An overview of the tea industry and associated problems

Lalith Hettiarachchi

TEA SECTOR; Over the recent past tea production in Sri Lanka has been in the region of 300 to 310 million kgs, roughly bringing in a gross revenue of 600 to 700 million Dollars annually. The total area under tea plantation in Sri Lanka is around 210,000 hectares with a work force in this sector of about 650,000.

While earnings from tea by way of foreign exchange accounts for nearly 15% of the total foreign exchange inflow to the country, it constitutes 70% of the earnings from the agricultural exports.

Based on research it is shown that in the medium term tea production/supply will soon surpass global demand.

Among the factors that contribute to this situation one of the most important is the reduction of tea drinking population globally due to (a) increasing attraction for "instant" beverages, especially among the younger folk (b) huge advertising campaigns supported by multinationals on such beverages getting popular as substitutes to tea and (c) changing lifestyles of people and therefore tea being a drink which is mostly consumed indoors, people having lesser time for brewing/preparation of tea before consuming.

Non-compliance of the ISO 3720 minimum standard by some tea producing countries has been identified as one of the reasons why "poor quality tea" is escaping into the market. International organisations related to tea have identified this as a reason why some consumers are driven away from tea drinking.

While poor quality tea that gets blended and sent to the market depresses the prices, lower prices lead to tea being identified as a "cheap drink," much to the detriment of the industry.

On the other hand relatively new plantations that have come up in countries such as Kenya have started producing higher yields by now. Since there are no restrictions on new plantations there are yet more new plantations coming up in other tea growing countries.

The cumulative effect of these factors is likely to increase supply thereby depressing prices in general.

These relatively new plantations all over the world have attracted planters from other countries who are better equipped with plantation and management skills so that these plantations came to be better managed.

Sri Lanka was a good source for such expertise. In the Sri Lankan situation, on the other hand at least over the last three decades skills development and training have been neglected in the estate sector.

The glamour of being a planter has also started diminishing due to other areas comparatively more attractive being open to educated and enterprising youth. Many other external factors have also contributed towards the so called brain drain where planters too have featured to the detriment of the tea industry.

Vulnerability of the tea industry to price fluctuations on the one hand and cost escalations on the other has been auguring badly on the industry. Labour and fuel costs together contributing to a high percentage (50% plus) in the cost structure, any escalation in these components is likely to cause a big impact on the overall cost of production (COP).

Legacy of the recent past

In the Sri Lankan situation, the (presently divested) RPC sector being the major owners of the tea plantations has been and is still suffering due to the legacy of the public ownership and its attendant political interference, which is haunting the sector.

This sector is struggling to come out from the strangulation from the neglect that it was subjected to at that time by way of (a) inadequate capital injection (b) top heavy and politically motivated management styles (c) lack of exposure to technological and other developments in other parts of the world and (d) the frequent policy changes that give often contradictory and different signals.

Whether one likes it or not the tea industry is heavily dependant on manual labour. Although certain areas of the industry have lent themselves to partial mechanisation, by and large still the Industry has a heavy input of manual labour.

With more and more facilities for education being offered, and the desire and urge of the younger generation to move to urban areas for white collar or technical jobs, manual labour is getting scarcer day-by-day.

Unlike a few decades ago, the present day youth is a much better informed youth as a result of improved communication facilities and the media, especially the electronic media. This has resulted in an accelerated exodus of youth (especially the manual labour category) from the estate sector resulting in a severe dearth of manual labour.

In tea, in the same way as it is in any agricultural product, fertiliser is an essential input if one expects a good yield. However much effort is put on soil conservation methods and however efficiently they are maintained, application of fertiliser cannot be discounted.

Cost of production

The present fertiliser prices are so high that planters are finding it extremely difficult if not impossible to apply the right dosage of fertiliser to the estates. Fertiliser cost in a kilogram of tea is as high as 11 - 15 per cent of total cost.

From a purely political point of view a fertiliser subsidy for paddy is important for any government. But from an export and macro economic point of view, application or non-application of fertiliser in tea production can make such a big difference in so far as it is related to the foreign exchange earnings of the country.

