ECONOMYNEXT – Sri Lanka’s state interference in privatized plantations wages has escalated into a threat to grab the leased land if the companies fail to pay the government ordered salaries due to ‘mismanagement’.
Sri Lanka is 2011 expropriated several private companies including two privatized sugar plantations, and a publicly listed hotel, claiming their assets were ‘underutilized’.
Sri Lanka has been unable to attract foreign investment in the scale of countries like Vietnam despite being socialist one party state, who have created better perceptions about investor protection and labour laws, analysts say.
Sri Lanka’s President Ranil Wickremesinghe in the presence of several plantations sector legislators announced on May Day that a 1,700 rupee a day wage had been ruled by a gazette.
Plantations and worker unions ended collective bargaining after President Gotabaya Rajapaksa ordered a 1,000 rupee a day wage under gazette rule.
Privatized plantations have protested that they cannot pay such wages and a pay system that is broadly based on smallholder system partly based on productivity is being adopted by some workers.
Cabinet spokesman Bandula Gunawardana said a committee had been set up to examine whether or not the companies can pay the wage taking into consideration cost of production and the competitiveness of Sri Lanka tea in the international market.
“The government has given 22 companies under long term lease,” Minister Gunawardana said.
“The president also asked to examine if they are being managed so inefficiently that salaries cannot be paid, to cancel these long-term leases and given them to individuals who can manage them better.”
“Cabinet approval was given to set up a special committee to examine matter relating to cancelling the lease and giving to other parties, if they cannot pay the salaries and develop this land assets.”
Minister Gunawardana was asked how reasonable was the demand by the state to pay mandate wages when plantations which were still under full state ownership in the Sri Lanka State Plantations Corporation and Janatha Estate Development Board, could not even pay the EPF of workers and tax payers have to fork out cash to pay that.
Elkaduwa Plantations, another company under state control also owes workers EPF and ETF according to reports in the public domain.
State Minister for Finance Ranjith Siyambalapitiya said recently that 5 billion taxes collected from the people would be given to state plantations to pay EPF and ETF arrears.
The plantations were privatized in the 1990s because they could not pay wages and tax payer funds of hundreds of millions of rupees, were being made monthly and no replanting was also being done due to inability to pay wages.
Minister Gunawardana was also asked whether threatening expropriation at this juncture, when the country was desperately trying to attract foreign investment was a wise decision.
“it is not a threat,” Minister Gunawardana said. “It is to examine the matter (karunu adyanayak) widely that the President put forward a cabinet paper under the leadership of the Presidential Secretary.
“The idea is to examine whether they are not being managed well enough to pay salaries and if not give them to another investor. Then the investors will get another chance.”
The plantations were privatized under several conditions including restrictions on diversification without the approval of a ‘golden shareholder’ which was the state.
However, it is not clear whether payment of politically decided salaries mandated by gazette, was a condition of the lease.
All Sri Lankan workers have suffered a steep fall in real wages after macro-economists printed money suppress rates to boost ‘growth’ (targeting potential output) leading to a collapse of the rupee.
There has been no official rise in wages by plantation companies since the currency collapse other than the productivity based formula. (Colombo/May24/2024)
