Tea needs higher productivity

Dr N Yogaratnam

Sri Lanka having initiated action on Geographical Indication System for the country’s tea, tea plantations and tea industry would get more globalised and integrated into the international commodity trade.

But with the potential threat of reduction in import duties in some countries like India, cheap teas from countries such as Vietnam could invade the international market and pose challenges to producers. Reducing the cost of production and increasing productivity alone will ensure that Sri Lankan tea plantation industry is able to survive the fiercely competitive global markets.

But statistics available 2007 for several countries show that Sri Lanka has not performed consistently in comparison with most competing countries of South East Asia in 2007 as far as productivity is concerned.

India had productivity of 1,663 kg a hectare, Sri Lanka had 1,615 kg, Vietnam had 1,548 kg, Indonesia had 1,115 kg and Bangladesh had 1,108 kg. Kenya had 2,477 kg per hectare. But, now differences in yield, cost of production and prices have made the profitability of tea vary widely across the different countries. Among the various countries, the highest profitability has been obtained by Kenya (over $2,000/ha), followed by India (over $1,400/ha) with the lowest being Sri Lanka ( $1,100/ha) a few years ago. Although the trend remains the same, the actual figures might have changed due to various interacting factors.

And increase in productivity hinges on a variety factors, including higher labour output, mechanisation, higher yields from superior clones and scientific management such as proper and timely application of fertilisers and pesticides as well as plucking of new shoots.

With their compact holdings and cost-effective operations, small growers have been able to implement most of these conditions more effectively than the big plantations, where the huge scale of operations and major investments have acted as major deterrents.

With most plantations finding shortage of labour, the introduction of manual and mechanised shearers is expected to boost labour productivity several fold.

From an average output of 50 kg of plucked leaves per worker, the productivity would surge to 300 kg with the use of manual shearers and to 600 kg with mechanised shearers.

This is bound to increase labour productivity and reduce cost of production.

But, with the legacy of large labour force, most plantations would not be able to replace man with machines immediately. Also, given the undulating terrains of tea plantations, application of manual and mechanised shearers may not be possible in all areas. The cost of re-planting with high-yielding clones would be huge for plantations.

Plantation sources say that the large social cost for plantation labour in Sri Lanka - provision of housing, electricity and water - as being the big burden that other competing countries do not have.

They demand that the Government provide support for this social cost. While challenges remain before the tea industry in increasing productivity and reducing cost of production, viable and practical avenues should be explored.

Productivity

Productivity is defined in the classical sense, that is, as obtaining more output for the same input. The two major inputs in the tea industry - land and labour - are neither as abundant nor as cheap as they were when the tea plantations were established more than 100 years ago.

Tea is among the most labour-intensive of all the plantation crops. It has both an agricultural and a manufacturing dimension. According to well-established precepts, 60 per cent of the income from tea is agricultural, the balance being of an industrial nature.

Although both the agricultural and manufacturing activities, with particular reference to labour requirement, have been discussed on few occasions earlier, it is still considered beneficial to re-examine this subject with the aim of facilitating an insight into the kind of productivity gains that are possible in an effort to improve the viability of this volatile sector.

Production and COP

Tea industry is no longer a dominant source of generation of surpluses for economic growth. An analysis of the performance of Tea, over the last ten years, from 2001 to 2010 indicates that tea production has increased only by 11 percent from 296 kg mn to 329 kg mn over the ten year period , where as the COP has gone by about 159 percent over the same period (see figures 1).

This figure may be still higher with the recent wage hike. Productivity (Yield/ha) has also not been consistent ( Figure 2). Looking at prices over the same period, tea prices have gone up by about 158 percent.

