博士論文

Enhancing Capabilities through Small Scale Contract Farming:

A Study on the Tea Plantation Sector of Sri Lanka

(小規模契約農業を通したケイパビリティ強化：スリランカの
茶プランテーション部門に関する研究)

WEERAKONDA ARACHCHIGE SAJITHA DISHANKA

ウェーラコンダ アラチュチゲー サジタ ディシャンカ
 Table of Content

Page

Table of Content..………………………………………………… i
List of Tables…………………………………………………….. iv
List of Figures……………………………………………………. vi
Summary…………………………………………………………. vii

Chapter One
1 - 14
INTRODUCTION

1.1. Background of the study.…………..………………………. 1

1.1.1 Tea industry of Sri Lanka …….……………………... 1
1.1.2 Performance of tea industry of Sri Lanka …………... 7
1.2 Tea plantation labour……………………………………… 7
1.3 Problem statement….……………………………………… 8
1.3.1 Objectives of the study……………………………… 10
1.3.2 Research propositions……………………………….. 11
1.4 Research methods and materials………………………….. 12
1.5 Strucute of the thesis………………………………..…….. 13

Chapter Two
SOCIAL DEVELOPMENT AND LABOUR
15 - 34
PRODUCTIVITY IN LABOUR MANAGEMENT SYSTEM
OF REGIONAL PLANTATION COMPANIES

2.1 Introduction………………………………………………... 15
2.2 Literature review……..……………………………………. 19
2.3 Methods……………………………………………………. 22
2.4 Findings and discussion……………………………….….. 22
2.5 Towards a sustainable solution……………………………. 28
2.6 Small-scale contract farming for tea estate community in
31
Sri Lanka…………………………………………………..
2.7 Conclusion………………………………………………… 33

i
 Chapter Three

SOCIAL CAPABILITY IN LABOUR MANAGEMENT 35 - 54

SYSTEM OF REGIONAL PLANTATION COMPANIES

3.1 Introduction……………………………………………….. 35
3.2 Literature survey…………………………………………... 38
3.2.1 Capabilities and human development……..………… 38
3.2.2 Culture, gender and capabilities……………………... 39
3.2.3 Migration and well-being……………………………. 40
3.3 Research methods…………………………………………. 41
3.3.1 Theoretical framework………………………………. 41
3.3.2 Operationalization…………………………………… 42
3.3.3 Sampling and data collection………………………... 43
3.3.4 Method of analysis…………………………………... 43
3.4 Results, findings and discussion………………………….. 44
3.4.1 Data description………………..……………………. 45
3.4.2 Dichotomous Logistic Regression Analysis………… 46
3.5 Conclusion and implications………………………………. 53

Chapter Four
EQUITY AND EFFICIENCY IN CONTRACT FARMING 55 – 95

4.1 Introduction………………………………………………... 55
4.1.1 The problem and the objective…………………...….. 56

4.1.2 Significance of the study………………..…………... 57

4.2 Literature review…………………………………………… 58

4.2.1 Global practice of contract farming…..……………... 58
4.2.2 Contract farming and human development of farmers 59
4.3 Nature of the contract at Alpha Tea Estat’ of Beta RPC….. 61
4.4 Research methods and materials…………………………... 64

ii
 4.4.1 Sampling and data collection………………………... 64
4.4.2 Data description and preliminary analysis…………... 64
4.4.3 Two-way MANOVA with interactions……………… 65
4.4.4 Multiple Regression Analysis……………………….. 67
4.5 Data analysis and results…………………………………... 68
4.5.1 Gender equity in contract farming at Alpha Estate…. 75
4.5.2 Productive efficiency of contract farming at Alpha
90
Estate…………………………………………………
4.6 Discussion and implications………….……………………. 92
4.6.1 Equity in distribution……………………………….. 92
4.6.2 Efficiency in production…………………………… 93
4.7 Conclusion………………………………………………… 94

Chapter Five
96 - 100
CONCLUSION

5.1 Concluding remarks...………..……………………............. 96

5.2 Major findings of the study………………………………... 97
5.3 Reccomendations and policy implications………………… 98
5.4 Limitations of the study……………………….…………... 99

References……………………………………………………….. 101 - 107

iii
 List of Tables

Table No. Page

Table 1.1 Contribution of tea to the economy of Sri Lanka – 2011….. 4

Table 1.2 Registered tea area by elevation – 2011…………………… 4
Table 1.3 Expansion of tea smallholdings……………………………. 5
Table 1.4 Total tea production of Sri Lanka 2011/2012……………... 7
Table 1.5 Land/ labour ratio and productivity……………………….. 9
Table 1.6 Details of field work………………………………………. 13
Table 2.1 Tea Plantation Sector Performance (2003 – 2012)………... 16
Selected Socio-economic Indicators of the Sri Lankan
Table 2.2 18
Economy………….………………………………………..
Table 2.3 Structure of the sample of estate workers…………………. 22
Table 3.1 Frequency distribution………………….…………………. 45
Cross-tabulation (Gender and future migration
Table 3.2 46
intention)…………………………………………………..
Dichotomous logistic regression for future migration
Table 3.3 47
intention……………………………………………………
Cross-tabulation (Gender and preference to change
Table 3.4 48
traditional work norms)……………………..……………..
Logistic Regression for preference to change traditional
Table 3.5 48
work norms…………………………………………………
Cross-tabulation (Gender and preference to be an
Table 3.6 49
independent farmer)………………………………………..
Logistic Regression for preference to be an independent
Table 3.7 50
farmer………………………………………………………
Table 4.1 Distribution of contract farmers…………………………… 63
Table 4.2 Population and sample distribution……………………….. 64
Table 4.3 Descriptive statistics – Total sample………………………. 69
Table 4.4 Descriptive statistics – Female sample…………………….. 70
Table 4.5 Descriptive statistics – Male sample………………………. 71
Table 4.6 t-Test for Equality of Means………………………………. 72
Table 4.7 Correlation matrix…………………………………………. 73
Table 4.8 Tests of normality………………………………………... 77
Table 4.9 Multivariate Tests (Wilks’ Lambda)………………………. 79

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Table 4.10 Linear regression analysis for CF output………………….. 80
Table 4.11 Linear regression analysis for CF yield……………………. 80
Table 4.12 Linear regression analysis for output per family labour…... 81
Table 4.13 Linear regression analysis for CF net income…………….. 82
Table 4.14 Linear regression analysis for CF net income per tea bush... 82
Linear regression analysis for CF net income per family
Table 4.15 83
labour……………………………………………………….
Table 4.16 Linear regression analysis for distribution of tea bushes….. 84
Table 4.17 Linear regression analysis for tea bushes per family labour. 84
Table 4.18 Linear regression analysis for family labour………………. 85
Table 4.19 Linear regression analysis for family labour per tea bush… 86
Table 4.20 Linear regression analysis for hired labour………………... 86
Table 4.21 Linear regression analysis for hired labour per tea bush….. 87
Table 4.22 Linear regression analysis for family and hired labour……. 88
Linear regression analysis for family and hired labour per
Table 4.23 88
tea bush
Linear regression analysis for future involvement in CF
Table 4.24 89
system………………………………………………………
Log-linear regression analysis of neoclassical production
Table 4.25 90
function – I…………………………………………………
Log-linear regression analysis of neoclassical production
Table 4.26 91
function – II………………………………………………..
Table 4.27 Gender and marginal productivity…………………………. 92

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 List of Figures

Figure No. Page

Figure 1.1 Tea production trend in tea smallholdings………………… 3

Figure 1.2 Registered tea area by elevation (2000 – 2006)…………… 5
Figure 1.3 Extent of tea plantation by district………………………… 6
Figure 2.1 Vicious Cycle of Labour Productivity…………………….. 29
Figure 2.2 Conceptual model of the solution………………………….. 30
Figure 3.1 Freedom-based Capability Approach……………………… 42
Figure 4.1 A contract farming framework…………………………….. 60
Figure 4.2 Estimated marginal means of CF output…………………... 76
Figure 4.3 Estimated marginal means of net income…………………. 77
Figure 4.4 Normal Q-Q plot of CF output……………………………. 78
Figure 4.5 Normal Q-Q plot of net income.………………………….. 78

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 SUMMARY

The tea industry of Sri Lanka consists of two main sectors namely, tea plantation/

estate sector and tea smallholdings sector. This industry has gained the attention of

various stakeholders due to its contribution to the economy of Sri Lanka in terms of

employment generation and foreign exchange earnings. Different varieties of teas

produced in the country have attracted the international communities around the world

due to various attributes such as taste, freshness, and aroma associated with it. In 1995,

the government of Sri Lanka privatized its plantations by clustering those into 23

Regional Plantation Companies (RPCs) due to the inefficiencies prevailed in production

and labour management. However even after this privatization, tea plantation sector did

not show any significant improvement and their contribution to the annual national tea

output has started to decrease. The main reason for this decrease has been the low

productivity associated with its labour.

The labour force of the tea plantation sector of Sri Lanka mainly consists of Tamil

immigrants from South India and this immigration occurred in the colonial era of the

British who initiated tea plantations in Sri Lanka. According to recent socio-economic

indicators (such as household income, quality of housing, level of education, health and

nutrition, etc.) of the Sri Lankan economy, estate community is far behind in the level of

socio-economic well-being when compared with non-estate rural and urban communities.

Moreover, the low social status associated with the estate community has discouraged the

younger generation to participate in the tea estate labour force and resulted in out-

migration pushing the tea plantation sector towards a risky condition. According to many

economists and social scientists, lack of adequate access to socio-economic necessities

(quality housing, proper education and health facilities, sufficient nutrition, and higher

social status) has adversely affected estate workers level of well-being and it has reflected

vii
in their lower work performance. In light of this condition, the researcher’s intention was

conceptualized to conduct an in-depth study to reveal the intrinsic and implicit issues of

this socio-economically deprived community. Further, this condition motivated the

researcher to adopt a normative approach to identify a possible solution which would be

applicable and sustainable.

Hence in the first chapter of this thesis provides an explanation to this chronic

labour problem which is related to the deprived level of socio-economic well-being of tea

estate workers. In order to elaborate these problems, socio-economic well-being and

labour productivity related evidence from the tea plantation sector of Sri Lanka have been

identified and discussed. Based on the identification of these labour problems, the

researcher developed the hypotheses of the study to be tested. The first objective was to

evaluate the effectiveness of labour policies (duties and responsibilities of employer and

their relationship with employees) and practices (work norms and, other pay and benefits

to employees to enhance their performance) of RPCs in developing a solution for the

prevailing labour productivity problem in the tea plantation sector. Further, it was

intended to investigate the initiatives taken by them in uplifting the socio-economic

condition (quality housing, proper education and health facilities, sufficient nutrition, and

higher social status) of resident workers who reside and work in tea estates. The second

objective was to explain the significance of enhancing the freedom of tea estate workers

to do and be what they value (capabilities), as a solution for the labour problem which

probably would become a solution for the labour productivity problem, eventually.

Finally, the objective of the study was to explain the significance of adopting small scale

contract farming (CF) system into the tea plantation sector of Sri Lanka in order to

enhance the capabilities of its resident workers. Providing freedom and opportunity for

estate workers to decide their own achievements would ultimately create a positive

viii
impact on labour productivity. Based on these objectives the study was designed, focusing

on a sample of RPCs and tea estate communities in tea estates (tea growing estates in high

lands above 1200 m) located in Nuwara Eliya, Badulla and Ratnapura districts of Sri

Lanka.

In the second chapter, we evaluated the initiatives taken by the selected RPCs to

increase the estate workers’ income and other sustenance needs to achieve a high level of

well-being. These initiatives include providing short term incentives such as additional

payments when exceeding the plucking targets and informal labour contacts for

harvesting. Further, to enhance the plucking productivity, estate management was

replacing labour with machines in plucking activity. However, all these initiatives were

taken by the management only in high crop periods. It was identified that these initiatives

taken by the management to increase the workers’ income and labour productivity are

inadequate and ad-hoc without any sustainability. The reason for that is, these practices

provide cost benefits to the company by reducing the cost of labour and give workers an

additional income only in high crop periods. Although RPCs have taken initiatives to

uplift the level of well-being of estate workers by rehabilitating housing facilities,

providing free education, health and nutrition; those have not been reflected in their level

of living and performance as RPCs could not properly identify what workers actually

want to do and be in their life. Therefore, the chapter was concluded by proposing

feasible small scale contract farming solution which is attributed with human

development essentials such as efficiency, equity and empowerment in order to be

sustainable.

According to the identification of the real problem of the tea plantation sector; in

chapter three, the researcher has analyzed the reasons for the failure of RPCs in providing

a sustainable solution for the poor well-being level of tea estate community. We have

ix
grounded this analysis on the theoretical foundations of Amartya Sen’s capability

approach. The capability approach is a broad normative framework for the evaluation and

assessment of individual well-being and social essentials. According to this approach,

well-being of an individual is determined on that individual’s freedom to do and be what

he/she values. Based on the analytical results and fieldwork findings, we identified that

this freedom of tea estate community has been severely affected and restricted by

personal inabilities known as personal conversion factors (such as low level of education,

low income, gender disparity, and age) and social restrictions known as social conversion

factors (such as male dominant estate culture, male biased work norms, social

discrimination of estate community, politicized trade union influence). These factors have

adversely affected the abilities of achieving what estate workers actually want to do and

be in their lives. Further, these factors have especially affected the estate youth and

women who are the major determinants of present and future productivity of the tea

plantation sector. Moreover, it was emphasized that RPCs should focus on providing not

only the basic capabilities (housing, education, health and nutrition) but also complex/

social capabilities such as social status and empowerment. Accordingly, this chapter is

concluded with implying the importance of introducing an alternative system which

enhances tea estate community’s capabilities.

In chapter four, the researcher stressed the significance of shift of tea plantations

in Sri Lanka into the small scale contract farming system with their estate workers. For

this requirement, the researcher identified and surveyed an instrumental case which is a

tea estate of a RPC in Ratnapura district of Sri Lanka. According to the survey findings,

this system is sufficiently attributed with equity, efficiency and empowerment

components which have enhanced required capabilities those are lacking in the existing

labour management plantation system of RPCs. Since, estate families in Sri Lanka consist

x
of more members than non-estate families; they can reduce the labour cost through this

system and thereby increase the net income. As estate families can participate in contract

farming as small farm business owners, it empowers them with more freedom and

provides them with higher social status. Our survey findings revealed that, higher income

and social status benefits of this system discontinue the labour out-migration and attract

back the estate workers who have already migrated. Moreover, the researcher could

identify that this system has empowered estate women by providing them with required

freedom. Accordingly, it was stressed that this system improves the level of well-being of

tea estate workers and their families and, such well-being improvement will reflect in

labour productivity improvement.

xi
 Chapter One

INTRODUCTION

1.1. Background of the study

Since tea plantation/estate sector in Sri Lanka was initially developed by the British in

the 19th century during the colonial period, it has been in operation and evolved to be an

important sector economically and socially. Economically, this sector makes a significant

contribution to the economy in terms of output, employment and foreign exchange earnings.

Socially, this sector is important because the resident workers of this sector known as ‘estate

population’ are categorized as a separate social entity, characterized with a unique set of

attributes based on their socio-economic conditions. Geographically, socially, economically

and politically the resident workers have been isolated from other areas of Sri Lanka over a

hundred and fifty years (Shunsuke, 2011; Jayawardena, 1984). Socio-economic indicators

depict that the households of this sector are in a lower position when compared with the

urban and rural sectors of the country1.

Hence, this study was principally designed and conducted to address the problems of

the prevailing unwholesome labour condition and the low human development of estate

population as well as its impact on the performance and future potential of this sector.

1.1.1. Tea industry of Sri Lanka

The first commercial tea plantation was established in Kandy district of the central

province in 1867 under the British and subsequently expanded to Nuwara Eliya and Badulla

districts. These British-initiated large tea plantations continued under the private ownership

and management until the introduction of land reform in 1972 which brought these

plantations under the public ownership and management. In this change, 61.1% of the

ownership and management of total tea lands of the country was held by People’s Estate
1 Estate population is not included in the rural sector.

1
Development Board and 34.4% by the State Plantations Corporation 2 . However, the

performance of the tea plantations was gradually declining due to the following managerial

issues.

1. Lack of skilled plantation managers

Some experienced managers left the plantations due to low benefits they receive from the

government. Further, some managers were asked or compelled to leave by the

government.

2. Decrease in the quality of management

In appointing managers, political affiliation was considered mainly rather than the

qualifications and experience.

3. Lack of decision-making freedom for managers

This resulted in undue delays in machine repairs and incurring expenditure to maintain

production at a high level.

4. Lack of productivity incentives in wages

Under the new government ownership, the wages of tea estate workers were increased

without linking it to their performance. Eventually, this resulted in an increased wage bill

for the government without productivity returns, leading the tea plantations toward

financial loses.

In order to address these negative issues in production and management, the

government decided to handover the management of tea plantations to private organizations

in 1992 by clustering 286 tea estates into twenty three public limited companies called

Regional Plantation Companies (RPCs). After this change, 13 RPCs managed to make

profits. However, the short-term management contract did not provide the RPCs an incentive

2The other 4.5% was held under the ownership and management of Tea Research Institute,
Upcountry Cooperative Estate Development Board and divisional land reform authorities.

