The Economics of Tea in Sri Lanka
"Not often is it that men have the heart, when their one great industry is withered, to rear up in a few years another as rich to take its place, and the tea fields of Ceylon are as true a monument to courage as is the Lion of Waterloo”.
Sir Arthur Conan Doyle in one of his works, paid the above tribute to the Ceylon Planters who successfully overcame the disaster that followed in the wake of the coffee fungus and the numerous hardships the pioneering planters had to overcome to establish the tea plantations of Ceylon over 150 years ago.
This industry will always hold a special place in my heart; having grown up on a tea estate for the first eight years of my life and my father to this day, working in tea to build a sustainable future for this key resource sector.
The tea industry has historically played a vital role in the economic growth and prosperity of Sri Lanka’s economy. Over time, this contribution has decreased due to growing production diversity in the modern economy and the declining demand for tea globally.
In the 1950s, the tea industry in Sri Lanka contributed to 37 percent of the nation’s GDP with the share of employment in plantation crops amounting to 29 percent of total employment in the country. By contrast, the latest data available today shows a contribution of only 1-2 percent to the nation’s GDP.
Tea in Sri Lanka is managed and run by various stakeholders.
Growing up around Regional Plantation Companies - RPCs (one of the largest sectors of tea producers), I have seen these establishments strive to compete and sustain their industry as they struggle under the weight of non-competitive labour costs, reduced labour productivity and declining prices in global tea markets.
RPCs manage over 400 estates in Sri Lanka, cultivating 35 percent of the country’s tea land making up 8 percent of the working population of 2.5 million people in the agricultural sector.
But the future of tea and the economics of it in Sri Lanka is dire. The Tea Research Institute of Sri Lanka has found that wages solely constitute 67-70 percent of the cost of production of tea and the daily wage rate of tea pluckers has been a constant source of both global and domestic outcry for years.
RPC workers today earn a daily wage of Rs 855. Internationally, the daily wage rate in North India for a tea plucker equals to Rs 241, in South India Rs 443 and in Kenya Rs 443; with the average plucker in North India daily collecting 26 kilos, in South India 38 kilos, in Kenya 48 kilos and in Sri Lanka 18 kilos. The last recorded price for high grown tea sold at the Colombo Auctions in Dec 2020 was Rs 581.
Companies are mandated to provide a minimum of 300 days of work to all residents over 18 years on the estate. They are required to provide attendance bonuses, profit shares, free maternal and child care, dry ration allowances and free medicines and vaccinations. This is in addition to funeral aid, housing and social support services. RPCs have had a long history of not only supporting their workers, but the dependents of their workers as well; something that is seen rarely in other industries today.
Tea production in Sri Lanka needs a new model, one that rewards workers for productivity instead of a daily wage model; in order to renew this industry and ensure its viability. Today, Sri Lanka’s tea yield is the lowest in the three major tea exporting economies - India and Kenya. Plant architecture has to be changed to improve quality and tolerate the rapid fluctuations of tropical climates with a move towards supporting the long term health of the tea bush.
This industry has survived for a long time and its continued sustenance is dependent on the decisions made today by key leaders and experts in the sector. It is time for the tea fields of Ceylon to once again be a monument to courage as they were 150 years ago.
