“Tea Is The Most Affordable Luxury,” Says The Sri Lanka Tea Board. How So? On Whose Toil?

By Harshana Rajakaruna –

Dr. Harshana Rajakaruna

On its website, STB brags about tea being “the most affordable luxury.” The question is, “how so?” “On whose toil?” Seeing the worker in the tea sector living in grave poverty, claiming tea as “cheap for the value” seems like a clear admission that it is “underpriced” by exploiting labor. The market price of tea has not reflected or represented its actual value. Such market distortion is possible only if they unfairly pay the labor. The industry can accrue a disproportionate margin of profits from a higher number of sales created through the extra demand that it generates being “cheap,” making tea an “affordable luxury” to the consumer at the expense of the labor’s sweat.

If so, the question is: how morally can we, the consumer, jubilate a cup of tea, rich in aroma, in a cozy room, forgetting the sweat, pain, and suffering of the worker not priced rightly? Have we as a nation only cared to ‘steal’ the beauty of innocent smiles of those women plucking tea in advertisements on magazines and TV to promote the multibillion-dollar Sri Lanka tourism and tea industry as a means of attraction? How fair is it to let the tea industry exploit these people, leaving them alienated in unimaginable poverty and living conditions?

“Master sir” vs. slave

The early ’70s song “Master Sir,” in the movie කළු දියදහර, the Black Stream, reminds me of a plea the tea estate worker makes to her superintendent to reduce the socioeconomic disparity between ‘us’ the ‘slaves,’ and ‘them’ the ‘masters’ (see Appendix). The song portrays true to this date, as it has been so over the last 200 years, since, the then-ruling colonial British brought the Southern Indian Tamils to Sri Lanka to work in the tea estates. After a decades-long political battle, in the early ‘80s, Sri Lanka granted citizenship to their descendants who stomached to live in the same indentured servitude as their forefathers did. Many generations of the so-brought Tamil people were born on our land now, but have remained socially immobilized as an underprivileged class among the most marginalized and impoverished people in the country. Their community has now exceeded one million people, half of them adults, working as laborers in the tea estates.  

Many socioeconomic studies and documentaries have highlighted that tea estate workers’ unimaginable poverty and living conditions to appeal to the government and others to take intervention actions. However, Sri Lanka had not shown committed involvement except for the promises the politicians and political parties had made when they needed worker votes at elections. The estate Tamil worker trade unions were hopeless because a handful of political elites controlled those in their favor rather than the community. Troublingly, Sri Lanka as a whole continues to see these labor communities as “lower-class-citizens.”

The tea sector contributes over 1% to Sri Lanka’s GDP, bringing billions of foreign exchange dollars to the economy. These estate workers are not merely local labor but foreign income earners. 

The toil of labor

A tea estate worker plucks 16-24 kg of tea leaves a day, 4-6 kg of processed tea ready for the market. What does it mean? It means, each day, a worker “plucks” many a thousand of shoots with her bare fingertips and throws them over her shoulder into a heavy sack that she carries through the day on her back in bare feet, on slippery terrain full of leaches. Here’s the crucial thing: companies have tried mechanical tea plucking. Still, they have not matched the worker’s skilled hand plucking quality because of their lack of selectivity, meaning that these workers’ sweat is indispensable. Otherwise, it has been long since the tea estate companies had replaced the estate workers with machinery. It means the labor that goes into harvesting tea leaves is economically “skilled, valued labor.” 

How much are these workers paid? According to a Central Bank report (2018), the cost of living for a four-member family in Sri Lanka is LKR 50,000 per month. Unless two people work in a family, with each plucking a minimum of 25 kg of tea per day, which is hardly doable, anything less than a daily wage of LKR 1000 would not meet the estimated minimum monthly living cost of a family. Hence, lately, through trade unions, the workers demanded a doubling of wages from LKR 500 to LKR 1000. However, the Ceylon Workers Congress (CWC), the political party representing most estate workers’ interests, assisted by trade unions, seems to have betrayed the demand’s struggle. In March 2020, worker labor unions agreed upon an LKR 200 increase and an LKR 50 allowance, as proposed by the companies. Thus, at present, the wage of a worker remains LKR 750.00.  