2
for long-term investment as they did not have a long-term stake in the company. Therefore, in

1995, the government stepped further by fully privatizing the ownership of RPCs by selling

its ownership shares to the private sector with an expectation of more efficient operational

and marketing performance. However, the ownership of tea lands was held under the

government by transferring it to the RPCs on a 50 years renewable lease agreement.

On the other hand, smallholding sector showed a significant improvement as shown in

figure 1.1. With this upsurge of tea smallholdings sector in terms of both land extent and

contribution to the output, the importance of tea estate sector managed by the RPC’s began to

sink.

250

200
Tea production (Mn. kg)

150

100

50

0
1985 1990 1995 2000 2005 2010
Total 82 114 140 184 206 230

Figure 1.1 Tea production trend in tea smallholdings

Source: Tea Smallholdings Development Authority, Sri Lanka

While, tea industry occupies 5% of the cultivated land area of the country by 2011, it

is economically significant as it created around one million direct and indirect employment

and accounts for 16 percent of Sri Lankan foreign exchange earnings (see Table 1.1).

3
 Table 1.1 Contribution of tea to the economy of Sri Lanka - 2011
Economic indicator Contribution (%)

Cultivated land area 5

Labour force participation 13

Value addition to the Gross Domestic Product (GDP) 2.1

Foreign exchange earnings 16

Source: Central Bank of Sri Lanka

Table 1.2 shows the different categories of tea cultivated in Sri Lanka by elevation

and the land extent by the year 2011. Tea production by elevation is important for the country

for two main reasons. First, these elevations represent climatic divisions where tea is

cultivated in the country. Based on the climatic division, the taste and the quality of teas

produced are different. Second, the high-grown tea production is contributed by tea estates

managed by RPCs, mid-grown areas mainly by RPCs and, low-grown areas are mainly

managed by tea smallholders.

Table 1.2 Registered tea area by elevation - 2011

Height above % of the
Area
Category sea level Regions total
(ha.)
(meters) extent

High-grown Above 1,200 Nuwara Eliya, Badulla 41,137 18.5

Medium-grown 600 - 1,200 Kandy, Matale 71,018 32

Low-grown Up to 600 Ratnapura, Galle, Matara 109,814 49.5

Source: Statistical Bulletin – 2011, Sri Lanka Tea Board

Figure 1.2 illustrates the elevation-wise changes in tea land extent from 2000 to 2006.

According to this figure, there was a sharp decline in high-grown tea lands between 2002 and

2003. This is mainly due to the abandonment and diversification of unproductive tea lands by

RPCs. This land abandonment and diversification occurred mainly due to two reasons. First

4
is low land productivity and rapidly aging tea bushes have resulted low tea output. The

second is lack of workforce due to high absenteeism and out-migration.

120,000

100,000

80,000
Area (ha.)

60,000

40,000

20,000

-
2000 2001 2002 2003 2004 2005 2006

High Grown Medium Grown Low Grown

Figure 1.2 Registered tea area by elevation (2000 – 2006)

Note:
1. Figures with (*) are based on the Census of Agriculture 2002.
2. 2005 extent is estimated from Agriculture Profile – 2003 (TRI) & Census of Small Holdings in
Sri Lanka (TSHDA).No updated records for years 2006 – 2011.

On the other hand, medium-grown and low-grown tea lands were increased in the

same years with the increased participation of tea smallholders in the mid-grown and low-

grown areas of the country (see Table 1.3).

Table 1.3 Expansion of tea smallholdings

1980 1994 2005
No. of smallholdings 159,865 206,652 350,982
Tea land extent (Ha) 75,769 82,918 116,492

Source: Tea Smallholdings Development Authority, Sri Lanka

5
 Figure 1.3 Extent of tea plantation by district
Source: Ministry of Plantation Industries, Sri Lanka

6
1.1.2 Performance of tea industry of Sri Lanka

Table 1.4 shows the performance of all players of the tea industry in Sri Lanka in

2011 and 2012. Smallholding sector accounts for about 70% while RPCs account for slightly

less than 30%. In addition to these major players, there are state-owned plantations but they

accounted for only 1% of the annual tea output. Therefore these two firms were dropped in

the analysis of this study.

Table 1.4 Total tea production of Sri Lanka 2011/2012

2011 2012
Production (Mn.kg) % Production (Mn.kg) %
Smallholdings 229.0 69.92 233.1 71.46
RPCs 94.4 28.82 89.2 27.34
State plantations 3.6 1.10 3.5 1.07

Other 0.5 0.15 0.4 0.12

Total 327.5 326.2

Source: Sri Lanka Tea Board

Note: ‘Other’ includes Tea Shakthi Fund, Tea Research Institute, Elkaduwa Plantations,
Kalubowitiyana Tea Factories Ltd., and Tea Smallholders Factories Ltd.

1.2 Tea plantation labour

Generally plantations are highly land and labour-intensive, and they require large

tracts of cultivable land and large labour force. However, the areas most suited for plantation

were sparsely populated and local labour was not easily available. Therefore plantations faced

the problem of acute labour shortage from the beginning. They had to depend on migrant

labour. Migration was induced by the plantations (Sarkar and Bhowmik, 1998). In the case of

tea plantations in Sri Lanka, immigration started in the 19th century when the plantations were

managed by the British. The immigrants were ethnic Tamil from South India. They have been

maintaining their own cultural beliefs and norms since they migrated to Sri Lanka. They are

7
called ‘resident estate workers’ as they reside in the estate where they work. However, these

immigrants remained stateless without citizenship of Sri Lanka for a long period restricting

their work and life to the plantations. After a series of debate between the governments of

India and Sri Lanka with the mediation of estate workers’ trade unions, these plantation

workers were granted the Sri Lankan citizenship in 1988.

According to the theory of Labour Economics, when there is a labour shortage, wage

rate increases until the equilibrium is reached. However, as there was a colonial society in Sri

Lanka before the independence in 1948, planters were able to fill the labour shortage without

any wage hike. 5 This situation contributed to the economic and social exclusion of the

plantation labour. Coercion and super-exploitation have always been the characteristics of the

plantation economies (Lahiri, 2000). This attribute still remains in the tea plantation sector of

Sri Lanka, which leads this sector toward an unwholesome condition.

According to the available statistics, there is a total of 259,149 tea estate labour force

and 867,084 resident population in the plantations under the management of RPCs6 . The

estate sector population is specific to the country not only due to their inherent cultural

attributes, but also the poor socio-economic conditions such as low income, low education,

poor housing condition and poor health and nutrition. These poor conditions clearly illustrate

the socio-economic deprivation of the resident population, which in turn creates adverse

impacts on their personal well-being as well as productive capacity in their work.

1.3 Problem statement

When the government started privatization by the handover of the management of tea

plantations to private organizations in 1992, the main reason of the privatization was the

5 This was the situation in cotton plantations in North America, sugar plantations in British
Guyana, Fiji and Cuba, rubber plantations in Malaysia and tea plantations in India and Sri
Lanka.
6 Central Bank of Sri Lanka, 2011

8
inefficiency prevailed under the government ownership. Privatization was expected to

increase investment in land development and replanting of tea bushes. However, the

performance of this sector did not show significant improvement. Rather than that, the

contribution of the tea plantation sector in terms of output declined whilst that of the

private/smallholdings sector rose. Many estates owned by RPCs showed poor performance in

terms of productivity as shown in Table 1.5. This table mainly indicates the gradual decline in

number of workers which would probably affect the future productivity of tea estates

managed by RPCs. Even well performed estates faced the threat of labour force decline and

thereby a potential future risk as the productivity is partly determined by labour.

Table 1.5 Land/labour ratio and productivity

Well-performed estates Poor-performed estates

Land Land Land/ Land Land Land/
Year No. of No. of
Productivity Extent labour Productivity Extent labour
workers workers
(kg/ha) (ha) ratio (kg/ha) (ha) ratio

2000 2,254 230.75 685 2.97 1,269 244.88 785 3.21

2001 2,261 234.00 664 2.84 1,255 245.17 757 3.09
2002 2,010 242.25 607 2.51 1,288 228.17 730 3.20
2003 2,145 248.50 549 2.21 1,181 227.33 763 3.36
2004 1,581 248.50 530 2.13 1,242 226.83 727 3.21
2005 1,868 229.00 522 2.28 1,351 225.83 742 3.29
2006 2,036 229.00 567 2.48 998 230.36 714 3.10
2007 2,117 229.00 560 2.45 1,151 235.16 729 3.10
2008 2,228 229.00 546 2.38 1,107 226.74 659 2.91
2009 2,287 229.00 521 2.28 1,189 227.33 645 2.84
2010 2,386 228.00 516 2.26 1,264 227.58 615 2.70
2011 2,281 228.00 489 2.14 1,311 227.58 615 2.70

Source: Tea Research Institute, Sri Lanka

Note: “Well-performed” tea estates are identified in terms of productivity measured by

harvest of green leaves (kilograms) per hectare of cultivated tea land.

9
 Due to this reason, RPCs’s share in Sri Lankan tea output has been declining. This

situation adversely affected the competitive position of Sri Lankan tea in the world market.

Further, labour-related socio-economic and political problems, which are intrinsic to this

sector, also affected its performance destructively. Uncertainty in future labour supply

discourages the RPCs in investing in land development and replanting.

It was revealed that the main reasons for low labour productivity and labour shortage

are7;

1. Out migration of workers to urban areas and overseas

2. Chronic absenteeism

3. Higher attainments in education avoids traditional estate employment

4. General aversion to plantation work due to various socio-economic issues

Due to poor socio-economic conditions of tea estate workers, they are socio-economically

deprived compared to other sectors in Sri Lanka. Accordingly, it is timely and important for

RPCs to find a sustainable solution, which encourages the estate workers to remain in the

estate and to achieve higher performance, and thereby both RPCs and estate workers will be

able to achieve their expected targets.

1.3.1 Objectives of the study

The following objectives are to be achieved through empirical field surveys and

observations which will be conducted in selected RPCs and its tea estates.

1. To evaluate the effectiveness of RPCs’ labour policy and practices related to pay

and other employment benefits in;

a) addressing the labour productivity problem in the tea plantation sector of Sri

Lanka and,

b) uplifting socio-economic condition of tea estate workforce

7 Tea Research Institute of Sri Lanka

10
 2. To examine the importance of enhancing complex capabilities of estate workers to

solve the prevailing labour problems in the tea plantation sector of Sri Lanka

These complex capabilities include social status and independence these workers

can enjoy in their work-life in tea estates.

3. To explain the impact of small-scale contract farming on enhancing capabilities

and performance of tea estate workers in Sri Lanka

1.3.2 Research propositions

Based on the literature survey and theoretical explanations related to the problem

area, following research propositions were developed which will be converted in to research

hypothesis in subsequent chapters.

1. Estate workers’ well-being-oriented provisions such as adequate income, good

housing conditions, better education and better health and nutrition in labour policies

and practices of RPCs will enhance the motivation of the estate workers and thereby

positive employer-employee relationship can be developed to form a loyal and

committed work environment.

2. RPCs’ orientation towards enhancing complex capabilities of estate workers such as

social status, recognition and participation will retain them in the estate work and

thereby minimize the future risk of investment and profitability.

3. Enhancing the freedom of choice of estate workers by customizing unproductive

traditional work norms and by introducing alternative mechanisms will provide the

estate workers an opportunity to achieve what they value to be and do.

11
1.4 Research methods and materials

Due to the intrinsic attributes of this particular research in the field of social science, it

was required to adopt multiple research methods and materials to achieve the objectives.

Hence, both the positive and normative approaches were used with related research methods

and materials. As the final target of this study is to provide implications to improve the

prevailing condition of the tea estate sector in Sri Lanka based on value judgments, normative

approach was used. However, to arrive at such judgments, it was required to learn from past

experiences by analyzing existing data, and the positive approach was also used

appropriately.

In this study the main focus was on the RPCs and their tea estates in the high-grown

tea areas located in Nuwara Eliya, Badulla and Ratnapura districts. These three districts were

selected for the study due to following reasons.

1. These are the leading tea growing areas of the estate sector which hold the highest

tea land extent and output contribution.

2. Tea estate resident workers in these areas consist of Tamil immigrants from South

India under the British colony.

3. Socio-economic statistics shows that the people in these areas (Especially, Nuwara

Eliya and Badulla) record the worst condition among the estate communities in

the country.

Field work of the study was carried out mainly in four phases, all of which were carried

out in Sri Lanka. In achieving the third objective of this study, it was required to survey

successful alternatives practices for comparison. Therefore, alternative labour deployment

model was surveyed in a tea estate in Ratnapura district of Sri Lanka. In addition to these,

both published and unpublished printed materials with secondary supportive data were

obtained from different sources.

12
 Table 1.6 Details of field work
Phase Target audience Area Data collection methods Time span
1  RPC and estate  Sri Lanka -  Questionnaire based 09.03.2012
management Colombo, structured interviews -
 Tea estate workers Nuwara  Questionnaire based 02.04.2012
Eliya, unstructured
Badulla interviews
 Direct observation
2  Officers of statutory  Sri Lanka –  Unstructured 20.07.2012
bodies of the tea Colombo interviews –
industry 28.08. 2012
3  Tea estate workers  Sri Lanka –  Questionnaire based 04.11.2013
Nuwara unstructured -
Eliya, interviews 21.12.2013
Badulla
4  Tea estate contract  Sri Lanka –  Questionnaire based 01.04.2015
farmers Ratnapura survey -
 Direct observation 30.09.2016

Source: Author construction

1.5 Structure of the thesis

This thesis is composed of five chapters. The subsequent chapters were structured in

the following manner.

 Chapter Two

Based on the initial field work carried out in the tea estate sector of Sri Lanka during

March 2012 to April 2012 , this chapter provides a deep understanding of the chronic labour

problems in this sector and identifies causes and effects, which are conceptualized into a

model. Further, labour policy and practices of RPCs related to pay and other employment

benefits are explained and evaluated to examine their adequacy in addressing the problems.

Opinions of both RPC management and estate workers were used.

13
  Chapter Three

The prevailing labour problem in the tea estate sector is critically examined based on

Amartya Sen’s Capability Approach. Enhancing individual capabilities through freedom of

choice is identified as the main solution for the labour problem of this sector. Out-migration

of estate workers and gender and cultural issues, which obstruct the estate sector

performance, are mainly addressed. Finally, the chapter is concluded with implications to

customize the existing system in a way to enhance capabilities of estate workers and thereby

improving the performance of the tea estate sector of Sri Lanka.

 Chapter Four

The purpose of this chapter is to evaluate the suitability and sustainability of small-

scale contract farming as a solution for the prevailing socio-economic and labour problems in

the estate sector in Sri Lanka. This evaluation is mainly based on equity and efficiency

perspectives. The field work for this analysis was conducted in a selected tea estate where the

contract farming is already adopted. Moreover, theoretical models and global practices of

small scale contract farming through a survey of existing literature were used as supportive

evidence.

 Chapter Five

This is the concluding chapter of this thesis, which consists of a major findings and

recommendations and policy implications for practitioners and policy makers. Further, this

chapter includes limitations encountered throughout the study, which could have affected the

validity and reliability of the study.

14
 Chapter Two

SOCIAL DEVELOPMENT AND LABOUR PRODUCTIVITY IN LABOUR

MANAGEMENT SYSTEM OF REGIONAL PLANTATION COMPANIES

2.1 Introduction

Tea plantation sector of Sri Lanka has been in stakeholder dialogues in the recent past

due to its economic and social importance. Economically, this sector makes a significant

contribution to Sri Lankan economy in terms of employment generation and foreign

exchange earnings. This sector is also socially important as these resident workers have been

geographically and socially isolated from the other sectors of the economy for over a hundred

and fifty years (Jayawardena, 1984). They emigrated from South India in the late nineteenth

century and have been categorized as a separate social entity known as ‘estate population’

characterized by a unique set of attributes based on their culture and socio-economic

conditions. According to Lahiri (2000), migrant nature of the labour and social divisions

resulted in the economic and social exclusion of the plantation labour.

The government of Sri Lanka privatized the management of state owned plantations

in 1992 by clustering the estates into twenty-three Regional Plantation Companies (RPCs) in

order to overcome the prevailing inefficiencies in production and labour management.

Although the RPCs were fully privatized in 1995, the labour problem of the sector remained

unsolved (Wickramasinghe and Cameron, 2003). The labour problem has been mainly due to

the poor condition related to the social well-being of resident estate workers. Apparently they

were not sufficiently addressed in the labour policies and practices of RPCs. Wickramasinghe

and Cameron (2003) argued that the profitability of tea plantations can be raised by improved

labour-productivity through appropriate management policies and practices. However, the

management of RPCs repeatedly stressed the high labour cost and low labour productivity in

15
their tea plantations and did nothing to solve the problems, which seems to be destructive to

the future of the Sri Lankan tea industry. This situation indicates the need for immediate

compromise of RPCs to uplift the social well-being of tea estate workers and to improve their

performance. Low labour productivity is an important determinant of poverty, and therefore

the solution also has the potential to lift a large number of individuals out of poverty (Irz et.

al, 2001).

