Plantations want govt. help to wade through present crisis
27 Aug 2015 - {{hitsCtrl.values.hits}}
By Chandeepa Wettasinghe
The Regional Plantation Companies (RPCs) are requesting the government to provide them with some breathing space to get through the current crisis in the tea sector, as the RPCs are set to post collective retained losses of Rs.11 billion by the end of this year.
“What we’re asking is for the government to reduce taxes on us and give us some support. The RPCs have helped the country and the one million people working in them for over 150 years, so when we go through a couple of years of trouble, we need the help,” Planters’ Association of Ceylon Chairman Roshan Rajadurei told Mirror Business. The RPCs cultivate approximately 30 percent of the tea in Sri Lanka, as well as rubber, oil palm and other minor crops.
Oil palm has remained the only lucrative major plantation crop this year, margins of which too have been squeezed recently. Rajadurei said that the 22 RPCs had posted losses of Rs.2 billion in 2012 and 2013, Rs.3.2 billion in 2014 and is set to make losses nearing Rs.5 billion by the end of this year, if the current trends continue. “This is not just with the RPCs. The government is subsidizing the tea smallholders with Rs.1 billion a month from the Treasury, so that’s Rs.12 billion a year of losses there. It’s also not just in Sri Lanka; Indian tea planters are also facing similar issues,” he said.
The causes of the crisis in Sri Lanka include the political and economic crises in the main tea markets of Russia and the Middle East, a drop in commodity prices globally and the increasing wages of tea plantation workers in Sri Lanka.
Rajadurei said that around 40-50 percent of the tea going under the hammer at the Colombo tea auction has been left unsold during this year.
The auction prices for the first half of August averaged Rs.386, against Rs.455 year-on-year (YoY), while the average from January to mid-August fell to Rs.406, against Rs.472 YoY.
This is against a cost of production of Rs.430 per kilo—70 percent of which is wages.
While the government has been asking the RPCs to add more value prior to exports to combat the issues, Rajadurei said that it was not possible.
“We’re specializing in production. There are others specializing in value addition and marketing. People like Dilmah and Lipton spent huge amounts for over 30 years to get where they are,” he said.
The RPCs in the past had said that it was also difficult since foreign buyers had set up their sophisticated tea blending and packing companies in their home countries.