The disparity between labor wages vs. industrial net profits

Based on the estimates shown below (in Appendix), we can see that for every USD 1.00 a laborer is making as “wage,” the industry makes USD 1.38 as “net profits” at the rate of LKR 500 (USD 2.71) wage. At the present rate of labor wage, LKR 750 (USD 4.01), the ‘wage to industrial net profits’ ratio remains 1:0.92, whereas 1:0.18 at LKR 1000 (USD 5.41). For a wage at LKR 1000, the “net income” (or “net-profits”) as a percentage of the total cost, from production to the point of export; will be 10%, compared with 26% at LKR 750 wage and 48% at LKR 500 wage, whereas the bank interest rate in Sri Lanka is about 6%. In contrast, the US companies’ profit margin, in a stubbornly “capitalist system,” is 7.9%, on average. German and French firms maintain profit to cost percentages of 6.4% and 6.0%, respectively. It means that the Sri Lanka tea industry can keep a socially just ‘net income margin’ after increasing the labor wage to LKR 1000. Note that the sector produces such profits in foreign exchange from skillfully hand-picked leaves produced at bare minimum wage. 

Options in creating “Ethical Trade” consciousness in our local market

Ethical or fair trade is a model tried in the West for more than a decade to fix the unethical labor- and environmental-exploitation issues of products they import from developing countries. Fairtrade label printed on the product on sale guarantees the consumer that the industry has paid the labor in production ethically and processed the product environmentally friendly. For such a guarantee, the consumer pays an extra buck. Sri Lanka produces a small percentage of tea into the international markets under such fair trade labels. Although there is an upward trend in the West to buy fair trade labeled products in good faith, studies are inconclusive on how effective they are in caring for the workers and the environment as promised. 

Sri Lanka produces 30 million kg of tea per year, 10% of the total, to the local market. Following the fair trade concept, if consumer pays extra LKR 100 for a kg, it can generate an extra LKR of 3 billion per year from the local market (Appendix). The additional payment the consumer pays can go directly to the worker, mechanized through institutions. It can roughly yield an extra LKR 266 per worker per day for tea produced to the ‘local market.’

Summary: Can we be a proud Sri Lankan to enjoy a cup of our tea?

It seems that the accurate image of tea has been evil to this date. Thus have we been guilty of drinking tea? Of course, we do not need a cup of tea -a “luxury for cheap”- unless the industry paid the worker rightfully for the toil. We need to correct it. Until now the government has failed to intervene in the industry to pay the worker the deserved wage LKR 1000 as asked, to increase the income to match their bare minimum living cost. The estate labor is skilled, efficient, and irreplaceable, and bringing foreign exchange dollars to the country. Here, we show how the industry is not losing unfairly by giving the worker what they demanded.

Until the industry settled the issues, I do not think tea fits in representing Sri Lanka as an ambassador or a signature image to the World in the present state. Beautiful hills of tea plantations will not give me any more chills unless they fairly distributed the price I pay. I will forgo the great pleasure of the aroma of my teacup that wakes me up to a fresh, healthy, and energetic day until such time. I hope one day we could sing a ‘new song’ in a genuine spirit of giving the underprivileged estate worker the deserved socioeconomic freedom they have been praying for in the last 200 years. I hope it will end the “master-slave” relationship and make them live with dignity. Sri Lanka needs to wake up before claiming, “Tea is the most affordable luxury,” as the STB ironically does. It is a shame on us, the nation at large, otherwise!

Appendix:

How well does the industry do compared to the worker? 

The cost of producing one kg of processed tea into the market is USD 2.57 (Source: Department of Census and Statistics, 2018). Supposing, on average, tea is exported at FOB USD 4.76 per kg (The Tea Exporters Association (TEA), 2020), then assuming revenue to the producer being 80% of the FOB (after deducting 20% for marketing overheads, storage, transport, freight, tea flavor, CESS and tea promotion, levy (2%), etc. (Source: TEA)), it yields an income of USD 3.81 per kg to the producer (i.e., before the cost of production is deducted). Thus, on average, if 300 million kg of tea is exported per year (which is a conservative estimate), it generates approximately USD 372 million “net income” (net profits) per year to the industry, i.e. (3.81-2.57)*300 million, at LKR 500 wage; i.e., LKR 70 billion (Footnote: over 50% of Sri Lanka tea exports is value-added, which may increase the returns than it is estimated here; Foreign exchange earnings exceeded USD 1.5 billion in some years). 