Since the early 1990s the contribution of the tea smallholdings sector in the national

tea output has been increasing while that of the plantation sector has been fluctuating

downward. Comparative performance indicators of each sector (see Table 2.1) clearly show

that the productivity of the plantation sector is worse than that of the smallholdings sector.

According to Table 2.1, there is a variation of the performance of the tea industry from 2004

to 2012. This data undoubtedly indicate the poor performance of RPCs in the past few years

with 30 per cent average contribution to the total made tea production.

Table 2.1 Tea Industry Performance (2004 – 2012)

2004 2005 2006 2007 2008 2009 2010 2011 2012

RPC 110 117 103 104 108 93 107 104 99

production 32% 33% 30% 31% 31% 29% 29% 29% 28%

RPCs land 91 95 98 91 92 89 84 85 82
extent 50% 45% 45% 43% 43% 42% 41% 41% 40%
Land
productivity 1,093 1,112 960 1,037 1,067 956 1,152 1,105 1,099
of RPCs

Smallholders’ 224 227 234 227 237 223 254 252 258
production 66% 65% 68% 68% 67% 69% 69% 70% 71%

Smallholdings 92 116 118 119 120 120 121 121 121

land extent 50% 55% 55% 57% 57% 58% 59% 59% 60%

Land
productivity
2,215 1,767 1,800 1,721 1,793 1,682 1,910 1,898 1,936
of
smallholdings

16
Source: Statistical Information on Plantation Crops – 2012, Ministry of Plantation Industries,
Sri Lanka.

Notes:

1) Remaining contribution to the output is by state-owned plantations which is 1% - 2%

2) Measurements: Made tea production - thousand metric tons; land extent – hectares;
land productivity – made tea production (kg) per hectare

There were several reasons for the poor performance in production of RPCs in this

period such as adverse weather, though it caused only minor damages. The main reasons were

the low land and labour productivity, which are highly considerable in output determination.

The reason for the low land productivity was that RPCs were reluctant to invest on

replanting. Replanting is highly important as output potential of aged tea bushes is

considerably low. On the other hand, there were two reasons for low labour productivity. First

was the prevailing labour cost and second was out-migration of estate workers, which caused

low labour participation. Hence, the present and future labour productivity issue of RPCs is

of foremost importance. Unless RPCs or state authorities take an immediate and effective

action for this problem, there will be an economic loss for Sri Lanka, since tea industry

accounts for 16 per cent of the foreign exchange earnings.

Moreover, the collapse of the tea plantation sector will adversely affect the estate

population who depends on the income earned from the estate. Table 2.2 shows that the

living conditions of the estate population were below that of the rural population. Further, the

estate population achieved only lower level of education, health and nutrition, and housing,

which in turn affect the workers’ productivity adversely.

17
 Table 2.2 Selected socio-economic indicators of Sri Lanka, 2012/2013

Sri Lanka Estate Rural2 Urban

Population (Mn) 19.9 0.9 15.4 3.6

Household size(Persons) 3.9 4.3 3.8 4.0
No. of income receivers per household 1.8 2.1 1.7 1.8
Mean household income / month (USD)1 358.4 236.1 324.0 545.9
Education (No schooling, %) 3.7 12.2 3.5 2.2
Educational level of household head
23.2 47.8 24.1 12.9
(less than Grade 5, %)
Housing (Floor area less than 250 sq.
11.1 33.0 10.7 7.8
ft., %)
Gini coefficient 0.48 0.39 0.45 0.51
Poverty (Head Count Index) 6.7% 10.9% 7.6% 2.1%

Source: Household Income and Expenditure Survey – 2012/2013, Department of Census and
Statistics, Sri Lanka.

Notes: 1) Average exchange rate for 2012, USD 1 = LKR 128

2) “Rural” excludes “Estate”

Estate sector is the worst in terms of all socio-economic indicators in Table 2.2 except

for income inequality which is represented by the Gini coefficient8. Equal income distribution

does not necessarily indicate good living standards in other aspects of life. Economic

development and improvement of living conditions often accompany inequalizaion of income

(Ikemoto, 1992). In spite of the fact that more persons are working as income receivers (2.1

per household) than other sectors, their household income is still lower while larger

household size increases the living cost, which becomes an obstacle for estate population to

access quality education, health and nutrition, and housing facilities. For example, 47.8% of

heads of estate households have less than five years of school education and 12.2% of the

8 Gini coefficient is used to indicate income inequality within a social group. It takes a value
between 0 and 1. When the value gets close to 0, it indicates relatively an equal distribution of
income within the society. When the value gets close to 1, it indicates relatively unequal income
distribution.

18
estate population had ‘no education’. Low quality housing with inadequate space is another

indicator of worse living condition of the estate community, resulting in health problems and

social and psychological unrest, which also affect level of participation and performance

adversely.

In this scenario, the estate sector is required a solution which is capable of uplifting

the socio-economic condition of estate sector, considerably. Therefore, this sector needs a

socio-economic transformation which is quite unrealistic within the existing labour

management system. Accordingly, the objective of this study is to show that small-scale

contract farming (CF) system can be a sustainable solution for promoting social development

and improving labour productivity in Sri Lankan tea plantation sector. In achieving this

objective, we firstly identify the problems of the existing management system of the tea

plantation sector based on empirical investigation. The findings of this investigation provided

us with the justification of adoping CF as a solution.

This chapter begins with literature review to compare the recent performance of RPCs

with that of the smallholding sector and the prevailing socio-economic condition of resident

estate workers of RPCs with those of other sectors. Section 2.3 explains the methods used in

this study. Section 2.4 is the findings of the study and a discussion to explain theoretically

why the contract farming (CF) system can be a viable and sustainable solution to the

problems in the tea plantation sector.

2.2 Literature review

According to ILO (2002), labour management in tea plantations are crucial in

determining output per worker per day, cost of production, profitability, quality of tea, and

volume of production. Sharpe (2004) argued that .innovation and investment in new

technology alone do not fully explain the difference in the level of productivity and thatsocial

19
factors such as education, health and social divergence are more important in determining

productivity. The ability of getting higher education and better health and overcoming social

divergence would probably motivate workers to work and thus improve their productive

capacity (Khan et. al., 1991; Gopaldas and Gujral, 2002). Therefore, the firms’ investment in

developing workers’ skills and welfare is essential as it enhances their abilities and

satisfaction to make them more productive (Koch and McGrath, 1996; Patterson et al., 2004).

During the last three decades, Sri Lankan tea sector has changed from vertically

integrated plantation system to the one where independent processors purchased green leaf

tea from independent small growers to make black tea. The increasing entry of small farmers

in tea sector can be explained by changes in transaction, production and management costs.

This has enabled plantations to buy green leaves harvest from small farmers at a low

transaction cost, thereby reducing their green leaves production cost and other administrative

expenses. The entry of small farmers has motivated the large scale planters to adopt out-

grower system to minimize their involvement in growing activities (Herath and Weersink,

2009).

Contract farming is one of the most debated institutional arrangement of out-grower

systems for production and marketing of agricultural commodities in developing countries

(Oya, 2012). Contract farming refers here to a system for the processing firms to purchase the

harvests of individual farmers where the terms of purchase are pre-arranged by contracts. The

exact nature of these terms varies considerably from case to case (Glover, 1984). In this

system, local farmers supply the harvest while the firms retain responsibility for technical

assistance and marketing. According to FAO (2001), the intensity of the contractual

arrangement varies according to the depth and complexity of the provisions in three areas;

(i) Market provision (grower and buyer agree on terms and conditions for the future

sale and purchase of the harvest),

20
 (ii) Resource provision (in conjunction with the marketing arrangements, the buyer

agrees to supply farmers with selected inputs, including on occasional land

preparation and technical advice) and ,

(iii) Production management specifications (grower agrees to follow the

recommended production methods, input requirements, and cultivatiing and

harvesting specifications).

Contract farming has been a component of most successful income-generating

projects for smallholders (Glover, 1987; Kirsten and Sartorius, 2002; Singh, 2002; Barrett et

al., 2012; Bellemare, 2012). Based on their study on contract farming in Senegal, Warning

and Key (2002) concluded that this system significantly increases the incomes of contract

farmers. They found that the higher income not only raised the standard of living of growers

but also created positive effects for employment, infrastructure, and economic growth in the

region. Miyata et al. (2009) concluded in their study on China that, three quarters of contract

farmers perceived increase in their income after they began contract farming. Glover (1984)

reported a successful case in Kenya that small-scale tea growers achieved incomes higher

than national average by contract farming. Morrison et al. (2006) identified in their study on

contract farming in Malaysia that the productivity of the contract farmers, on average, is

improving each year. Moreover, Glover and Kusterer (1990) find that contract farming is

likely to prevent social differentiation rather than to promote it. Importantly, it can contribute

to the empowerment of smallholders and collective action (Baumann, 2000). However, it

must be mentioned that smallholders does not necessarily perceive that the contract is fair. It

merely implies that the smallholders expect to be better off with the contract (Barrett et al.,

2012).

21
2.3 Methods

To achieve the objective of the chapter, primary data were collected through

interviews and observation in the fieldwork carried out in six RPCs and ten selected tea

estates from high-grown tea areas in Nuwara Eliya and Badulla districts during March - April

and July - August in 2012. Key interviews were conducted with managers at different levels

of the RPC management hierarchy, which included two General Managers, four Human

Resource Managers, two Financial Managers and five estate managers. Supplementary

interviews were conducted with a stratified random sample of 105 tea estate workers (see

Table 2.3).

Table 2.3 Structure of the sample of estate workers

Married Unmarried Total

Male 21 35 56
Female 27 22 49
Total 48 57 105

The rationales for the selection of strata of estate workers are a) the male dominant

culture in the estate community, b) female workers as the major determinant of labour

productivity, and c) unmarried estate youth population as the source of future labour supply

and productivity in tea plantations.

Intending to secure the value of the study, interview responses and observational

findings of the fieldwork were discussed interpretatively. Managers’ and workers’ responses

were embedded in the findings. The latter stage of the discussion focused on linking a

conceptual solution to the problems identified in the empirical study.

2.4 Findings and discussion

The level of motivation, skills, knowledge, training and health are the main

contributory factors in determining the level of efficiency of the workforce. Therefore, it is

firmly believed that labour policies and practices of organizations do matter and are important

22
in improving labour productivity of those organizations (Dishanka and Amaratunge, 2011;

Koch and McGrath, 1996). Moreover, these policies and practices should be designed,

focusing on the organizational objectives such as employee satisfaction and motivation, cost

efficiency and profitability.

Accordingly, this section reveals the major findings of this study related to the level of

social development of tea estate workers and, responsive labour practices of RPCs in

addressing such issues in order to improve the living conditions and labour productivity of

the tea plantation sector in Sri Lanka.

2.4.1 Low level of income of tea estate workers has limited their access to a wider range

of economic choices which in turn adversely impacts on workers’ performance.

Since 1996, changes to the wage structure of tea estate workers in Sri Lanka are

determined by a CA which is revised in every two years through negotiations between trade

unions of estate workers and Employers’ Federation of Ceylon (EFC) which represents RPCs.

The current wage income of tea estate workers from estate employment is not sufficient for

them to achieve a higher consumption level which enhances their production possibility

through an improved level of living. However, the management of RPCs still believes that the

collective agreement (CA) to revise (generally, increase) wages in every two years is a

burden for them as such increases in the past have not been reflected in workers performance.

RPCs and their representatives repeatedly stressed that there is no further requirement of

revising the wages introduced in 2009 since workers gain LKR 10,000 to LKR 12,000 per

month and the poverty level of the estate sector had declined to the national average. Further,

they claimed that there is a negative productivity impact from the new wage revision as the

wage-productivity link had been removed in the new scheme. Nevertheless, estate workers’

trade unions demanded a wage revision on the grounds of rising cost of living and RPCs had

to accept it due to the strong bargaining power of estate workers’ unions with relatively high

23
political affiliations. Although, the minimum wage was revised, seemingly there is no

considerable improvement in estate workers’ living conditions and the level of poverty.

Devereux (2005) has emphasized that the minimum wages should have poverty-reducing

effects among a highly vulnerable group of workers and it should be with limited negative

consequences in the form of dis-employment or displacement of retrenched workers into the

informal sector.

2.4.2 Poor human development indicators of the tea estate community have caused a

negative impact on their productivity.

High human development factors such as quality education and training, proper health

and nutrition, safety and security, and quality housing, are considered to be the elements of a

high living condition. However, socio-economic statistics on estate sector and empirical

findings of the study evidence that the prevailing living conditions of the tea estate

community are not up to standard. Low quality houses with poor sanitary facilities and

insufficient space have created adverse health effects on estate workers. Low income level of

workers prevents them getting the daily required nutritional intake. Although, the Plantation

Human Development Trust (PHDT - the RPCs body for estate workers' human development)

has initiated and implemented various programmes to satisfy these human development

requirements, the success rate is very low. Especially, PHDT has introduced new model

houses for estate workers which can be acquired on monthly installment basis. But, the estate

workers response rate is around 12 per cent and they stressed that their income is not

sufficient for them to meet these monthly installments.

2.4.3 Future labour supply of tea plantations is at risk due to low worker income and low

recognition of the job.

Almost all the activities up to the harvesting such as land preparation, holing,

24
planting, weeding, pruning in the tea production are done manually. In the last few decades,

labour resource in estates was in abundance for all those activities. However, the younger

generations now in tea estate worker families are very reluctant to follow their predecessors.

The two main identified reasons for this are; existing wages are not sufficient for them to

enjoy a life similar to their counterparts in other sectors and the other is, the poor job

recognition given to the estate workers by society. As they realize that more income

opportunities and better livelihoods are available in urban areas and overseas, the migration

occurs. Hence, unless the RPCs refine their existing practices and, tea growing and

processing systems in order to give the workers an opportunity to earn a better income with a

proper recognition; probably the future of tea plantations would be worse than the present

situation.

2.4.4 Traditional work norms in tea estates have created inefficiency in utilization of

labour resource.

RPCs have been unable to customize traditional work norms for male and female

workers and continue with what evolved from the British colonial period. Out of the total

estate workforce in the Sri Lankan tea plantation sector, 52.4 per cent are female workers and

95 per cent of whom provide labour as tea pluckers. Since, the processing productivity in

factories mainly depends on the plucking productivity (plucking productivity mainly covers

the quantity of quality green leaves harvested per work day); female workers role is the core

determinant of labour productivity. Female workers provide their labour throughout the

working day whilst male workers engage in work only in the morning session. Although,

male workers provide less contribution, both categories are paid equally. This proves that

RPCs continue to practice traditional work norms due to several uncontrollable endogenous

factors which lead to inefficient labour utilization. Philips (2003) stressed that women’s

workload and working hours have increased in recent years, due to the profit-maximizing

25
goals of RPCs. Apart from the full day work in tea estates, female workers hold the burden of

household chores as a requirement of the male dominant socio-cultural system of the

immigrant Tamil estate community. Samarasinghe (1993) explains this as estate women’s

double burden. This practice adversely affects the major labour productivity component

(plucking productivity) and is inevitably a root cause for the adverse total factor productivity

situation in tea plantations. Further, this traditional work norm is apparently against the

United Nations’ Millennium Development Goal of promoting gender equity and empowering

women. Consequently, RPCs have been unsuccessful in maintaining equity in the process of

manpower planning due to their inability to transform the embedded socio-cultural practices

within the estate community.

2.4.5 RPCs responsibility towards stockholders hinders the worker orientation in its

labour policy.

With the privatization of state owned plantations, stockholders’ profit maximization

has become the prime responsibility of the RPC management. Therefore, any management

decision related to workers’ welfare has to be taken after considering its impact on the

profitability of the firm. Although the RPC management admits that the prevailing socio-

economic conditions of estate workers are well below the social norms, they firmly express

their inability to address those issues on profit grounds as they do not have the bargaining

power to influence the price mechanism in the tea market. Further, these RPCs do not solely

depend on producing and marketing tea. In addition to that they engage in some other

agricultural crops such as rubber and oil palm. Therefore, the management is focusing on the

profitability of those crops in order to settle the loss from tea as they are responsible for

stockholders’ returns. But, this practice necessarily does not solve the labour problem in the

tea estate sector though it provides a solution to the RPC profitability and stockholders

interest problems.

26
2.4.6 Absence of RPC top management in estate level labour related issues proves

ineffectiveness in labour-management relations and nature of high power distance

in the organizational culture.

Twenty RPCs which are in operation are managing around 82,000 hectares of tea land

and this extent has been grouped into 286 estates. Each estate that belongs to an RPC is

headed by an estate manager who is in charge of every operational aspect of that estate. The

estate manager is responsible and accountable to the top management for production and

labour related functions. The estate manager is usually supported by an assistant manager and

an office staff. According to the RPC top management, the smooth functioning of the estate

operations largely depends on the interpersonal skills of the estate manager. The close

relationship maintained by the estate manager with estate workers creates a conducive

operational atmosphere and the level of rigor of the manager determines the labour problems

and disputes. Estate workers also hold the same belief and state that some estate managers

regularly look after their personal matters when there is a crisis situation. Hence, lack of top

management intervention in labour-management relations at estate level proves the power

distance maintained by top managers and results in creating a negative impression in workers’

attitudes. Consequently, this has enlarged the span of control of the estate manager and it has

made his job in labor management rather difficult and distasteful.

