that was forced on the sector through the
Wages Board. Moreover, productivity-linked wages offer flexibility to harvesters in the time
spent on the fields and are incentivized based solely on performance and output.
We believe this could also provide a solution to the shortage of labour experienced in the
industry at present. For the RPC sector, our workforce has reduced from 300,000 down to
approximately 100,000 to date, and shows no signs of stopping. Especially if Sri Lanka is to
achieve its national production targets our first priority is to implement every viable measure to
reverse the migration of labour out of the plantation sector.

Land use policies and diversification – our way forward
While tea and rubber have put Sri Lanka on the map, we believe it is an opportune time for Sri
Lanka’s plantation sector to diversify its product offerings to the world. It is absolutely critical for
Sri Lanka to harness its resources and assets in the most optimum level possible, however to
do this RPCs need to be given a free hand to determine its own land use policies should it be
beneficial for the economy.
In instances where the land has become unsuitable for crops like tea or rubber, plantations
should be looking to instead produce other valuable crops like coffee and spices which most of
our RPCs have been successful in doing so, however, there is more that can be done.
Companies are already experimenting with crops like avocado and berries which have yielded
successful results, and valuable new export opportunities.

In that regard, another crop with strong export earning potential is Oil Palm. We cannot overlook
the economic benefits this golden crop could offer Sri Lanka, especially at a time when the

country requires dollars to purchase essentials like fuel, medicines and gas. At present Sri
Lanka produces approximately 25,000 MT, where Sri Lanka imports 200,000 MT of palm oil for
domestic usage. The value of those imports is now over Rs. 24Bn.
Like the 100% organic strategy before it, the campaign against oil palm cultivation has long
been proven to be completely lacking scientific facts, and PA has since the beginning provided
evidence as to how this crop can be grown in an ethical and sustainable manner without
causing harm to the environment.
Diversification is not merely a revenue growth strategy – it is a de-risking strategy, which
ensures that even when one industry experiences a downturn, others may be able to continue,
ensuring the financial viability of the whole. However to do this successfully, RPCs require
support from the government by enabling and providing the necessary assistance to grow crops
that are financially viable and freedom to utilize the land in the best possible way.

Crisis as an opportunity for greater collaboration
Since the privatization of the plantation sector in 1992, RPCs have come a long way, with the
past two years being incredibly challenging for all. This has pushed the sector become
innovative and use technology to unlock new potentials in the industry – an example to this is
the online auction system which was implemented during a short period of time.
RPCs have also been experimenting with precision agriculture, in order to optimize plant
nutrition and effective utilization of agri-chemicals following the ban with some even going into
producing their own fertilizer to cut down on cost and to be able to meet their requirement.
These promising advancements are a testament to the plantation sector’s ability to adapt and
find innovative methods amidst crisis. However if we are to unlock the full potential of this billion
US dollar industry it is imperative that we learn from the mistakes of the past, and work together
to prevent any further repetitions of the kinds of policies that got us to this point.
Privatisation in its true form is therefore the only way forward, to allow business to do business,
while the government should stay focused on policy that is led by individuals who understand
and are focused on commercial realities. It is safe to say that the spirit of privatization is the
spirit of democracy where collaboration is essential to securing the best outcome for all.

Senaka Alawattegama, Chairman, The Planters’ Association of Ceylon

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