Factors influencing productivity

Harvesting: Commonly referred to as plucking in tea parlance, this activity is overwhelmingly labour-intensive, despite the tendency lately in some areas of the tea growing regions to use shear harvesters during the heavy cropping period when labour is scarce. Plucking accounts for about 70 per cent of the workdays on estates and about 40 per cent of the total cost of production. The main factors that influence plucking are:

Yield - a higher level being attained by adopting better agricultural and management practices leading to enhanced plucking output;

Plant density - Fields with less plants (about 8,600 per hectare in the “seedling” tea) having a lower plucking potential than those with more plants (about 12,500 per hectare in vegetatively propagated tea);

Leaf variety - The small-leaved China variety yielding less than the large-leaved “Assam” variety or the hybrid medium-leaved vegetatively propagated plants;

Climate and topography - Higher elevation, steep areas, prolonged drought, etc. serving as constraints to plant growth, field productivity and, hence, plucking output;

Age of plant - Older bushes yielding less than the new and replanted fields;

Leaf standard - The traditional “two leaves and a bud”, while ensuring quality, does not generate as extensive a crop as does plucking the third leaf — a practice that is now gaining ground — or even coarse plucking, which substitutes quantity for quality;

Plucking frequency - For instance, a seven-day interval involving about 52 rounds a year resulting in a different level of yield — and profitability — than a five-day frequency involving about 73 rounds;

Wage rates and incentives - A properly designed incentive system, in particular, resulting in less leaf going unplucked and, at the same time, enhancing workers’ earnings;

Worker productivity - Embraces a wide spectrum of factors such as earnings, motivation and socio-economic influences.

Fertilizing. Given the required soil conditions, there is a high degree of correlation between field productivity and the application of inorganic fertilizer, as recommended by the Tea Research Institute that are in operation.

Apart from adhering to the recommended dosage — roughly, 1 kg of nitrogen for every 10 kg of made tea — the industry is now looking more closely at establishing precise linkages with fertilizer prices (subsidies for which have, by and large, been withdrawn) as well as the price of tea itself.

Fertilizer application continues to be a manual operation, the workdays involved being almost the same for most fields, except that fields with very high productivity require additional rounds which, in turn, involve more labour, albeit to a small extent.

Weeding. Technical opinion now is that weeds in the tea fields are to be controlled, not eradicated. It is, therefore, a question of weed management with an eye on the cost-benefit line of the operation. Well-maintained and productive fields with good ground cover require little expenditure on chemicals and labour for weeding, whereas the substantial weeding costs incurred for fields with large vacant areas add little to productivity. Furthermore, manual weeding is slowly giving way to chemical weeding, so that what was a labour-intensive component of production is now no longer so, and the workforce involved in weeding is bound to shrink further in the future.

Pruning. The average life of a seedling tea plant is well over 50 years, with hybrid types having a life of around 40 years. Pruning is important for maintaining the tea bush in the right form and height for growing and plucking. Pruning is also necessary for the removal of branches that are decayed or dead as a result of drought, pests or diseases, thereby to ensure a clean and healthy plant. The rule of thumb is that the length of the pruning cycle is determined by the elevation of the estate (i.e. one year for every 300 m plus one more year). In practice, pruning is undertaken when the yield of a particular field starts to decline.

Other field operations. These include soil conservation measures, control of pests and diseases, and sundry activities. The labour requirements — mostly men workers — do not vary significantly with field productivity, being about 15 per cent of the total workdays absorbed on an average tea estate.

Manufacturing. About 4.5 kg of freshly plucked green leaf is required to manufacture 1 kg of black tea (finished product). In Sri Lanka, factory expansion and modernization have not kept pace with the additional crop generated in the field, and it has been a matter of slowly upgrading the conventional technology. Between the two principal methods of manufacture — orthodox and CTC (cut, tear and curl) — the global demand for the latter has been on the rise because of its higher cuppage (about 1.6 times more cups than its orthodox counterpart) and greater acceptability in quick brewing tea bags.

Producing countries in the region have, accordingly, affected a shift to CTC manufacture, with the entire Bangladesh product being of this variety. In India, the ratio of CTC to orthodox is around 85:15, largely reflecting a growing domestic market and shrinking exports. Sri Lanka has traditionally been an orthodox producer, but the island has lately affected a partial conversion to CTC manufacture, with more than 10 per cent of output estimated to be of this variety. It is pertinent to note that, because of the relatively continuous process which CTC entails, the factory labour requirement is just about half that necessary for orthodox production. This trend of lower labour absorption in tea processing is expected to continue.