2.4.7 Informal labour contracts solution with workers at estate level to utilize the idle

time of male workers is an effective practice of improving labour productivity.

This seems to be an effective practice maintained by RPCs since it motivates the

pluckers to earn an additional income and in turn improves productivity. Further, this practice

allocates a responsibility to the contracted and he/ she has to satisfy the contractual

requirement by employing a set of workers. Through this process, the idle labour of male

workers can successfully be brought back into the production process. Further, this

27
mechanism is practiced as a labour deployment model in tea estates where labour supply does

not meet the demand requirement. However, this practice appears to be entrepreneurial in

nature and successful in many aspects as it inevitably promotes empowerment and

participation by underprivileged tea estate workers.

2.5 Towards a sustainable solution

According to above findings, a vicious cycle (see Figure 2.1) has been formed with

direct causal relationships between RPC labour policy and practices, socio-economic well-

being of estate workers, labour productivity and company profit. This particular vicious cycle

explicates that lack of tea estate workers’ social development oriented provisions in RPC

labour policy and practices has resulted in low labour productivity and as a consequence

RPCs are experiencing low profits. In turn, this low profitability of RPCs has obstructed them

from providing more benefits for the social development of tea estate workers.

The first three findings of this study explained the problem prevailing in tea

plantations and evidencing that the estate workers are considerably adversely affected

regarding the socio-economic aspect of life. More precisely, the living condition problem has

been caused by low income and the social status problem. Those findings imply that these

labour problems affect not only current productivity but also the output and productivity of

the tea plantation sector in the foreseeable future. The second three findings discussed the

practices of RPCs that inevitably obstruct the improvements in workforce conditions.

28
 Low labour
productivity

Poor socio-
Low RPC
economic
profit
well-being

Inadequate
provisions in
labour policy

Figure 2.1 Vicious cycle of labour productivity

The last finding related to the remedial action taken by RPCs as a solution to the labour

productivity problem. Although, this scheme of informal labour contracts has been successful

to a greater extent as far as the cost reduction objective of RPCs is concerned, the overall

effectiveness is quite low since this practice so far has been unable to address the

fundamental problem of human and social development of estate workers. However, this

practice has provided a positive indication for Sri Lankan tea estate sector and its social

development. Therefore, based on the above findings, the latter part of this discussion is

centered on the suitability and applicability of formal contract farming system to the tea

plantation sector of Sri Lanka. The major motive of evaluating this practice as a viable

solution to the labour problem of this sector is twofold. First, the tea estate and its workers’

community have attributes which are significant for the adoption of contract farming practice.

Second, formal contract farming practice is characterized with many positive socio-economic

outcomes which are absent (or omitted) in the present practice.

In developing a solution for the socio-economic and performance problems in the

estate sector, it is very important to take the human development aspect into consideration.

29
This section of the study focuses on the process aspect of improving the socio-economic

condition and discusses the mechanism through which well-being of estate workers can be

improved for better performance in their personal and work life. The evaluation of small scale

contract farming for tea estate sector is done on the four key principles: equity,

empowerment, efficiency and sustainability advocated by Mahbub Ul Haq (as cited by Alkire

and Deneulin in 2009) which should be satisfied in any process of human development (see

Figure 2.2). He claims that the purpose of development is to enlarge all human choices, not

just income. Hence, development must put people at the centre of its concerns.

Small scale contract farming

Efficiency Equity Empowerment

Optimal use of Distributive justice People act as agents,
existing resources to between groups individually and as
expand capabilities such as women, groups. The freedom
in order to reach ethnic minorities to make decisions in
goals of individuals and other matters that affect
and communities disadvantaged their lives

RPC profit Workers’ well-being

Sustainability
Outcomes of the process
should bring in improvements
in social, political and
financial spheres of human life
that endures over time

Figure 2.2 Conceptual model of the solution

30
2.6 Small-scale contract farming for tea estate community in Sri Lanka

In the informal practice of contract farming adopted by RPCs (as detailed in the

findings), few tea bushes are assigned to one person to maintain and provide the harvest at a

verbally agreed rate. In order to complete the assignment, this particular worker employs his

family labour or other co-workers in this practice. However, this practice is applied by RPCs

only in high crop periods and the main purpose of this practice is to reduce the cost of labour.

As a positive attribute of this practice, it provides an additional income for estate workers and

brings the underutilized male labour back into the production process. This has reduce worker

absenteeism considerably which was out of the control of estate management. Hence,

improvement in the productivity level of estate workers is an apparent positive marginal

effect of contract farming.

In order to improve productivity more hard qualities of labour such as flexibility,

physical and mental capacity, and willingness to learn new technological skills are more

important, and comparative advantage of younger workers lies primarily in their hard

qualities (Van Dalen et al. 2010). Unfortunately, the migration of young productive labour

from tea estates in Sri Lanka has resulted in low labour productivity due to high dependence

on aged population in estate work. Mostly, younger generation is reluctant to become merely

farmers on someone else’s land but, prefers to become independent farmers (White, 2012).

However, Ikemoto (1992) explained that the migrants can be attracted back to their origins

through pulling factors, such as the recovery of agriculture. The entrepreneurial nature of

contract farming system appears to be an effective mechanism which satisfies the

expectations of youth and retains them within the farming community. Therefore, CF system

probably could be a back-to-the-land scheme for the already migrated youth. Given these

characteristics, the CF system has the potential to resolve the risk of future labour supply

shortage in the plantation sector as it retains the prospective youth to a greater extent.

31
 Among the five types of contract farming systems (Centralized model, Nucleus Estate

model, Multipartite model, Informal model, and Intermediary model), the Nucleus estate

model is a specifically designed model which is highly suitable for tea plantations in Sri

Lanka due to its intrinsic attributes. In the nucleus estate model the plant owner has an estate

plantation, which is usually close to the processing plant or factory. Farmers in the

surrounding area of the estate produce crops on estate land and sell their crops to the estate

for further processing. Beneficial aspects of CF for farmers are that the estate is providing

inputs, training, transport and social and medical benefits (FAO, 2001). Accordingly, the

estate management can easily assign a certain extent from the tea land to each estate

household living in the same estate based on their resourcefulness. They can manage it

independently as their own business based on the provisions of the pre-arranged contract. The

workers, who are not willing to be contract farmers under this system, can either provide their

labour to contract farmers or remain with the existing employment under the RPC

management.

Many of the major labour disputes occurring in tea plantations in Sri Lanka in the

recent past have been grounded in wage related issues. However, in the recent past adverse

after effects resulted due to the lack of cooperation between the two parties in the collective

agreement. High bargaining power of one party dominated the conditions of the agreement

and hence, the other party got adversely affected as a result. Therefore, an adequate

involvement of the government through well-defined policies is highly important to ensure

the proper functioning of any agreement between employees and private sector. Especially, as

small-scale estate farmers are involved in this contract farming system, public policy should

support the establishment and maintenance of this system (Miyata et al, 2009). It will work as

a shield which protects contract farmers from ill-effects of contracting (Singh, 2002).

Specially, the government should attend to this matter since; the estate community in Sri

32
Lanka is socially and economically deprived. Absence of such policies might result in

transferring the total risk of contract farming system to small-scale farmers and manipulating

the system solely as a tool for reducing the cost of production of the private firm. Porter and

Howard (1997) in their study of CF in Africa have specifically emphasized the power

relationship between big business and small growers (including women) and the need to

strengthen the position of small growers and labourers. Moreover, these contracts should

stimulate women's participation to empower women. It is a common practice in contract

farming that men sign the contracts, but rely on the labour of their female partners in

fulfilling contract obligations (Glover and Kusterer, 1990; Raynolds, 2002). To overcome this

situation and maintain gender equity, it is apt to sign the contract with both men and women.

Probably, this would be an important condition as the estate community in Sri Lanka is

characterized by male domination with lack of female empowerment and participation.

2.7 Conclusion

The overall effort of this paper was to explain the causes behind the low labour

productivity in the tea plantation sector of Sri Lanka and to evaluate the appropriateness of

small-scale contract farming in improving such conditions. In this process, we clearly

identified that the main cause behind this low labour productivity is lower level of social

development of the tea estate community which apparently impacted on their abilities and,

eventually created negative effects on their productivity. Conversely, RPCs claim that low

labour productivity has resulted in considerable financial constraints. This proves the bi-

directional causality between social development and labour productivity has created a

vicious cycle. In order to address this situation, the estate workers should be motivated for

higher performance by satisfying their physical human requirements and, provided social

status and recognition. It is evident that the existing labour management system essentially

does not have an endogenous variable which is capable of counteracting this cyclical effect.

33
Absence of such has necessitated the incorporation of an external intervention.

Therefore, in this study we discuss the importance of converting tea estate workers

and their families into tea small-farmers and adopting small-scale faming practice within the

plantation sector through the contract farming system. The literature and responses from

estate workers suggests it will be a successful and sustainable solution to the socio-economic

problems faced by the estate community. Further, it reduces the burden of labour and

production management of RPCs to a great extent as contract famers employ their own

labour. Importantly, with the introduction of this new system, estate workers will have the

freedom of choice either to get engaged in contract farming or to remain in regular RPC

employment.

34
 Chapter Three

SOCIAL CAPABILITY IN LABOUR MANAGEMENT SYSTEM OF

REGIONAL PLANTATION COMPANIES

3.1 Introduction

The concept of human development has emerged in 1990 as an alternative

development paradigm which embraced emphasis on advancing the richness of human life

rather than the richness of the economy which is more materialistic (Edewor, 2014).

Although Sri Lanka has reported significant economic improvements in the recent past as a

developing nation, the regional human development aspect has not been satisfactory as far as

the livelihood of the tea estate community is concerned. Many scholars and stakeholders had

repeatedly addressed the poor basic capabilities (low income, poor health, insufficient

nutrition, low quality housing) and poor work performance (low labour productivity) of this

communal workforce. However, none of them were able to discuss their poor complex

capabilities (poor social condition characterized with lower social status and independence)

and its impact on their work performance. In the last couple of decades stakeholder activists

such as employers and their representatives, and the national government have launched

many development oriented programmes to provide them with basic capabilities. However,

the success of those attempts had not been adequately reflected in their work performance as

the focus of those programmes were community-wide and, some of those have been partial in

which the target group has not been directly benefited (Dishanka and Ikemoto, 2013). The

main reason for this failure is that, the activists have been unable to identify and address the

tea estate workers’ complex capabilities and freedom to achieve what they really value.

According to Sen (2003), this has done injustice to this community as valued capabilities

vary from basic freedoms such as being free from hunger and undernourishment to complex

35
capabilities such as achieving self-respect and social participation. This unwholesome

scenario has apparently headed the tea plantation sector of Sri Lanka toward a risky condition

necessitating a sustainable solution to assure steadiness in future labour supply and

performance.

In this paper we firmly stress the importance of a significant improvement in the

social condition of the tea estate community which enables them to enjoy freedom as a core

and pre-requisite of their human development, which eventually would reflect in enhanced

work performance and encouraged participation in estate workforce. According to the major

findings of our previous study (Dishanka and Ikemoto, 2013), the labour problem of the tea

estate community in Sri Lanka can be synthesized into a capability problem due to lack of

freedom. Apparently, absence of independence in existing employment practices and culture-

bound traditions have become social barriers (social conversion factors), while gender, age,

education and income variations are being personal factors (personal conversion factors) in

achieving valued functionings of this community, which has eventually resulted in poor work

performance, and low labourforce participation due to migration.

Accordingly, we could categorize the following problem areas in our study.

(a) Although recent improvement in estate education and income has given better

opportunities for new generations, such development has not considerably

reflected in their social lives in estates. Therefore, labour out-migration has

become very widespread especially among the youth in the labour force. Thus,

future labour supply of the tea estate sector is at high risk due to the lack of

participation of the younger generation in the labour force.

(b) Estate community in Sri Lanka has a diverse set of cultural attributes which have

evolved from generations. Major component of the total factor productivity of the

tea estates is handled by women workers as tea pluckers in the estate. As far as tea

36
 estate sector in Sri Lanka is concerned, women are responsible for all kind of

household activities in addition to their full-day work in the tea estate whilst the

male workers are working half a day. This evidences the gender discrimination in

tea estate work norms which are determined and controlled by their traditional

culture.

(c) In the process of human development, it is essential for an individual to be his/her

agent in making decisions related to his/her well-being. Individuals should be

identified as independent agents, who have their own goals, make their own

choices, and not mere receptacles for resource-inputs and satisfaction (Gapser,

2007). Valued freedom of individuals should not be severely violated as a result of

this collective effort. In this perspective, the opportunity and process freedom of

this community is thus questionable if their socio-economic decisions are

exogenously controlled.

Hence, we firmly believe that, providing this community with required and expected

freedoms in achieving complex capabilities would eventually minimize the prevailing labour

problem. In order to achieve this objective we have concentrated our survey findings on the

theoretical foundations and explanations of Amartya Sen’s freedom-based capability

approach. We have identified freedom as the major requisite of justice and the freedom is

operationalized using appropriate indicators which were questioned during our survey. The

succeeding sections of this paper elaborate the related literature survey conducted, followed

by the research methods adopted. Subsequent section provides an analysis of survey data and

qualitative findings upon which the discussion and the conclusion were grounded.

37
3.2 Literature survey

3.2.1 Capabilities and human development

Perhaps the most important thematic deficiency of classical development economics

is its concentration on national product, aggregate income and expenditure, national saving

and investment rather than on ‘entitlements’ of people and the ‘capabilities’ that these

entitlements generate (Sen, 1983). After the first Human Development Report (HDR) of the

United Nations Development Programme (UNDP) in 1990, there was a considerable shift in

defining ‘development’ from economy aspect to people aspect (more precisely, the human

development aspect). With this paradigm shift, the assessment of development changed from

economic indicators (such as growth rate, per capita income, trade surplus, unemployment

rate, etc.) to what people can do and be in their lives. The human development paradigm is

concerned both with building up human capabilities through investment in people and with

using those human capabilities fully through an enabling framework for growth and

employment (as cited by Fukuda-Parr and Shiva Kuma in 2003). According to Sen’s

capability approach, the ability and freedom of a person to achieve what he/she values,

determines that person’s development as it reveals his/her socio-economic well-being.

However, gaining the freedom to do the things that we have reason to value is rarely

something we can accomplish as individuals (Evans, 2002). Seen from this viewpoint,

development is about removing the obstacles such as illiteracy, ill health, lack of access to

resources, or lack of civil and political freedoms to what a person can do in life (Fukuda-Parr,

2003).

The two important aspects associated with human capabilities are process and

opportunity aspects of freedom. Violation of process aspect is being forced to do something

even though it is an action an individual would have freely chosen also. Violation of

substantive opportunity freedom is forcing an individual to do what an individual does not

38
like to do when that person has any plausible alternative (Sen, 2005). It is important to

recognize that, both processes and opportunities can figure powerfully in the content of

human rights. Although, human rights and human capabilities share the same motivation

seemingly, these two are distinctive in socio-political spheres. Therefore, it is required to

formulate the norms as a set of capabilities for fully human functioning while maintaining the

cross-cultural diversity (Nussbaum, 1999).

3.2.2 Culture, gender and capabilities

In real life, ideas of the good life are profoundly influenced by family, tribal, religion,

community or cultural ties and background (Robeyns, 2005). Culture is community based

phenomenon which specifies a set of traditions and norms to shape the behaviour of

individuals in that community group. Sen and other feminist scholars have paid much

attention to the social norms and traditions that form women’s preferences, and that influence

their aspirations and effective choices in social groups. Many feminist researchers have

addressed the lower status and heavy burden of estate women within the household and

working environment (Nussbaum, 2000; Raynolds, 2002; Philips, 2003; Iversen, 2003). This

has been defined as the ‘double burden’ of tea estate women in an extremely male dominant

estate community culture (Samarasinghe, 1993). In many traditional societies in the world,

women are lacking both the freedoms of voice and choice. In making a decision whether to

participate in labour market, they have to concern about cultural factors, social attitudes,

gender role patterns and many other demographic factors (Eberharter, 2001). Chua, Bhavani

and Foran (2000) stated that women in the third world are lacking agency and their roles

played in both private and public domains are not adequately discussed. According to

Nussbaum (2000), women in much of the world, lack support for fundamental functions of a

human life. They are less well-nourished than men, less healthy, and more vulnerable to

physical violence and sexual abuse. Physical or psychological spousal abuse seriously

39
undermines women’s capability to function and to live the lives they value (Panda and

Agarwal, 2005). They are much less likely than men to be literate, and still less likely to have

pre-professional or technical education. However, despite these comparatively negative

attributes of women in the third world, they have become the key determinant of technical

efficiency in many production systems. Apparently, they are the core factor in determining

the productive efficiency of tea manufacturing in Sri Lanka’s estate sector as it is based on

the tea plucking efficiency of female workers. Although there was a significant improvement

in tea estate female workers’ income in the past, it has not necessarily reflected in their

capabilities in the form of empowerment (Samarasinghe, 1993).