We can estimate the total number of person-days of labor per year as 300 million kg (processed tea)*4 (processed to wet conversion ratio)/18 kg min harvest per day per person, 67 million. It gives the cost of labor in the industry, for plucking only, approximately USD 180 million per year (calculated at the expense of wage per day at USD 2.71 (LKR 500) before the late wage increase). It is too complicated to estimate the total person-days of labor involved in factory processing and plantation fieldwork in the industry from the reports. However, we can assume the person-days of labor needed for such work is half the number of person-days required for plucking the same amount of kg at the present economies of scale (which is a conservative estimate). Thus, the total cost of labor in the industry for a year will be USD 270 million (i.e., USD 180+90). (Here, 67 million/300 workdays per year gives 224,000 labor force in plucking alone. As we know that the existing workforce is 500,000 in the industry, assuming that another 112,000 is used for the labor needed for caring in tea plantations plus processing seems proper.) Hence, we note the labor cost alone for one kg of produced tea turns USD 0.9, i.e., USD 270 million/300 million kg, before the late wage increase. Thus, this yields the labor cost to be 35%, i.e., (0.9/2.57)% of the total production cost. That is, if we double the labor cost, at LKR 1000 (USD 5.40) per day, then the total cost of production of one kg of tea will rise to USD 3.47, i.e., USD (2.57+0.9). Hence, this will reduce the industry’s net profits to USD 102 million (i.e., USD); i.e., LKR 19.00 billion. That is a drop in net earnings from LKR 70 to LKR 19 billion. That is if the companies met the demanded wage hike, they would still keep LKR 19 billion as “net profits” per year. (Here, we ignore the local market.) Thus, for every USD 1.00 a laborer is making as “wage,” the industry is making USD 0.18 (i.e., (3.81-3.47)/1.80) as “net profits” at the rate of LKR 1000 wage. At the present status of labor wage, i.e., LKR 750 (USD 4.02) per day, the ‘wage to industrial net profits’ ratio remains 1:0.92. The wage at LKR 1000, given a minimum of 18 kg tea leaves harvested per person per day, the percentage of “net income” of production to the producer will be 10%, i.e., ((3.81-3.47)/3.47)%. However, we have not computed the variances, uncertainties, bounds, and risks in these analyses.

The option of ethical trade in the local market

Following fair trade or ethical trade concept, a consumer paying LKR 100 extra for one kg can generate extra LKR 3 billion; i.e., 100*30 million kilograms per year. It yields an extra LKR 266 per worker per day, i.e., LKR 100*4 kg wet/ 1.5 persons for plucking and other labor. (Footnote: there will be a small institutional cost deduction from this amount.)

The Song “Master Sir” (Lyrics by K. Abeysekara)

 “පනම් අටෙන් මට වැඩිකර දුන්න,

හැකි උනත් බත් මිටක් දරුවට කවන්න,

මාස්ටර් සර් මට හිමි තැන දෙනවාදෝ

අනේ සර් අනුකම්පා නොසිතේදෝ?

මට මතක් වෙනව සුද්දා තැලූ පෙලූ හැටි.

අපි කතා කලේ පණ ගැහි ගැහි දණින් වැටී.

මාස්ටර් සර් මගෙ හිමි තැන මට දෙන්න.

අනේ සර් කරුණාවෙන් සලකන්න.

අප අතරේ කඹ ඇදිල්ලේ තරගෙ මේ,

නිම වෙන්නට කල් ගත වෙයිදෝ?

අනේ සර් අපි මිතුරන් වෙයිදෝ?

එදා දවස උදා වේවිදෝ…?”

The meaning: “The extra eightpence that you got us increased in our wage may help us with an extra handful of rice for my kids. But sir, one day, please care to feel me in my boot? Let us also have a decent and deserved life. Do you remember how the white man whipped us? Shivering with fear, we kneeled at him when we talked. Do you know when this tug of war will end between us? Would you ever care to treat us fairly? Would there ever be a day that our lives will dawn? Will you and I, one day, be friends?”