Wage Cost Increase Hits Karnataka Planters

Against the 2007-08 wage of Rs 79 per day, the current wage is at Rs 277

While climate change and a drop in prices are impacting Karnataka's planters on the one hand, increasing labour wage is pushing the cost of doing business upward on the other. Wages constitute more than 60 per cent of the total cost of coffee cultivation. 

Karnataka accounts for about 72 per cent of the total production of coffee in India. Out of this, Kodagu produces about 130,000 tonnes, Chikmagalur about 82,000 tonnes and Hassan 32,000 tonnes. Karnataka also produces about 6.5 million Kg of tea, about 33,000 tonnes of pepper, 1,000 tonnes of Cardamom, and about 40,000 tonnes of rubber.

Karnataka Planters Association (KPA) Chairman Maneyapanda M Chengappa said that drought in the plantation districts, indifferent and untimely rains, and white stem borer infestation have resulted in severe crop loss.

Income from pepper provided cushioning against the low prices of coffee and high input costs. With pepper prices crashing by 50 per cent, the future looks bleak and the growers now have their backs to the wall, said a planter based in Karnataka.

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Added to this, the Centre's proposal of a National Minimum Living Wage is looming on the horizon. At the state level, there is an imminent increase in wages around the corner. This will certainly deliver a knockout blow to the plantation sector. With all the mandated add-ons of social benefits under the Plantation Labor Act, this will amount to about 50 per cent additional wage burden, said Chengappa.

Labour wage constitutes more than 60 per cent of the total cost of coffee cultivation. The annual wage increase was below six per cent till 2007-08. From 2008-09, the increase was very steep. Against the 2007-08 wage of Rs 79 per day, the current wage is at Rs 277. This could be the highest increase for any industry in Karnataka, said Chengappa.

The statutory and welfare costs for labour, which are over and above the wages and benefits, work out to an additional 50 per cent of the wages. This is an additional financial burden for both corporate and proprietary planters.

The inter-ministerial committee's recommendation for sharing of the social costs by the Centre, the state government, and plantations in the ratio 50:30:20 has to be implemented to reduce the burden on plantations.

The sale price for coffee at the farm gate hovers around Rs 2,800 to Rs 3,500 per quintal, while the labour and fertiliser costs have spiralled upward disproportionately, said Chengappa.

Reference - http://www.business-standard.com/article/companies/after-price-drop-climate-change-hike-in-wage-cost-hits-karnataka-planters-117110200542_1.html