Changing the culture in order to inculcate gender equity and a conducive work

atmosphere cannot be done from outside. Although it is challenging, this change should be

introduced by the systems and programmes initiated within that same society in concern

(Philips, 2003). However, introducing such change into a society with deeply rooted cultural

norms and beliefs are rather challenging unless the leaders from that society participate in the

change process.

3.2.3 Migration and well-being

Migration from agriculture occurs when there is a departure of individuals or

households for more than a week or so, from the small, primarily agricultural community in

which they live (Lipton, 1980). He further stated that, migration takes away the young with

more capabilities aged 15 – 25 years who are often most significant agricultural innovators.

Migration and its impact on socio-economic development of sending and receiving

communities have been extensively discussed by both functionalists and structuralists. These

two paradigms advocate for two opposing views on this phenomenon as explained by De

Haas (2010). Functionalist paradigm grasps the neo-classical view which is more optimistic

on migration and development, whereas structuralist paradigm represents the neo-Marxist

40
view which is highly pessimistic. Representing the neo-classical migration theories, Harris

and Todaro (1970) depicted a dualistic model of migration and development. In their

argument they have specifically stated that rural-urban labour migration not only continues to

exist, but indeed, appears to be accelerating, despite the existence of positive marginal

products in agriculture and significant levels of urban unemployment.

The incentive to migrate is not a function of income levels but rather, and exclusively

so, of income differentials (Stark & Yitzhaki, 1988). Harris and Todaro (1970) have explained

that migration occurred on an expected wage, will locate the migrant himself on a lower well-

being utility curve. However, with emergence of new economic theories and models on

labour migration, more motives for migration were identified. With this emergence, the

migration has been identified as a part of the risk-sharing behaviour of families or households

(De Hass, 2010). This migration has a second round effect as the feedback of migrants

induces the non-migrants who are relatively deprived (Stark, 1991). The main negative

impact of such migration on the development of the sending community is through an

increase in inequality (De Hass, 2010). However, due to this migration sometimes the

migrant enjoys their freedom of choice even though their achieved material well-being

diminishes (Alkire, 2005).

3.3 Research Methods

3.3.1 Theoretical framework

In this paper, we have grounded our arguments and discussion on Sen’s Freedom-

based Capability Approach for achievable/achieved well-being. The concepts, variables, and

its interrelationships are illustrated in the theoretical framework in figure 3.1. The capability

approach conceptually explains, achieving what a person value depends on his/her abilities of

converting the goods and services available into achievable functionings known as that

41
person’s capability set. However, the ability of this conversion mainly depends on his/her

personal factors (e.g. physical condition, sex, skills, intelligence, etc.) and socio-

environmental factors (e.g. public policies, social norms, gender roles, societal hierarchies,

power relation, geographical context, etc.) of the social group and the environment that

individual belongs to.

Personal
conversion
factors

Capabilities Achieved
Commodities Choice
well-being

Socio-
environmental
conversion
factors
Means to Freedom to Achievement
achieve achieve

Figure 3.1 Freedom-based capability approach for achieved well-being

Based on the influence of these factors, the capability set with achievable functionings

will be formed. Ultimately, the freedom of choice of that individual determines what he/she

should achieve and thereby the individual himself reach a certain well-being level which is

valued. More precisely, Sen’s claim is that well-being achievements should be measured in

functionings, whereas well-being freedom is reflected by an individual’s capability set

(Robeyns, 2005). Availability or simply the possession of commodities does not explain an

individual’s well-being and the achievements if that individual does not necessarily

experience a freedom.

3.3.2 Operationalization

As per the main objective and theoretical model in figure 3.1, the freedom of the tea

estate community was operationalized in three (03) nominal indicators. Specifically, those

are; (i) future migration intention, (ii) preference for a change in traditional work norms, and

42
(iii) preference to be independent farmers. In order to regress these three variables; gender,

age, educational attainment, monthly estate income were used as predictor variables (personal

conversion factors) which are either nominal or ordinal. However, in the above causality we

have identified estate workers’ satisfaction on estate management as a mediator variable

which may hold controlling power.

3.3.3 Sampling and Data collection

Primary data were gathered through questionnaire based interviews conducted with a

stratified sample of 105 tea estate workers from different working families belong to RPCs in

high-elevation tea estates in Nuwara Eliya and Badulla districts in Sri Lanka. The interviews

were conducted as mutual discussions due to the ethnographic nature of the study as the

respondents were attributed with specific socio-cultural characteristics. Moreover, livelihood

of those workers and their families were directly observed in order to secure validity and

reliability of responses received. Thus, the discussion of the quantitative survey results was

accompanied with the ethnographic interview findings and observations.

In selecting the sample of 105 workers, gender and age were mainly considered as

these personal factors have a high impact on individual capabilities and valued achievements

in the tea estate sector of Sri Lanka. Accordingly, 56 male workers of whom 24 were within

the age category of 16 - 25 years and 32 were above 25 years of age. The female strata of 49

consist of 15 workers from the 16 – 25 years of age category and 34 workers are 26 years of

age or more. The reason for such focus is mainly driven by the future labour supply problem

of the tea estate sector.

3.3.4 Method of analysis

The researchers’ attempt in this study is to explore a conceptual social phenomenon

with respect to a social context. Thus, the study turned out to be intrinsically interpretive.

43
However, the researchers’ normative explanations required to be sufficiently evidenced and

supported by positivistic findings. Hence, the analysis was quantified using dichotomous

logistic regression (DLR) analysis of which the results were critically assessed and discussed

with the findings of the qualitative inquiry. Thus, mix method was adopted as the key

research methodology as merely the positivistic study itself does not do justice to the social

phenomenon under study as the reality was quite subjective in this social context. A data

description using descriptive analysis was preoccupied in order to identify and measure the

variables used in the DLR analysis.

3.4 Results, findings and discussion

The first Human Development Report in 1990 declared, human development is not

merely improving the access to basic capabilities; it is the process which widens people’s

choices and the level of their achieved well-being. Many scholars and stakeholders have

addressed that the basic needs of the tea estate community such as housing, education, health

and nutrition are well-below the expected standard requirements. Based on this, employers

and their representing organizations launched different projects to uplift those conditions.

However, our fieldwork observations revealed that those initiatives were just restoration of

the aforementioned basic requirements. Redistribution to the poor in the form of improving

their health, education and nutrition is not only intrinsically important in enhancing

capabilities to lead more fulfilling lives (Anand & Sen, 2000).

Complex capabilities of an individual include social recognition, self-esteem,

participation in decisions, etc. Every individual has his/her own needs hierarchy ranging from

physical needs to self-actualization needs. If an individual sees his/her future path of this

ultimate achievement, it would probably be a motivation factor for him/her to achieve such

level through the work performance. Being a lower level field worker throughout the working

tenure (without appreciations, rewards and promotions) has hindered the estate workers’

44
ability of achieving a higher social status. Further, their education level has not been

sufficient for them to access complex capabilities with higher social status and independence.

Hence, most of them had to confine their lives to tea estates without adequate interaction with

outer communities. More precisely, social exclusion phenomenon is highly attributed with

this socially deprived community. Lack of social status and job recognition has

predominantly influenced many youth in the tea estate community to keep them out of the tea

estate sector labour force.

3.4.1 Data description

Table 3.1 Frequency distribution

Valid Cumulative
Frequency Percent
Percent Percent
Gender Female 49 46.7 46.7 46.7
Male 56 53.3 53.3 100.0
Age 16-25 39 37.1 37.1 37.1
26-35 31 29.5 29.5 66.7
36-45 12 11.4 11.4 78.1
46-55 12 11.4 11.4 89.5
56-65 6 5.7 5.7 95.2
Over 66 5 4.8 4.8 100.0
Education No schooling 24 22.9 22.9 22.9
Grade 5 32 30.5 30.5 53.3
Grade 6-10 49 46.7 46.7 100.0
Income 10,000-15,000 55 52.4 52.4 52.4
15,000-20,000 45 42.9 42.9 95.2
20,000-25,000 5 4.8 4.8 100.0
Future migration No 61 58.1 58.1 58.1
Yes 44 41.9 41.9 100.0
Change work norms No 55 52.4 52.4 52.4
Yes 50 47.6 47.6 100.0
Independent farmer No 55 52.4 52.4 52.4
Yes 50 47.6 47.6 100.0
As the dependent variables (freedom indicators) of the DLR analysis are binary

variables and the explanatory variables (personal conversion factors) are categorical variables

data are presented in the form of frequency distribution (see Table 3.1).

45
 As far as the personal conversion factors are concerned, the selected sample is

representative in gender-wise and education-wise. However, the elder category (above 56

years of age) was not representative due to the difficulties in accessing them. The main

reason for that is socio-cultural obstacle such as language and social phobia. Further, the

higher income category representation is quite low evidencing the lower income levels of tea

estate workers. However, sample units with respect to freedom indicators are fairly

represented.

3.4.2 Dichotomous Logistic Regression (DLR) Analysis

The DLR analysis was accompanied with a view of identifying the relationship of

aforementioned three indicators of freedom (future migration intention, preference for a

change in traditional work norms, and preference to be independent farmers) with estate

workers’ personal characteristics in the tea estate community in Sri Lanka. However, level of

satisfaction on the estate management was excluded from the DLR analysis as it did not

convince any significant relationship with any of the personal conversion factors and freedom

indicators. It inferences, that tea estate workers’ relationship with the estate management is

fairly neutral. Nevertheless, this was discussed in our qualitative inquiry as it provided

significant inference toward the freedom indicators of this community.

Table 3.2 Cross-tabulation (Gender and future migration intention)

Gender
Future migration 1 (Female) 2 (Male) Total
0 (No) 30 (61.2%) 31 (55.4%) 61 (58.1%)
1 (Yes) 19 (38.8%) 25 (44.6%) 44 (41.9%)
Total 49 (46.7%) 56 (53.3%) 105 (100.0%)
Chi-Square Value Df Sig
Pearson .370a 1 .543
Likelihood Ratio .370 1 .543
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 20.53

46
 The cross-tabulation result in table 3.2 confirms that gender variation within the estate

community and workers’ migration intention are statistically independent. Although it is not

significant, it was included in the DLR analysis and the result in table 3.3 was obtained.

Although, the outcome appeared to be rather passive with lack of significant variables, the

model reflects the reality as confirmed by the chi-square statistic which is being highly

significant at 1 percent level of significance. The model explains that the workers with the

highest educational attainment in the sample are having an intention to migrate from estates.

Table 3.3 Dichotomous logistic regression for future migration intention

B S.E. Exp (B)
Constant -.762 .806 .467
Gender (Female) base
Male .251 .464 1.285
Age (16 - 25) base
26 – 35 -.014 .524 .986
36 - 45 -.354 .773 .702
46 – 55 -.388 .833 .678
56 & above -.394 .871 .689
Education (No schooling) base
Up to Grade 5 .762 .739 2.144
Grade 6 - 10 1.424** .723 4.155
Income (10,000 - 15,000) base
15,000 - 20,000 -.614 .332 .501
-2 log likelihood 113.380
Model chi-square 29.417***
Nagelkerke pseudo R2 0.329
Hosmer and Lemeshow test 0.604
Note: N=105; *p<.1; **
p<.05; ***p<.01

Even in the preference to change the traditional work norms as a social conversion

factor of tea estate community’s capabilities, gender has been independent as depicted in

table 3.4. In capability expansion through changes in traditional work norms, 26-35 middle

age category and 46-55 upper age category have significantly disclosed discontentment (see

Table 3.5).

47
Table 3.4 Cross-tabulation (Gender and preference to change traditional work norms)
Gender
Change work norms 1 (Female) 2 (Male) Total
0 (No) 26 (53.1%) 29 (51.8%) 55 (52.4%)
1 (Yes) 23 (46.9%) 27 (48.2%) 50 (47.6%)
Total 49 (46.7%) 56 (53.3%) 105 (100.0%)
Chi-Square Value Df Sig
Pearson .017a 1 .896
Likelihood Ratio .017 1 .896
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 23.33

Table 3.5 Logistic Regression for preference to change traditional work norms
B S.E. Exp (B)
Constant 1.307 .815 3.694
Gender (Female) base
Male -.437 .473 .646
Age (16 - 25) base
26 – 35 -1.036* .528 .355
36 - 45 -.451 .756 .637
46 – 55 -2.542** .980 .079
56-65 -1.880 1.151 .153
66 & above -21.625 1.782E4 .000
Education (No schooling) base
Up to Grade 5 -.045 .707 1.046
Grade 6 - 10 -.407 .698 .665
Income (10,000 - 15,000) base
15,000 - 20,000 -.580 .481 .560
20,000 - 25,000 2.046 1.302 7.737
-2 log likelihood 121.631
Model chi-square 23.692***
Nagelkerke pseudo R2 0.270
Hosmer and Lemeshow test 0.700
Note: N=105; *p<.1; **
p<.05; ***p<.01

This situation is much strong within the 46-55 age category due to two possible

causes. First, these are the workers those who have considerable power both at estate level

and household level. Second, elder workers are usually reluctant to change due to their risk-

48
averse behavior in social and organizational change processes. However, it is quite unusual to

see the passive response of the youth for a social transformation confirming their social

adherence. This outcome further emphasizes the inadequacy of estate workers’ education to

demand a radical change in unproductive social systems.

Despite the fact that gender is impartial in migration intention and traditional work

norm change, it is materialized to be a significant predictor of being independent farmers (see

Table 3.6). Notably, this preference to be an independent farmer has been contently expressed

by male workers implying their social power within the community (see Table 3.7).

Table 3.6 Cross-tabulation (Gender and preference to be an independent farmer)

Gender
Independence preference 1 (Female) 2 (Male) Total
0 (No) 31 (63.3%) 24 (42.9%) 55 (52.4%)
1 (Yes) 18 (36.7%) 32 (57.1%) 50 (47.6%)
Total 49 (46.7%) 56 (53.3%) 105 (100.0%)

Chi-Square Value Df Sig

Pearson 4.364a 1 .037
Likelihood Ratio 4.399 1 .036
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 23.33

Conversely, elder community above 66 years of age has significantly voiced their

discontent to be independent farmers as would have expected at such elderly age. Tea estate

workers in the selected sample with the highest educational attainment (Grade 6-10) have

significantly expressed their unwillingness to be independent farmers reconfirming their

intention of migrating from tea estate sector.

49
Table 3.7 Logistic Regression for preference to be an independent farmer
B S.E. Exp (B)
Constant .639 .786 1.894
Gender (Female) base
Male .891* .464 2.437
Age (16 - 25) base
26 – 35 .045 .526 1.046
36 - 45 -1.012 .825 .364
46 – 55 .028 .818 1.028
56-65 -1.565 1.128 .209
**
66 & above -2.781 1.325 .062
Education (No schooling) base
Up to Grade 5 -1.124 .705 .325
**
Grade 6 - 10 -1.854 .718 .157
Income (10,000 - 15,000) base
15,000 - 20,000 .715 .485 2.045
20,000 - 25,000 .038 1.050 1.039
-2 log likelihood 127.363
Model chi-square 17.960*
Nagelkerke pseudo R2 0.210
Hosmer and Lemeshow test 0.886
Note: N=105; *p<.1; **
p<.05; ***
p<.01

Primarily, in light of the above analysis, the following are identified as the major and

immediate areas of intervention by the stakeholders in order to ensure the productive

functioning of the tea estate sector in Sri Lanka. These three (03) aspects were and discussed

grounded on the three freedom indicators (migration intention, preference to change work

norms and preference to be independent farmers) explained in above analysis. We have

identified these areas of intervention based on the results of the above explanatory study and

the findings of the exploratory study which was grounded on qualitative aspect of the inquiry.

3.4.3 Less focus on the youth and their capabilities

As far as the future production possibility and the productivity are concerned, the

participation of the youth in the labourforce is a predominant factor in any economy. Thus,

50
the attraction and retention of such individuals would probably be a sustainable solution for

the tea estate sector of Sri Lanka, which happened to be a dilemma at present. DLR analysis

categorically signified the impact of educational attainment (Grade 6-10) as the major reason

for migration of the present younger generation. Thus, the migration of the youth from the

estate sector labourforce is apparent with the presence of relatively higher educational

attainment and relatively lower income from estate employment (though the latter was not

signified in the DLR analysis). This migration occurs mainly since they cannot enjoy the

modern social life style they value by being in the estate sector and lack of career progression

in estate employment. They are discouraged of continuing the same traditional estate work

that was done by their previous generations. This is why they migrate although their

achievable income of post-migration would be less than what they probably can earn from

estate employment.

3.4.4 Social and traditional work norms as a key conversion factor

According to the traditional work norm, female workers are required to work full day

while males engage only half a day in tea estate employment, though both receive an equal

daily wage. This has evidenced social and income inequality between gender groups in the

estate sector. This proves that the tea estate women are extremely disadvantageous and

underprivileged as their freedom is violated in both process and opportunity aspects. This has

been the reason for significant disinterest of the adult male (46-55 years of age) workers in

tea estates to customize the existing inequitable work norms as they might fail to retain their

influential power within the community. Although the management of RPCs surveyed in our

previous study (Dishanka & Ikemoto, 2013) attempted to change these capability restricting

social and work norms, they were unsuccessful in many occasions due to the toughness of the

adherence toward the traditions of this community.