Replanting

The slow pace of replanting now is very striking. As against a targeted rate of 1.5 to 2 per cent per annum, it is only about 0.4 per cent in Bangladesh and India and 0.7 per cent in Sri Lanka. The activity, which involves uprooting of old bushes, rehabilitation of soil, planting of tea and maintenance of the young field till maturity, is overwhelmingly labour-intensive; about 70 per cent of the cost involved over the five-year period is on labour.

From the point of view of individual managements, the reasons for the slow pace of replanting are economic — high investment and negative returns. But replanting has to be seen in a wider national perspective. By enhancing field productivity, replanting also generates much higher employment per unit area than the old seedling fields. An element of state intervention and assistance to give a fillip to this activity will have a multi-dimensional impact on the long-term development of the industry.

Meanwhile, industry efforts have been directed at the filling of vacancies with a view to increasing the plant density per unit area without suffering any loss of crop. To the producer, this is the most cost-effective field development option and it also has the advantage of absorbing underemployed workers, the labour component of infilling being, as in replanting, about 70 per cent of plant cost and maintenance.

Several yardsticks are available to the tea industry by which to judge production efficiency and its effect on reducing costs, the most important of which are discussed below.

Plucking productivity

This is the quantity of green leaf harvested per workday, the objective being to increase it without detriment to quality. The average for the South Asian countries in making allowances for the type of plucking, elevation and regional differences in kg of green leaf per day per worker, India - North, 24; South, 25, Bangladesh, 20, Sri Lanka - corporate sector, 15 ; Smallholdings, 24.

By comparison, the Kenyan average is 40 to 50 kg of green leaf per day per worker, although it must be added that this includes an element of assistance by family members, especially in the smallholdings, which adds to the individual plucker’s efforts. According to a recent study of the African tea-producing countries, estates in Zimbabwe are registering a plucking productivity averaging as high as 68 kg.

Processing productivity

This involves two aspects: first, the ratio of green leaf to made tea; and second, the worker output at the factory. In regard to the former, a combination of good quality leaf, careful handling and transport, and timely processing will help to reduce the conversion ratio to made tea. As noted above, 4.5:1 is the usual proportion but this can be improved to a certain extent through better manufacturing techniques. For example, a ratio of 4:1 is reported in Zimbabwe.

With regard to worker output, the relative position of the South Asian countries in terms of, average factory output in kg of made tea per day per worker is, India - North, 40; South 80, Bangladesh, 18, Sri Lanka, Up country (orthodox), 45; Low country (orthodox), 35; CTC (cut, tear and curl), 80.

The relatively lower worker output in the factories in North India is attributed to the large number of workers employed for hand picking of stalk.

Land-labour ratio

The main parameters determining the productivity of a tea estate, particularly in respect of its day-to-day operations, are the levels of labour utilization and the labour per unit area appropriate to the different levels of yield.

As an example, the workdays required for an estate with a yield of, say, 1,500 kg per hectare is reported to be around 657, with an average of 2.74 workers per hectare. In practice, however, the latter parameter varies from country to country and from district to district within the same country, the average for India being 2.5 and for Bangladesh 2.

In Sri Lanka, there is a marked variation between estates and smallholdings. In estates, there are as many as 3 to 3.5 workers per hectare, whereas in smallholdings there are said to be as few as about 1.5, although family employment has also to be taken into account to reflect the true position.

In the East African estate sector, the average number of workers per hectare is reported to be 2, despite the higher yield.

Three aspects may be noted. First, workforce requirements are based on the currently low productivity levels for existing tasks. More cost-effective norms have to be established. When that happens and labour productivity improves, there will be savings on labour which, in turn, will have a salutary effect on the cost of production.

Second, the figures represent the average, not the maximum, and especially in respect of plucking, will require an upward revision for the heavy cropping period.

This can be calculated taking into account the yield difference between average and peak months.

Third, where there is a situation of disguised unemployment, the use of surplus workers in productive field development, to undertake such tasks as replanting or infilling, would help to improve long-term viability of the plantation.

In conclusion, if the tea industry has to choose between improving prices and controlling costs, the former is the more difficult option particularly in a global environment where transnational corporations are exerting greater influence on the buying operations.