Stakeholders say industry going through rough patch
By Chandeepa Wettasinghe
A tea industry stakeholder called on the government to implement a sensible, business-friendly approach for the tea plantation sector, as subsidies to smallholders provided through the interim budget is deteriorating the industry.
“The trade is most skeptical about the decision to pay smallholders who cultivate less than 10 acres of tea a guaranteed price per leaf of Rs.80. It only encourages the production of poor quality leaf and consequently inferior manufacture of tea, and foster corrupt practices,” Colombo Tea Traders Association Chairman Anselm Perera said.
Speaking at the organization’s 121st Annual General Meeting, he said that the industry must be given support and guidance to solve intrinsic problems over a longer period of time. Planters Association of Sri Lanka Secretary General Malin Goonatillake recently noted that the regional plantation companies which constitute 30 percent of the production, instead of the smallholders, are responsible for Ceylon Tea acquiring the multitude of international certifications, and bringing recognition to the country as the best tea producer in the world.
Both Perera and Goonetillake called on the smallholders to replant ageing trees and conform to better standards.
Ceylon Chamber of Commerce Chairman Samantha Ranatunga, at the apex body’s 176th AGM held recently, expressed that the government is giving such subsidies to cover up underlying social issues.
Due to increasing income, the residents in the plantation sector are falling victim to alcoholism, while domestic violence has also been on the rise. The planters are requesting the government to facilitate a long term concessionary loan, and to smoothen regulatory bumps to convert unproductive rubber plantations into palm oil.
Both moves are aimed at to float the local tea industry, which pays the highest wages while receiving the lowest production levels globally.
Meanwhile, Perera said that the current predicament of Ceylon Tea is the worst the local industry has ever faced, which could be mitigated by focusing on higher quality tea.
“This is one of the most trying periods the industry has ever experienced. However, the tea trade has always been very resilient since its inception in 1867,” he said.
The militancy prevailing in Russia, Ukraine and the Middle East, coupled with falling crude oil prices and economic sanctions on Russia and Iran have smothered the tea trade with average sales at the Colombo Tea Auction falling to Rs.390; well below the average production costs of Rs.440.
However, Perera expressed that compared to the failed nationalization of the plantations, the southern insurrections and the civil war, the present crisis will be short lived.
“A sensible approach in the context of the present crisis would be for producers to fine tune and improve manufacture, so as to enhance the quality of the end product. This will attract better prices, whilst eliminating production of teas at the bottom end which only serve to depress prices further,” he said.
He added that forecasting tea prices for 2015 will very complex given the current macroeconomic circumstances.
“With world population exceeding 7 billion, and continuing to grow rapidly, we would naturally have expected consumption to register an upward movement. However, demand for tea has not shown a significant increase,” Perera said.
He further expressed that removal of non-trade barriers by countries such as India and China would allow for greater exports into the most populous countries in the world, while converting tea into 100 percent value-addition would be detrimental, as the main tea importers have invested millions into their own branding and packaging processes.
Rails to plantation areas
Reviving the country’s abandoned railway systems would help the plantation sector, and greatly reduce the traffic congestion on the roads, according to Colombo Tea Traders Association Chairman Anselm Perera.
“It is time to reintroduce rails into the plantation areas. If it is implemented effectively, 60,000 truckloads will be removed from our highways each year. Even at 80 percent usage, it will reduce 48,000 truckloads from using our roads,” the expert said.
He noted that traffic congestion costs the country crucial man hours in addition to daily inconvenience.
“The producers supply around 7 million kilos of tea each week from the plantations of the 7 regions to Colombo for the Tea Auction. This amounts to 1,200 truck loads per week, minimum. The volume of traffic this size naturally contributes towards the congestion on the road,” Perera said.
The British developed the rail system in Sri Lanka initially to transport coffee from plantation areas to Colombo. Following the coffee blight and the introduction of tea which accounted for 90 percent of the country’s GDP during its heydays, the network was expanded intricately into all plantations.
“Up until the 1970s, this was a very economical and efficient mode of transport for our teas. Mismanagement and corruption in the state railway system compelled the trade to totally abandon using the railway system,” Perera noted.
He called on the Transport Ministry to reintroduce, and upgrade the abandoned network.
“This would benefit both the tea industry and the railway. They should also look at re-laying the rail tracks which were removed from Avissavella to Opanayake and go beyond into deep Sabaragamuwa,” Perera said.
He added that upgrading the southern railway network would facilitate the transport of Ruhunu Teas as well.
Traffic congestion is at an all time high due to inadequate roads catering to the ever growing vehicle imports, further aggravated by cheap oil prices.
Experts have been calling for the implementation of a congestion charge system in urban areas to alleviate the situation, while bringing in valuable public financing.