51
 Accordingly, a human development essential (maintaining gender equity and

empowering women) has not been satisfied in this particular ethnic group by restricting the

tea estate women workers’ ability to expand their capability set. This nature has considerably

and adversely impacted on their level of well-being. This needs special attention of

employers and policy makers as estate women’s capabilities are severely restricted by the

traditions of their culture and traditional work norms. In our field survey also we identified

that they do not bring out their independent voice due to this cultural impact on their lives.

Employers as well have adopted this social norm without customizing it in accordance with

the organizational requirements. Therefore, inability of the organizational culture to

customize the behaviour of its employees has been injustice to the female workers.

3.4.5 Workers’ inability to be their own agents

This does not mean that an individual can perfectly be independent behavioural agents

in a social setting. It is important for less privileged groups or ethnic minorities to attain this

freedom as a collective effort. In this practice political parties and trade unions are holding a

pivotal role in these societies. However, as per the human development paradigm, individuals

should be able to decide what they need to do for their own satisfaction and development.

Although trade unions are important for individuals of the working class to represent them in

the issues related to labour relations, overall control of the work and personal life of an

individual by the trade union is not expected. In our sample, all the respondents were

members of a trade union (we did not include this in our correlation and regression analysis

as there is no variation in this variable) which are highly politicized and represent the national

political system in light of the support of this working class. We could identify through our

discussions with the sample respondents that despite of employees’ personal intensions, they

have to do what they are asked by trade union leaders. Although many workers including the

52
employers purposefully expect a change in the existing traditional work norms, they were

unable to implement such a change at the opposition of these unions. Being engaged in any

event without an individual’s intention and consent even though the outcome of which is

something that individual expected anyhow is a violation of that individual’s process freedom

(Sen, 2005). It was apparent that the trade unions within the estate community have become a

critical social conversion factor in practicing workers’ independence in their decisions. This

condition has inferred that the opportunity freedom and process freedom of individuals of this

community is affected to a greater extent at the absence of independence. The main cause of

this dependent nature happened to be the low educational attainment of the community

members. None of the respondents in the sample was able to reach above ten years of school

education which is a major personal conversion factor eventually reflected adversely on being

independent.

3.5 Conclusion and implications

As the core requirement of the capability approach, individuals and social groups

should have freedom in both their ‘doings’ and ‘beings’ in achieving what they value in their

lives. Necessarily, the freedom of an individual should be grounded on that individual’s own

desire and decision, irrespective of the outcome. However, tea estate community in high

grown areas in Sri Lanka is not in a better position to be the agents of their own goals and

decisions. If they attempt to make their own decision, there is a high possibility of a decrease

in their achieved well-being due to their high dependence and adherence to external

influences. Social conversion factors such as politicized trade unions and culture-bound

social norms have a considerable negative impact on their freedom. These reasons have

become the major underlying barrier which avoids efficient utilization of the human resource

in the tea estate sector. Therefore, employers and policy makers should focus on means of

improving complex capabilities of this community to uplift their social status and

53
independence by maintaining equity and workers’ participation in decisions and processes.

This can be done by enabling the people to become their own agents in their own life and

decisions. In order to succeed in this, it is highly and timely important to customize the social

conversion factors such as traditional work norms and gender discrimination which, border

individual capabilities. Decreasing participation of youth in the estate labour force is highly

linked with their increasing level of education and low level of income. This migration

scenario is further strengthened with their desire to achieve better life style even at a high

explicit opportunity cost of living. This has proved that merely an increase in estate income is

not adequate in retaining the potential future migrants and attracting the migrated back to the

land. Accordingly, such an increase should be linked with enablers to convert such income

into capabilities. This would probably enhance justice in the tea estate community and reflect

that in their performance.

54
 Chapter Four

EQUITY AND EFFICIENCY IN CONTRACT FARMING

4.1 Introduction

Tea industry of Sri Lanka has attracted the social and economic importance due to its

valued contribution to employment and export earnings of the economy. However, the estate

sector of this remarkable industry got affected by many challenges due to its intrinsic

constraints such as low productivity, high cost of production and labour scarcity. These

constraints can be precisely categorized into broad aspects. The first is the land productivity

problem and the other is labour productivity problem. As far as land productivity of tea sector

in Sri Lanka is concerned, it is reported to be less than that of many other tea growing

countries such as India, Kenya, Japan, etc (Shyamalie et. al, 2013). As for labour

productivity, it has become a socially important issue in various discussions since the

prevailing socio-economic condition of the estate sector workers is quite undesirable and

destructive. This poor socio-economic condition within the estate community is characterized

especially with low income, poor living conditions and lower social status and recognition.

This has adversely affected the quality of labour and resulted in low productivity (Dishanka

and Ikemoto, 2013).

In developing a solution for this socio-economic and performance problem in the

estate sector, it is highly important to take the human development aspect into consideration.

In previous studies, we have discussed the objective aspect of human development in tea

estates though enhancing their capabilities (Dishanka & Ikemoto, 2017). Therefore, this

particular study focuses on the process aspect of improving the socio-economic condition,

and discusses the mechanism through which capabilities of estate workers can be improved

for better performance in their personal and work life. Based on the lessons learnt from global

55
practices, we discuss and evaluate the application of small-scale contract farming in tea

plantation sector in Sri Lanka as a sustainable solution to the above-mentioned fundamental

socio-economic problem based on our own field survey.

4.1.1 The problem and the objective

The human development paradigm of economic development is in enforcement since

1990 prioritizing the quality of human life rather than the materialistic improvement of the

economy. According to human development initiatives, any economic activity to be

sustainable should be predominantly incorporated with equity, efficiency and empowerment

requisites. Mahbub Ul Haq (as cited by Alkire and Deneulin in 2009) conceptualized these

human development essentials which should be satisfied in any process of economic activity

as follows.

1. Equity - The consideration for distributive justice between groups such as women,

children, ethnic minorities and other disadvantaged sections of the population.

2. Efficiency - The optimal use of existing resources to expand capabilities in order to

reach goals of individuals and communities.

3. Empowerment - The processes in which people act as agents, individually and as

groups. It is about the freedom to make decisions in matters that affect their lives.

4. Sustainability - The outcomes of the process should bring in improvements in social,

political and financial spheres of human life, and endures over time.

These fundamentals of human development are being ill-treated in the existing

employment practice in tea estate sector in Sri Lanka creating chaotic labour condition.

Therefore, we have stressed and justified the importance of introducing small-scale contract

farming (CF) system into tea estate sector in Sri Lanka in order to align its production system

with human development essentials (Dishanka and Ikemoto, 2013). Thus, this study has been

56
designed and conducted to evaluate the satisfaction of human development essentials in CF

practice in terms of equity and efficiency in tea estate sector in Sri Lanka. In achieving this

objective, the researchers have identified an instrumental case where the CF system is

enforced as a labour deployment practice.

4.1.2 Significance of the study

According to the nature of the deep seated problem in the traditional labour

management system of the tea estate sector in Sri Lanka, alternative mechanism has been

required to be enforced. Although occasional remedies have been applied by different

Regional Plantation Companies (RPCs) to improve labour productivity, a sustainable solution

could not be developed since the fundamental socio-economic problem of estate workers was

not adequately addressed in those previous initiatives. As one of the remedies, some of the

RPCs apply an informal CF system has been at a minimum level. In this informal practice the

tea estate management assigns few tea bushes to one person to maintain and provide the

harvest at a verbally agreed rate. That particular worker employs his family labour or other

co-workers in this practice. However, this practice is applied in high crop periods and it has

been revealed that the main purpose of this practice is for the RPCs to reduce the cost of

labour. However, as positive implications of this practice, it seems to provide an additional

income for estate workers and to bring the underutilized male labour back to production.

Morrison et al. (2006) have identified in their study on contract farming in Malaysia that the

productivity of the contract farmers, on average, is in improvement each year. Moreover,

participating farm households in contract farming system enjoy higher levels of welfare

(Barrett et al, 2012). Therefore, it is interesting and important for policy implications to

investigate the impact of the CF system on the socio-economic outcomes of workers in tea

plantations in Sri Lanka.

57
4.2 Literature survey

4.2.1 Global practice of contract farming (CF)

Contract farming is one of the most debated institutional arrangements for production

and marketing of agricultural commodities in developing countries (Oya, 2012). Contract

farming refers to a system whereby processing firm purchases the harvest of individual

farmers and the terms of purchase are pre-arranged through contracts. The exact nature of

these terms varies considerably from case to case (Glover, 1984). In this system local farmers

supply the harvest while the firm retains the responsibility for technical assistance and

marketing (see Figure 4.1). The intensity of contractual arrangement varies according to the

depth and complexity of the provisions in three areas known as market provision, resource

provision and management specifications (FAO, 2001).

1. Market provision - The grower and buyer agree to terms and conditions for the

future sale and purchase of a crop or livestock product;

2. Resource provision - In conjunction with the marketing arrangements, the buyer

agrees to supply selected inputs, including on occasions land preparation and

technical advice;

3. Management specifications - The grower agrees to follow recommended

production methods, input regimes, and cultivation and harvesting specifications.

Among the five models10 of contract farming systems, the nucleus estate model is a

specifically designed model which is highly suitable for large plantations in tea, coffee,

tobacco and sugar industries due to its intrinsic attributes. In the nucleus estate model the

plant owner has an estate plantation, which is usually close to the processing plant or factory.

Farmers in the surrounding area of the estate produce crops on their own land and/or on the

The five models are centralized model, nucleus estate model, multipartite model, informal
10

model, and intermediary model.

58
estate land and sell their crops to the estate for further processing. Beneficial aspects for

farmers are that the estate is providing inputs, training, transport and social and medical

benefits (FAO, 2001). Accordingly, the estate management can easily assign a certain extent

from the plantation to each estate household living in the same estate. They can manage it

independently as their own business based on the provisions of the pre-arranged contract.

The contract farming framework in figure 4.1 explains the players, functions and

interrelationships of an effective small scale contract farming mechanism. According to this

generally accepted model farmers, sponsors (plantation companies) and the government are

the main players of the CF system. Sponsors are responsible for the administration and

monitoring of the proper functioning of the system. Government is holding the responsibility

of providing the required legal and legislative coverage to the contractual agreement between

farmers and sponsors.

4.2.2 Contract farming and human development of farmers

Contract farming has been a component of the most successful income-generating

projects for smallholders (Glover, 1987; Kirsten and Sartorius, 2002; Singh, 2002). Warning

and Key (2002) have concluded based on their study on contract farming in Senegal that, this

system significantly increases the incomes of contract farmers. Further, they have found that

this higher income not only raises the standard of living of growers, but may also create

positive multiplier effects for employment, infrastructure, and economic growth in the region.

Miyata et al. (2009) have concluded in their study in China that three-quarters of contract

farmers have perceived an increase in their income since they began contract farming. As a

successful case, small-scale tea growers in Kenya have achieved incomes above the Kenyan

average through contract farming (Glover, 1984).

59
 Farmers Sponsors

Preconditions
Market
Environment The contract
Land tenure
Financing
Infrastructure
Materials Management and Government
Communications Administration support
Political stability
Project components General legislation
Crop schedules Industry regulation
Pricing policies The project Public utilities
Extension services Community services
Contract formulas Quarantine controls
Contract formats Plant pathology
Farmer selection Production performance Environment
Field selection Land tenure
Technical inputs
Farmer advances
Research & trials Monitoring
Staff/ farmer training
Farmer forums

Feedback to farmers and sponsors

Price adjustment and contract
amendments
Innovations and adaptations
Quota allocation and distribution

Figure 4.1 A contract farming framework

Van Dalen et al. (2010) have found that in order to improve productivity more hard

qualities of labour such as flexibility, physical and mental capacity, and willingness to learn

new technological skills are more important, and comparative advantage of younger workers

lies primarily in their hard qualities. According to White (2012), younger generation is

reluctant to become merely farmers of someone else’s land but, expects to become

independent farmers. Therefore, the entrepreneurial nature of contract farming system seems

to be an effective mechanism which satisfies the expectations of youth productive population

and retains them within the farming community. Further, Morrison et al. (2006) emphasized

60
that the state-administered contract scheme in poultry farming in Malaysia is a part of broader

national goal to develop indigenous entrepreneurship, apart from eradicate poverty and raise

rural incomes.

4.3 Nature of the contract at ‘Alpha Tea Estate’ of ‘Beta RPC’

This study takes Alpha Estate of Beta Regional Plantation Company as a case of

contract farming since it is one of the two tea estates that have introduced a contract farming

system to the Sri Lankan tea industry with utmost success. This model has been adopted by

the estate management as a labour deployment model in response to the prevailing labour

productivity problem in the tea estate due to inadequate labour supply. Average productivity

of this estate was 1,057 kg per hectare a year with 764 residential workers whose ratio to land

is 1.81per hectare. The main reason for this low labour-land ratio is abundance of tea lands

due to the lack of labour supply. Importantly, this CF system is considered to have brought

back the abandoned tea lands due to labour scarcity problem because it improves labour

productivity and reduces the cost of production significantly.

Currently, 57 percent of the total tea extent of this estate is maintained through this

system. According to the management, about 600 to 2200 bushes are allocated to an estate

employee through this system for a contract period of six months (January – June and July –

December). Thereby the employee plucks 100 - 350 kg of green leaves a month allowing him

or her to earn an additional monthly income of Rs. 4,300 – 15,000. Thus the management

firmly believes that this solution is highly sustainable as it ensures the essential pillars of

human development of tea estate community workers and their families while meeting the

organizational objectives as well. The desired number of tea bushes to the contract employee

is assigned by the estate management from the abandoned tea land. The following are the key

uniform conditions necessitated by the contractual agreement between RPC and the contract

farmer.

61
1. The contract farmer is required to engage in the usual estate work for at least fifteen

days a month.

2. The estate management has the right and responsibility to monitor the activities

related to the functions of contract farming system.

3. It is prohibited to sub-contract fully or partially the activities of CF by the farmer to a

third party either directly or indirectly.

4. The agreement or the contract is valid for six month from the date entered into and

with the lapse of this period the farmer is required to handover the properties belong

to the RPC.

5. If a farmer obtains the harvest from any part of the estate which is not covered under

this contract will result in an immediate termination of the contractual agreement.

6. The farmer is responsible for any damage done to the properties covered in the

contract by the contracted or any other third party.

7. The harvesting is done under the supervision of the estate management and the

minimum output requirement is determined based on the number of trees and the

period. Further, the farmer agrees to maintain the minimum required quality standard

of the output specified by the management.

8. The farmer is expected to commence plucking green leaves within the first two weeks

of the contract and required to maintain at least five (05) tea plucking rounds a month.

9. Further, the farmer is expected and required to engage in development initiatives such

as weeding, purchase and application of standard fertilizer recommended by the Tea

Research Institute, planting and maintaining of shade trees, pruning and avoiding soil

erosion in order to satisfy the output and quality requirements.

10. The farmer agrees not to do any temporary or permanent construction in the tea land

leased under this contract.

62
 11. The farmer is required to make all the statutory payments for workers employed in

the leased tea plot and held liable for any such payment outstanding to a third party.

12. The farmer agrees not to engage in any illegal activity within the leased plot and

held liable for any such activity.

13. The farmer is not entitled for any statutory employee rights such as contributions to

employee provident fund (EPF), employee trust fund (ETF) and employee gratitude.

14. The payment for the harvest is subject to the satisfaction of the estate management

on the above requirements.

15. The final payment for the harvest is 64 percent of the fair value received for the

factory’s teas decided by the tea commissioner. The RPC will retain 36 percent of

the fair value as the land rent and initial capital expenditure, such as land

preparation and, tools and equipments provided.

The distribution of the CF system in five estate divisions in the Alpha Estate is

explained in Table 4.1.

Table 4.1 Distribution of contract farmers

Division No. of contract farmers
Division – 1 59
Division – 2 38
Division – 3 49
Division – 4 55
Division – 5 49
Total 250

Although the contract farmer has to bear the operational cost of production, the estate

management has introduced a credit system in order to facilitate them in cash management.

According to this system, cost of fertilizer, chemicals and hired labour are initially born by

the estate management and deducted from the final payment to the farmer in three, two and

63
one installments, respectively. The final monthly payment will be directly done to the farmer

who entered into the contract by direct debit to his/ her bank account.

4.4 Research methods and materials

The main objective of this study is to evaluate the effectiveness of CF in tea plantation

sector in improving the level of well-being of its communal workforce. This objective has

necessitated us to operationalize and test the capabilities approach with respect to this tea

estate workforce in order to establish generalizable results and findings. Thus, in satisfying

this requirement, research methods and materials were adopted and applied in the following

methodology.

4.4.1 Sampling and data collection

Primary data were gathered through a questionnaire based survey administered within

the selected study site (Alpha tea estate).

