Oil palm cultivation ban costs millions for Malwatte Valley Plantations

• RPCs pursue litigation against ban based on disputed CEA report 

The government’s sudden policy decision to ban the cultivation of oil palm incurred a loss of Rs.75 million for Malwatte Valley Plantations PLC and Regional Plantation Companies (RPCs) are pursuing litigation measures against the ban, which is based on a disputed report by the Central Environment Authority (CEA).

“The land we had prepared for the planting of 600 hectares of oil palm went back into secondary bush, due to the change of government policy, which precluded us from planting the plants we had nurtured in our nurseries,” Malwatte Valley Plantations PLC Chairman Frits Bogtstra told the company’s shareholders in its 2019 annual report. 

In mid-2014, the government decided to allow the expansion of oil palm cultivation for an area of 20,000 hectares for the RPCs, based on a strategic environmental assessment study. 
Consequently, the RPCs imported oil palm seeds to plant and they have already planted the seedlings in an area of 11,000 hectares. However, with the social pressure triggered by environmental groups, the planting of the remaining seedlings at nurseries was suspended.

In the meantime, the CEA released a draft report, which recommended banning further cultivation of oil palm in the country.  The ‘Yahapalana’ government maintained the status quo on palm oil cultivation with further cultivation of oil palm being halted. However, the new government, which came into power in late 2019, decided to ban palm oil cultivation, based on the recommendation of the CEA report. 

The Planters’ Association of Ceylon (PA) last year warned that the RPCs would incur a loss of Rs.550 million, as they have already procured the oil palm seeds and nurtured them in their nurseries to plant in the remaining 9000 hectares. 

Some RPCs have seen the seedlings at their nurseries maturing and going to waste, due to the cultivation ban. 

Bogtstra said the company has already lost Rs.75 million, due to the cultivation ban. “This has cost your company around Rs.75 million and the matter is now under litigation,” he informed the company’s shareholders.  Watawala Plantations PLC recently informed its shareholders that the RPCs have already pursued legal action against the cultivation ban based on the CEA report.

Accordingly, an FR petition has been filed to challenge the CEA report in the Supreme Court by the PA.

Further, the implementation of the CEA report on oil palm by the Plantation Ministry was also challenged by way of a Writ Application in the Court of Appeal by the planters. 

The PA has alleged that the CEA published a draft report titled ‘A Study to Identify Environmental and Social Issues of Oil Palm Cultivation in Sri Lanka’, despite the objections by a majority of the study team on the observations and recommendations in the report. 

According to the PA, four members of the seven-member study team have refused to sign the report.

The report, which was published on the CEA website, recommended that the establishment of new plantations, expansion of the existing plantations and replantation of oil palm should be discontinued in Sri Lanka.

Watawala Plantations said that the oil palm cultivation ban has also been extended to replanting of old trees, making it a blanket ban. “A total ban has now been imposed on new palm oil cultivation, primarily on the grounds of objections based on environmental concerns. As it stands, this appears to cover even replanting of old trees, for which we are seeking an exception. Import of seeds is also prohibited at the present moment,” the company elaborated. 

As the government increasingly encourages import subsidisation amidst disruption to foreign exchange flows into the country, due to the COVID-19 pandemic, the planters urged the government to clarify its position on oil palm cultivation while addressing the environmental and social concerns in a scientific manner.

“We need clarity on certain policy issues such as replanting and expansion of palm oil land to formulate definite strategies for the post-COVID-19 era. How the pandemic will play out in the coming months is also an uncertain factor.

We need to conduct more effective advocacy to communicate to all stakeholders the importance of palm oil cultivation to the economy and to correct misconceptions. Any legitimate environmental concerns need to be addressed in a scientific manner and practical solutions found. The fact that we are an import substitution industry should augur well for us in the present climate,” Watawala Plantations noted.

Sri Lanka currently imports 180,000-200,000MT of edible palm oil per annum, with an estimated cost of Rs.30 billion. 

The palm oil cultivation ban posed obstacles for the crop diversification plans of some of the RPCs. The diversification aimed at limiting the impact of volatility of rubber and tea prices in the international market. 

Bogtstra noted that Malwatte Valley Plantations has now moved into other crops, abandoning its plans for oil palm cultivation. 

“The land in question is now being diversified into other crops. The company continues to increase its cultivating extents in pepper, mandarin, avocado, rambutan, durian and cinnamon,” he added. (NF)