One has to bear in mind also that a drop in the yield will sure to have a snowballing effect on the total cost of production as lower the yield lower the absorption of overhead costs. Tea producers therefore argue that if a fertiliser subsidy can be worked out it would not only be an incentive to the planter, but will go a long way in lowering the cost of production, while it would reflect favourably on the economy.

Quite a substantial percentage of the cost of production (COP) of a kilogram of tea is in the use of energy. Such energy is derived from either the sun or electricity or firewood. Except for solar energy the other two have been increasingly expensive over the past years.

Historically we are aware that some of the tea estates in the British days and even later, have been having their own mini power generation plants.

They were either mini hydropower plants or in areas where such hydropower could not be harnessed, small diesel generation plants. Even diesel-generated power was relatively cheap those days as fuel was inexpensive.

But with the national grid being harnessed to supply reliable power to the estates comparatively cheap, the mini hydropower plants and the diesel generation plants became redundant and consequently came to be abandoned and neglected. Even though some of the remnants of these plants are still seen in some estates, most of them are beyond repair now and are preserved if at all as museum pieces.

Supply of hot water and heating of the residential quarters in most estates of high and medium elevations almost throughout the year and more especially in the colder times, and lighting in public areas and in the line rooms also add to the cost of production.

On the one hand environmental lobbyists have been successfully arresting the cutting down of trees for firewood. On the other hand alternative use for even the cheaper varieties of timber has made firewood dearer and dearer. Although theoretically it is possible to grow the required firewood in the estates, this has to be necessarily a long-term project. On the other hand there also have been policy guidelines restricting the forestry programs in the estate sector.

Transportation and haulage costs have risen beyond comprehension due mainly to higher fuel costs. In addition all other components in that cost group like repair and maintenance of vehicles have gone up too.

Social impacts

Making matters worse for the plantation sector, while improvement to the living conditions offered by the estate owners, by way of subsidy schemes, improved education, health and social welfare facilities, due partly to the political pressure, humanitarian lobbyists' efforts and media highlights, in whatever form have offered improved living conditions, these efforts (unfortunately for the estate sector) have failed to prevent the labour in the estate sector moving out to other areas in search of greener pastures. Anyway such movements have to be viewed as rational human behaviour.

On the one hand there is a foreign labour market sponsored by the Government, which attracts especially the women folk. The exodus of women from all three major communities in large numbers to especially the Middle East has not only created a labour shortage mainly of women in the estates, but also has created a domestic labour shortage in the affluent, upper middle and even the lower middle class families in the urban and suburban areas.

This vacuum is filled with whatever the remaining labour from the estate sector in spite of the sector already suffering from a severe shortage of especially women labourers. Unfortunately for the tea estates, women labour is most vital for the tea industry.

In any case these men and women who have moved out from the estates have become aware that domestic labour in an urban or suburban environment is not only comparatively easy but also more remunerative apart from life being of a better standard.

In rare instances some of these labourers have found ways and means of remaining in the estate payroll at least for short spells while working in homes far away in Colombo or elsewhere! The result is therefore that when once a labourer moves out from an estate, he/she will never return to the estate in the capacity of a labourer.

Certainly from a humanitarian point of view improvement to living conditions in the estates has brought happiness to the estate labourers. But on the other hand, the reality is that, although such improvements to facilities offered to labour, whether it is through donor assistance or otherwise, gave political mileage to successive governments, it not only failed to prevent the migration of labour from the estates but also proved to a certain extent counter productive as far as retention of labour in the estate sector is concerned.

It is known that some of the planters are forced to supplement their labour by bringing down labour from other areas seasonally as the labour force in the estates and the vicinity is inadequate. In a way such practice has been found to be convenient and less troublesome than depending on resident labour in the estates who are invariably affiliated to labour unions within the estate.

However there is no gainsaying that such a practice would certainly add to the cost of production. The tea estates are suffering from (a) the past neglect and (b) lack of improvements over a long period of time. On the average our tea plants are at least 90 years or more old.