Table 4.2 Population and sample distribution

Population (No. of Selected sample

Division contract farmers)
Male Female Total
Division – 1 59 08 12 20
Division – 2 38 11 09 20
Division – 3 49 07 13 20
Division – 4 55 08 12 20
Division – 5 49 10 10 20
Total 250 44 56 100

4.4.2 Data description and preliminary analysis

The variables used for the analytical purpose were categorized as performance

indicators (dependent variables) and explanatory variables (independent variables). Contract

farming output per week, Monthly net income of contract farming, number of tea bushes per

64
contract farmer, number of family workers and hired workers in contract farming were used

as performance indicators. Contract farmers’ characteristics (gender, age, family size, years of

education, estate experience and contract farming experience) and farm characteristics

(distance from home to contact farming land, and estate division dummies) were used as

explanatory variables.

The statistical analysis is pre-occupied with descriptive statistics of variables which

are used in subsequent analysis. Descriptive statistics of the variables used in analysis were

presented for the total sample of 100 contract farmers, female contract farmers (sample of 44)

and male contract farmers (sample of 56). As the preliminary analysis, this data description

was followed by independent samples t-Test for the difference between group (male and

female) means in order to assess the gender equity.

4.4.3 Two-way MANOVA with interactions

The primary purpose of the two-way MANOVA is to understand if there is an

interaction between the two independent (categorical) variables on the two or more dependent

(continuous) variables. Accordingly, this study adopted this analytical tool to assess the

variance of equity (in distribution of output and net income) among identified independent

groups of respondents. In this exercise, weekly output of green leaves of tea harvested in

contract farming and monthly net income of contract farming were used as indicators to

measure the variance in equity of distribution. Although, the primary objective of this study is

to identify the gender equity in distribution, equity of distribution was assessed with respect

to the tea growing divisions in order to identify the impact of land on major performance

indicators (CF output and net income of CF). Multivariate analysis was conducted and results

were derived by satisfying the following assumptions in order to ensure validity and

reliability.

65
 (i) Independence of observations

For this purpose, two (02) gender groups (male and female contract farmers)

were used as independent variables where data duplication is autonomously

avoided.

(ii) Multivariate normality

Mahalanobis distance measurement and Shapiro-Wilk test of normality were

used for this purpose.

(iii) Linearity of dependent variables

Moderate level linear relationship between all pairs of dependent variables is

ensured from the multicollinearity analysis conducted prior to MANOVA.

Further, scatterplot matrix for all combinations of group of two independent

variables is illustrated.

(iv) Homogeneity of variance and covariance

Homogeneity of variance is contented as the sample size of each tea growing

division is equal and that of gender groups is fairly equal. Box’s M test of

Equality of Covariance Matrices was conducted to ensure the homogeneity of

covariance.

The equity in distribution was inquired through the following hypotheses in order to

ensure the capacity of the CF system to do justice to the underprivileged of the tea estate

community.

(i) Equity in distribution

H0a: There is no significant difference between the output of male and

female contract farmers

H1a: There is a significant difference between the output of male and female

contract farmers

66
 H0b: There is no significant difference between the net income of male and

female contract farmers

H1b: There is a significant difference between the net income of male and

female contract farmers

4.4.4 Multiple Regression Analysis

This analytical tool was occupied to evaluate gender equity and estimate the

efficiency of production function (Cobb-Douglas production function) of the CF system of

the selected case. The result of such analysis is used to identify the equity in distribution of

output, net income, tea bushes and labour (household and hired) and, efficiency of the system

in terms of productivity returns.

The independent variables for testing efficiency were incorporated in light of the

correlation output result. Thus, three principle independent variables (amount of labour,

number of tea bushes and CF experience of the farmer) were operationalized into the Cobb-

Douglas production function as conceptualized in equation (1).

= (1)

Q – Weekly output of green leaves in kilograms

A – Total factor productivity

L – No. of labour inputs

B – No. of tea bushes

E – No. of contract farming experience

The variables were regressed using the log linear approximation as depicted in

equation (2) for the analytical purpose.

( )= ( )+ ∗ ( )+ ∗ ( )+ ∗ ( ) (2)

The conceptual inquiry in equation (2) above is defined in the form of hypotheses

which are expected to be tested against the data collected from the primary field survey. Thus,

67
the following hypotheses were developed with respect to the efficiency of the CF system.

(ii) Efficiency in production

H0c: There is no significant impact from the number of tea bushes on green

leaves output

H1c: There is a significant impact from the number of tea bushes on green

leaves output

H0d: There is no significant impact from the number of workers on green

leaves output

H1d: There is a significant impact from the number of workers on green

leaves output

H0e: There is no significant impact from the contract farming experience on

green leaves output

H1e: There is a significant impact from the contract farming experience on

green leaves output

4.5 Data analysis and results

The descriptive CF output statistics (see Table 4.3) indicate that the total green leaves

production is highly variable, ranging from 33 kilograms to 100 kilograms per week with a

standard deviation of 13.9 kilograms. The mean output level is 64.28 kilograms per week

with a median of 65 kilograms. Importantly, the CF output describes a symmetrical normal

(0.0) and a moderate level platykurtic distribution (-0.46). The descriptive net income

statistics (see Table 4.3) indicate that the monthly net income from contract farming is also

highly variable, ranging from Rs. 3,500 to Rs. 12,000 with a standard deviation of Rs.

1,888.15. The mean monthly net income is Rs. 7,329.50 with a median of Rs. 7,500.

Similarly, the monthly net income also describes a normal distribution (0.06) and a moderate

level platykurtic distribution (-0.36).

68
Table 4.3 Descriptive statistics – Total sample

Standard
Mean Median Kurtosis Skew Min. Max.
Deviation
Output (kg/week) 64.28 65 13.90 -0.46 0.00 33 100
CF net income 7329.5 7500 1888.15 -0.36 0.06 3500 12000
Division 3 3 1.42 -1.30 0.00 1 5
Gender 1.44 1 0.50 -1.98 0.25 1 2
Age 51.22 51.5 8.05 -1.02 -0.26 35 65
Family size 5.22 5 1.59 0.05 0.43 2 10
Education (years) 4.46 5 3.16 -1.09 -0.05 0 10
Estate experience 31.36 32 8.44 -0.77 -0.09 10 48
CF experience 9.69 10 3.37 -0.93 -0.33 3 15
No. of tea bushes 1325 1300 156.91 2.46 0.59 1000 2000
Family labour 2.36 2 0.61 0.39 0.69 1 4
Hired labour 1.04 1 0.90 -0.86 0.35 0 3
Distance 1.715 1.75 0.78 -0.80 0.36 0.5 3.5
Management 2.9 3 0.93 -0.71 -0.42 1 4
supportCF
Future 2.91 3 1.02 -0.55 -0.70 1 4

However, the descriptive statistics evidence that the output, CF net income and the

number of tea bushes significantly ranging between minimum and maximum values in both

female and male samples (see Table 4.4 and 4.5). However, that data clearly show that there

is no considerable variance between gender groups as the statistics of two gender samples

have not deviated from the statistics of the total sample (see Table 4.3). This has been

signified in the t- Test for the equality of means (see Table 4.6).

69
Table 4.4 Descriptive statistics – Female sample

Standard
Mean Median Kurtosis Skew Min. Max.
Deviation
Output (kg/week) 64.43 65 14.35 -0.16 -0.15 33 100
CF net income 7360.71 7500 1943.30 -0.69 -0.06 3500 11500
Division 2.98 3 1.41 -1.25 -0.05 1 5
Age 51.95 52.5 7.13 -0.58 -0.24 35 65
Family size 5.09 5 1.52 -0.54 0.17 2 8
Education (years) 4.80 5 3.01 -0.96 -0.28 0 10
Estate experience 31.52 30 7.32 -0.49 -0.01 15 46
CF experience 10.00 10 3.42 -0.68 -0.48 3 15
No. of tea bushes 1321.43 1350 142.02 -0.30 -0.34 1000 1600
Family labour 2.34 2 0.58 0.74 0.96 1 4
Hired labour 1.05 1 0.90 -0.49 0.51 0 3
Distance 1.73 1.5 0.81 -1.00 0.35 0.5 3.5
Management 3.02 3 0.82 -0.40 -0.44 1 4
supportCF
Future 3.02 3 0.96 -0.21 -0.80 1 4

70
Table 4.5 Descriptive statistics – Male sample

Standard
Mean Median Kurtosis Skew Min. Max.
Deviation
Output (kg/week) 64.09 65 13.46 -0.86 0.23 42 90
CF net income 7289.77 7250 1837.07 0.31 0.23 3750 12000
Division 3.02 3 1.45 -1.39 0.05 1 5
Age 50.30 50 9.10 -1.46 -0.16 36 64
Family size 5.39 5 1.69 0.40 0.63 2 10
Education (years) 4.02 5 3.33 -1.03 0.25 0 10
Estate experience 31.16 33 9.77 -1.12 -0.11 10 48
CF experience 9.30 10 3.30 -1.15 -0.18 4 15
No. of tea bushes 1329.55 1300 175.64 3.81 1.21 1050 2000
Family labour 2.39 2 0.65 0.22 0.44 1 4
Hired labour 1.02 1 0.90 -1.34 0.15 0 3
Distance 1.69 2 0.73 -0.41 0.35 0.5 3.5
Management 2.75 3 1.04 -1.10 -0.25 1 4
supportCF
Future 2.77 3 1.08 -0.87 -0.58 1 4

71
Table 4.6 t-Test for Equality of Means
Sig. (2- Mean Std. Error
F Sig. t df
tailed) Difference Difference
CF_outp .000 .986 .120 98 .905 .337 2.813
ut .121 94.906 .904 .337 2.791
Net_inco .332 .566 .186 98 .853 70.941 382.247
me .187 94.650 .852 70.941 379.653
Age 7.461 .007 1.018 98 .311 1.651 1.622
.989 79.946 .326 1.651 1.670
Family_ .279 .598 -.925 98 .357 -.297 .321
size -.913 87.396 .364 -.297 .325
Educatio 1.209 .274 1.230 98 .222 .781 .635
n 1.214 87.595 .228 .781 .643
Estate_e 9.269 .003 .210 98 .834 .358 1.709
xp .203 77.539 .840 .358 1.768
CF_exp .051 .822 1.039 98 .302 .704 .678
1.043 93.975 .299 .704 .675
No._tea_ .645 .424 -.256 98 .799 -8.117 31.761
bushes -.249 81.673 .804 -8.117 32.578
Family_l 1.253 .266 -.380 98 .704 -.047 .124
abour -.375 86.701 .709 -.047 .126
Hired_la .446 .506 .170 98 .866 .031 .182
bour .170 92.529 .866 .031 .182
Distance 1.255 .265 .248 98 .805 .03896 .15709
.251 96.147 .802 .03896 .15511
Mgt_sup 7.066 .009 1.443 98 .152 .268 .186
port 1.403 80.443 .164 .268 .191
Future_ 1.620 .206 1.200 98 .233 .245 .204
CF 1.184 87.182 .239 .245 .207

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Table 4.7 Correlations matrix
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14)
(1) CF output 1
**
(2) Net income .73
(3) Division .07 .04
(4) Gender -.01 -.02 .01
(5) Age -.09 .01 -.10 -.10
(6) Family size .10 .17 -.09 .09 -.07
(7) Education -.04 -.17 .02 -.12 -.67** -.06
(8) Estate experience -.07 .05 -.06 -.02 .88** -.02 -.71**
(9) CF experience .41** .63** -.27** -.10 .14 .12 -.17 .13
(10) No. of bushes .72** .51** .10 .03 -.13 .19 -.11 -.09 .24*
(11) HH labour .25* .24* .09 .04 -.02 .50** -.06 .02 .24* .28**
(12) Hired labour .42** .44** .02 -.02 -.11 -.08 -.01 -.12 .21* .27** -.25*
(13) Distance -.14 -.23* -.13 -.03 .04 .08 -.03 -.01 -.13 -.02 -.03 -.06
(14) Manage. support .43** .60** .11 -.14 -.11 .02 .04 -.05 .48** .27** .17 .21* -.15
(15) Future involve .46** .54** .17 -.12 -.30** .19 .10 -.29** .43** .27** .17 .29** -.08 0.43**

Note: N=100. *p<.05 (two-tailed); **p<.01 (two-tailed)

73
 The correlations among fourteen variables identified in the study are depicted in table

4.7 which is a fundamental requirement for all the subsequent analysis done in this study.

Among those variables, CF output and CF net income are predominant as dependent

variables which are significantly correlated with many other variables which seem to be

rather independent.

The primary aim of this analysis is to understand whether the effect of estate division

(or gender) on output and net income of contract farming is dependent on gender (or estate

division). Although, it proves that the CF output and net income are significantly correlated

as the coefficient value (0.73) is greater than 0.2, it has not created a multicollinearity effect

as it is below 0.9. CF output further ensures significant positive relationships with number of

tea bushes (0.72), number of workers hired (0.42), experience in contract farming practice

(0.41), and the estate management support (0.43) at 1 percent (p-value < 0.01) level of

significance. Moreover, number of workers involved from the household (0.25) is also

positively and significantly correlated with contract farming output at 5 percent (p-value <

0.05) level of significance.

Net income earned from contract farming also has shown positive significant

relationships with contract farming experience (0.63), number of tea bushes (0.51), amount of

hired workers (0.44), and estate management support (0.6) at 1 percent level of significance,

and number of workers involved from the household (0.24) at 5 percent level of significance.

Notably, the distance to the CF plot has shown a much weaker significant negative

correlation (-0.23) with the net income from contract farming at 5 percent level. However,

tendency of contract farming involvement is depicting a negative relationship (-0.27) with the

tea estate division which is significant at 1 percent.

Among the other significant correlations; although the age of the contract farmer

highlights a strong significant positive correlation with estate work experience (0.88), its

74
relationship with contract farming experience is insignificant. However, the results signify

that higher the contract farming experience, higher the number of tea bushes managed (0.24).

Although, the negative correlations of level of education attained by contract farmers with

age (-0.67) and estate work experience (-0.71) are significant, the involvement in contract

farming practice is not significantly related to the level of education attained by the farmer.

The result notably highlights some significant positive indications on the involvement

of household labour in contract farming. Among those, family size is significant with a

moderate correlation. Further, it reveals that contract farmers tend to use more family workers

and as well as hired labour as they increase their involvement in contract farming. However,

the results further confirm a much expected significant negative correlation (-0.25) between

household labour and hired labour. Most notably, the results in table 3 suggest that highly

involved contract farmers (with more experience and tea bushes) with more hired labour tend

to perceive the estate management support in their contract farming endeavour positively. As

far as the future involvement of estate workers in contract farming is concerned, the

correlation result reveals a positive significant relationship with contract farming output

(0.46), net income from contract farming (0.54), past experience in contract farming (0.43)

and the support from the estate management (0.43). However, the future involvement

signifies a negative correlation with farmer’s age (-0.30) and estate work experience (-0.29).

4.5.1 Gender Equity in Contract Farming at Alpha Estate

Estimated means of CF output are illustrated in figure 4.2 explaining the performance

diversity between gender groups in five estate divisions. These tea divisions were used as

proxies for variability in land productivity. It explains that marginal means of females

(compared with men’s) are lower in Division 1, 2 and 4. The higher performance of females

in Division 5 shows a considerable difference than men. In Division 3, both the genders are

performing at the same level which is close the mean CF output of the sample selected.

75
 Figure 4.2 Estimated marginal means of CF output

The divisional marginal means of CF output are reflected in divisional marginal

means of net income (see Figure 4.3). However, Division 1 females have managed to

maintain their net income at a higher level than men irrespective of their lower CF output.

Thus, the marginal means of divisional CF output and net income are based on the

differences of individual capacities which are apparently not exogenously determined.

76
 Figure 4.3 Estimated marginal means of net income

Table 4.8 Tests of Normality

Kolmogorov-Smirnova Shapiro-Wilk
Statistic df Sig. Statistic df Sig.
CF output .061 100 .200* .990 100 .629
Net income .069 100 .200* .985 100 .313

*. This is a lower bound of the true significance.

a. Lilliefors Significance Correction

One of the key requirements (assumptions) of MANOVA to be satisfied is the

normality. According to this requirement the dependent variables need to be normally

distributed. The Shapiro-Wilk result of the normality tests with significance values of 0.629

and 0.313 (see Table 4.8) evidences that CF output and net income are normally distributed.

The K-S test as well by reporting a significance value of 0.2 for both the dependent variables

confirms that there is enough statistical evidence to prove the data are normal.

77
 Figure 4.4 Normal Q-Q plot of CF output

The normal Q-Q scatterplots in figure 4.4 and figure 4.5 depict that all the points lie

quite close to the trend line confirming that the CF output and CF net income data come from

a normal distribution. Although, there’s a little random wriggle about the line; this does not

disqualify these data from being normal.

Figure 4.5 Normal Q-Q plot of net income

78
 The results of different multivariate tests (see Table 4.9) can be used to test the

statistical significance of the different effects of the independent variables. Although,

different tests provide different statistics for the significance, we have used the most

commonly adopted Wilks’ Lambda. Accordingly, significance values 0.362 and 0.981 of

emphasize that there is no significance variation in CF output and net income between estate

divisions and gender groups, respectively. The interaction effect determines whether the

gender effect is similar for all the divisions. However, the p-value of 0.222 explains that the

gender effect is similar for all the divisions. Therefore, it is concluded that there is no

statistically significance interaction effect between estate division and gender on the

combined dependent variables (CF output and net income).

Table 4.9 Multivariate Testsa (Wilks’ Lambda)

Effect Value F Hypothesis Error Sig.
Df df
Intercept .043 998.865b 2.00 89.00 .000
Division .908 1.104b 8.00 178.00 .362
Gender 1.000 .019b 2.00 89.00 .981
b
Division * Gender .889 1.350 8.00 178.00 .222

a. Design: Intercept + Division + Gender + Division * Gender

b. Exact statistic

Accordingly, the following section of the data analysis depicts the major results of the

gender equity of CF system at the Alpha Tea Estate of Beta RPC. Multiple linear regressions

were conducted using performance indicators as the dependent variable and farmers’ and

farm characteristics as explanatory (independent) variables including divisional dummies.

Regression output in table 4.10 depicts the impact of explanatory variables on the

weekly CF output of green leaves harvest in kilograms. Accordingly, the result suggests that

the gender is not statistically significant in CF output. Thus it reveals that the CF system

successfully equalizes gender in terms of weekly CF output. However, it reveals that the

79
estate management support is statistically significant (0.043) variable as a farm characteristic

with a positive impact.

Table 4.10 Linear regression analysis for CF output

Table 4.11 Linear regression analysis for CF yield

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 CF yield explains the CF output per tea bush maintained by the contract farmer.

According to the result in table 4.11, gender equality is apparent in CF system. Further, this

result also positively signifies (0.047) the estate management support in yielding the

maximum output from a tea bush.

Table 4.12 Linear regression analysis for output per family labour

The regression result proves the gender equality in output per family labour (see Table

4.12). However, the family size seemed to be significant at 10 percent level of significance

(0.070), though it is insignificant at 5 percent level.

As the other key performance indicator, the monthly net income from contract

farming is not affected by the gender (see Table 4.13). However, there is statistical evidence

to prove that the family size, contract farming experience (0.039) and management support

are significant (0.003) in determining the monthly net income from contract farming.

The regression result in table 4.14 suggests that gender is not significant in

determining the net income per tea bush.

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Table 4.13 Linear regression analysis for CF net income

Thus, the gender equality is maintained in the CF system in terms of net income

earned from a tea bush. However, contract farming experience (0.015) and the management

support (0.009) are significant in determining the net income per tea bush.

Table 4.14 Linear regression analysis for CF net income per tea bush

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Table 4.15 Linear regression analysis for CF net income per family labour

The regression result in table 4.15 reveals that none of the main explanatory variables

are statistically significant in determining the net income from CF per family labour.

Especially, this result also proves that being a female in contract farming does not

significantly determine the net income per family labour.

One of the key performance indicators of CF system is the allocation of tea bushes

among contract farmers as it principally determines both the green leaves output and

subsequently the net income. Interestingly, the regression result (see Table 4.16) reveals that

gender or any other explanatory variable is not significant in the allocation of tea bushes

among contract farmers. Thus, it proves that the equity is maintained in the CF system

thereby both males and females have equal opportunities to involve in contract farming

system.

83
Table 4.16 Linear regression analysis for distribution of tea bushes

Family labour seems to be a key explanatory variable in contract farming as it is

literally dominated by family labour. Thus, family size is supposed to be a significant

variable in determining the number of tea bushes per family labour.

Table 4.17 Linear regression analysis for tea bushes per family labour

84
 Nevertheless, the regression result (see Table 4.17) evidences that family size is

insignificant at 5 percent level. Further, reemphasizing the gender equality in this analysis,

being a male or female proved to be insignificant.

Table 4.18 Linear regression analysis for family labour

As explained in the preceding analysis, family labour is highly important in CF

system as it improves the household income by reducing the explicit labour cost. As

expected, the family size has become significant (0.031) in determining the family labour

involvement in contract farming (see Table 4.18). However, the gender issue has become

insignificant in this determination implying an improvement in females’ position within the

household. This indicates that the traditional gender disparity is gradually disappearing from

household with the introduction of CF system to the tea estate sector.

Family labour per tea bush (see Table 4.19) is another important factor as it

necessarily depicts a positive relationship with the yield. Therefore, the size of the family is

statistically significant (0.043) in determining the family labour per tea bush.

85
Table 4.19 Linear regression analysis for family labour per tea bush

However, the regression result in table 4.19 also proves that gender is insignificant in

determining family labour per tea bush. This result also validates the gender equity

maintained in CF system.

Table 4.20 Linear regression analysis for hired labour

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 Hired labour is a substitute for family labour in contract farming. According to the

regression result in table 4.20, family size has become insignificant in determining the

number of workers hired from outside.

Table 4.21 Linear regression analysis for hired labour per tea bush

Probably the reason might be, the family size essentially does not perfectly and

positively correlated with family labour. In other words, the family might lack of working-

age members. Therefore, the contract farmer has to hire workers from outside. However, the

results in table 4.20 reveals that contract farmer tend hire workers when he/she is well-

experienced in contract farming (0.009). However, the interesting result here is, hiring

workers from outside is gender neutral implying gender equity promoted in CF system.

The regression result in table 4.21 repeats the same outcome which was highlighted in

the preceding analysis. That is the hired labour per tea bush significantly depends on CF

experience (0.017) of the farmers though the predictor variable is gender neutral. The

outcome of table 4.22 can be identified as the combined output of the regression results in

table 4.18 and table 4.20.

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Table 4.22 Linear regression analysis for family and hired labour

Thus, the family and hired labour usage of a contract farmer is significantly affected

by the size of the contract farmers’ household and the past CF experience of the farmer.

Table 4.23 Linear regression analysis for family and hired labour per tea bush

88
 Further, the analysis reveals (see Table 4.22) that it is gender neutral proving that

females are treated equally in using family and hired labour. However, unlike the preceding

outcome, the linear regression for family and hired labour per tea bush (see Table 4.23)

significantly depend only on the past CF experience of the contract farmer. Moreover, this

outcome also neutralizes the gender promoting equity.

The future involvement in contract farming by the existing farmers is significantly

determined (0.001) by the past CF experience of them (see Table 4.24). It is further

sufficiently and significantly determined (0.034) by the age of the existing farmer. In other

words, young farmers have shown a high enthusiasm in increasing their participation in CF

system in the future.

Table 4.24 Linear regression analysis for future involvement in CF system

Accordingly, there are no sufficient statistical evidences to reject the null hypothesis

H0a and H0b, developed in favour of gender equity in distribution of the outcomes of contract

farming in light of the linear regression outcomes.

89
4.5.2 Productive Efficiency of Contract Farming at Alpha Estate

The second primary objective of this study is to evaluate the significance of the

contract farming system in enhancing the productive efficiency in Alpha Tea Estate of the

Beta RPC. This has been evaluated using the log-linear regression model of the neo-classical

production function. In this analysis, total labour hours of both family and hired labour,

number of tea bushes and the contract farming experience of the farmer were used as input

variables to evaluate the green leaves output (see Table 4.25).

Table 4.25 Log-linear regression analysis of neoclassical production function - I

In observing the regression coefficients, it has been proved that number of tea bushes

has become the predominant variable with increasing returns to scale (1.22). This apparently

shows that the output elasticity with respect to the number of tea bushes is elastic. However,

both labour hours and CF experience have been found to be insignificant (at 5 percent level

of significance) but, inelastic in output determination with coefficient values 0.102 and 0.116,

respectively.

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Table 4.26 Log-linear regression analysis of neoclassical production function - II

The log-linear function in table 4.26 has occupied both input variables and, farmers’

and farm characteristics. Accordingly, both labour hours and number of tea bushes have

become significant with values 0.038 and 0.002, respectively. However, the gender has

become insignificant as a farmer characteristic.

If the marginal productivity of labour is the same between male and female, the

allocation of tea bushes within the estate is Pareto efficient. If the female’s productivity is

higher than male’s one, tea bushes should be allocated more to female in order to increase the

efficiency of the company. The results (see Table 4.27) show that marginal productivity of

labour is equalized between genders, but marginal productivity of bush is not equalized

between genders. It implies that labour allocation is efficient, but tea bush allocation is not

efficient. In order to increase output from the CF system, tea bush should be allocated to

males more and to females less. Considering that tea bush is allocated equally between

gender, such allocation is not efficient. Accordingly, the CF system encourages male workers

91
to work more seriously (at least by hiring workers) than without the CF system, and because

males’ inherent ability is higher than females’. Therefore, the equal allocation of bushes

between genders is not efficient.`

Table 4.27 Gender and marginal productivity

4.6 Discussion and implications

4.6.1 Equity in distribution

One of the two objectives of this particular study is to identify whether the CF system

maintains positive attributes in doing justice to socio-economically deprived tea estate

community. In this effort, we have focused especially on the gender equity as female workers

92
in this working community have been subjected to socio-economic vulnerabilities. In the

traditional estate management system, the role of females is considerably depressed in

employment, and equity is not maintained in compensation. The CF system has eliminated

those discriminative practices and proved to be equitable both in performance (output) and

compensation (income).

In the traditional estate labour-management system, both male and female workers are

equally paid despite the fact that female workers’ full-day engagement compared to male

workers’ half-a-day (Samarasinghe, 1993; Philips, 2003). This has violated the fundamental

justice in income distribution as the share of the income is not aligned to the level of

contribution. Conversely, the CF system has proved that the equity is addressed and

maintained as gender discrimination has been eliminated in all the spheres of the system such

as, farmer selection, enforcing contracts, monitoring and guidance, resource assistance and

payment management.

4.6.2 Efficiency in production

Efficiency in the human development paradigm refers to the optimal use of existing

resources to expand capabilities in order to reach goals of individuals and communities. Tea

plantation sector in Sri Lanka has been challenged by the technical efficiency issue due to its

inability to maximize the output with the given amount of labour and land inputs. Tea lands

were idled due to the fact that labour was in a severe shortage. Therefore, the technical

efficiency in production in CF has been assessed in light of the neo-classical Cobb-Douglas

production function in order to identify the behaviour of returns through maximizing the

usage of labour and land resources.

The neo-classical Cobb-Douglas production function is predominantly attributed with

some intrinsic values which are fundamental in analyzing the economic behaviour of input

93
and output relationship. This analysis has been included with two conventional explicit input

variables (land and labour) and one non-conventional explicit input variable (CF experience).

According to the nature of the CF system of the study, the land factor has been indicated by

the number of tea bushes. Labour factor includes both hired and household labour which has

been accounted in terms of number of workers. Thus, the output of the neo-classical analysis

(see Table 4.25) explains the linear dependency of tea green leaves output on labour, number

of tea bushes and contract farming experience.

The valid and vital implication given by high output elasticity of tea bushes is,

encouraging more male farmers to the system while retaining the existing farmers as the

experience is significant in maintaining the gender equity.

4.7 Conclusion

The major reasons for the poor performance in the tea estate sector of Sri Lanka have

been known to be the labour shortage and low labour productivity attributed in the existing

traditional labour-management system, and hence a CF system has been introduced as an

alternative institution. In this study, we investigate the performance of CF system of Alpha

Estate of Beta Regional Plantation Company in terms of gender equity and production

efficiency of contact farmers and find that it would be a concrete and sustainable solution for

the socio-economic problems faced by the estate community as it is attributed with equity,

efficiency and empowerment.

The present practice of labour-management system in the plantation sector can be

successfully and easily converted into small-scale CF system as implemented by the Beta

RPC in its Alpha Estate. Since each estate household gets a reasonable proportion from the

tea land, they can raise their income by gradually increasing their participation. As the CF

system promotes both freedom and equality, it encourages the discouraged to participate as

94
entrepreneurial farmers instead of being mere estate workers. This transition of tea estate

workers would uplift their independent behaviour strengthening them to be their own agents

in their socio-economic endeavours which is essential in human development.

95
 Chapter Five

CONCLUSION

5.1 Concluding remarks

Different varieties of teas produced in Sri Lanka have gained the attention of different

consumers around the world since the 19th century. However, as far as the tea growing and

manufacturing process in the tea plantation sector in Sri Lanka is concerned, the prevailing

condition is quite unwholesome due to poor socio-economic well-being condition of tea

plantation workers, which was defined in above chapters as labour problem of tea plantation

sector. This poor well-being condition of tea plantation workers has adversely affected their

performance level (defined as labour productivity problem) and ultimately the contribution of

tea plantation sector to the national tea output. Although these problems were discussed by

different stakeholders of the tea industry of Sri Lanka, none of them were able to introduce a

successful and sustainable solution.

According to the identification of the above labour and labour productivity problems,

this study was designed and conducted with an ultimate objective of introducing a successful

and sustainable solution for the tea plantation/ estate sector in Sri Lanka. In order to achive

this expected outcome, field investigations were conducted in both tea industries in Sri Lanka

and Japan with an extensive literature survey. The study and the solution development

consisted of three (03) stages.

1. It was investigated the initiatives taken by the management of selected Regional

Plantation Companies (RPCs) to improve the labour productivity and level of socio-

economic well-being of their tea estate workers.

96
 2. Level of socio-economic well-being of tea estate workers were analyzed using

Amartya Sen’s capability approach in order to identify what they really value (want to

do and be) in their personal and work life.

3. Small scale contract farming mechanism was evaluated to identify the suitability and

applicability to tea plantation sector of Sri Lanka as a successful and sustainable

solution to the chronic labour problem.

The major findings of the study are explained here which satisfy the study objectives

explained in chapter one (01). Based on the findings explained below, recommendations and

policy implications are given for different stake holders in order to implement the small scale

contract farming solution in the tea plantation sector of Sri Lanka, successfully.

5.2 Major findings of the study

1. The existing labour policies and practices of Regional Plantation Companies (RPCs)

have failed in addressing the poor socio-economic well-being of estate workers and

improving labour productivity of tea plantations in Sri Lanka. This failure does not

definitely explain that the RPCs’ labour policies are totally ineffective; rather those

are insufficient in addressing those labour problems due to the prevailing deprived

socio-economic condition within the estate community and budgetary constraints of

RPCs.

2. As far as human development essentials in the tea plantation/ estate sector in SriLanka

are concerned, the condition is rather adverse over to non-estate rural and urban

sectors of the economy. This community is socio-economically deprived as they are

lacking many basic (education, housing, health and nutrition) and complex human

capabilities (social status, job recognition, participation and decision making) which

have ultimately affected their freedom of choice. Although, employers and other

97
 interested parties attempt to enhance basic capabilities, those have not been sufficient.

Increase in estate income itself does not give a solution for this, if the individual does

not have freedom to convert it to achieve his/ her personal goals.

3. Although plantation systems are important for the tea industry due to its economies of

scale effect, small scale contract farming practice as well provide better solutions to

enhance the production efficiency due to the reduced burden of involving in tea

growing and harvesting. Further, it promotes gender equity which is hardly seen in the

plantation sector.

4. Small scale contract farming system is widely used agricultural practice around the

world due to its intrinsic values. Entrepreneurial nature of this practice gives the

farmers a better social recognition and thus enhances their complex capabilities such

as social status and empowerment. It was found in the field survey that the preference

of estate workers for such a practice is significant.

5.3 Recommendations and policy implications

In accordance with the above findings of this study, it is highly recommend

introducing small scale contract farming in to the tea plantation sector in Sri Lanka through a

formal mechanism. In the process of introducing this mechanism following activities are

further recommended.

1. This practice has to be introduced gradually without replacing the existing system at

once. Since, there are estate workers who are not familiar with contract farming and

its effects; they will be reluctant to become contract farmers at the beginning. This

was apparent in the field survey as some workers in the sample expressed their desire

to continue with the existing system.

98
2. Although, the new system is introduced, some estate workers may prefer the existing

plantation employment. As a solution for that, RPCs can provide both the alternatives

for workers to make their choice by respecting their freedom of opportunity.

3. The following barriers identified in the study should be customized to enhance

capabilities of tea estate workers through this new system.

a. Avoidance of participation and mediation of politicized estate workers’ trade

unions which are not functioning as real agents of estate workers. These trade

unions should be replaced with farmers’ cooperatives which are owned and

controlled by independent estate farmers.

b. Customization of traditions and norms which minimize the effectiveness of the

new system. Specially, the male dominant culture has adversely affected the

empowerment of women through this new system.

4. Importantly, the success of this mechanism is partially depends on the policy

instruments of the government. The government should provide adequate provision in

the contract and labour law to support the promotion of such mechanism.

5.4 Limitations of the study

Limitations

1. As explained in above chapters, Sri Lankan tea estate community in high-grown

areas consists of Tamil immigrant workers from South India and considered as an

ethnic minority. This attribute has created different human rights related issues in

past. Therefore, top management of RPCs has applied restrictions and strict

conditions for outsiders in accessing this community.

2. Due to the limited accessibility of these Tamil estate workers to other

communities, their Sinhala language speaking ability was very low. This created a

barrier for the researchers in conducting interviews with them.

99
3. It was found many contradictions in the secondary data obtained from different

regulatory firms of the tea industry of Sri Lanka. Since, there were mutual

interdependence among these firms; it was difficult to identify the original source

of data for reliability.

100
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