Plantation companies say attempts towards diversification blocked

• PA chairman says facing resistance from various stakeholders in diversifying to oil palm
• Obstacles have cropped up after industry managed to solve restrictions related to importing oil palm seeds
• Diversification into oil palm is necessary to counter changing weather patterns, maintain profitability   

The diversification efforts of Sri Lanka’s regional plantation companies (RPCs) into profitable oil palm operations are being restricted by local politicians, villagers and bureaucrats, the head of the plantation fraternity charged last week.

“Companies have invested large sums of money in raising their (oil palm) nurseries but are now facing a plight without being able to plant due to agitation by local politicians, villagers and also government officers giving directives to stop planting,” Planters’ Association Chairman Sunil Poholiyadde said.

Speaking at the organisation’s annual general meeting, he noted how the government had set a target of 25,000 hectares (ha) of oil palm to be planted.

 However, he said that less than 10,000 ha of oil palm are under cultivation.

“This is a very unfortunate situation and we have requested the ministry to intervene and resolve this issue,” Poholiyadde added.

He said that these obstacles have cropped up after the industry managed to solve the restrictions related to importing oil palm seeds.

During the world commodity crash linked to the fall in oil prices over the past few years, both tea and rubber profitability sank, with most tea producers in Sri Lanka incurring losses.

A handful of companies had managed to stay in the black and the most notable was Watawala Plantations PLC, which had diversified into oil palm over a decade ago and continued to make considerable profits during the challenging times.

This is despite Poholiyadde noting that oil palm prices too had crashed from US $ 1,000 per metric ton to almost US $ 600 during the crisis, before stabilizing at the current prices around US $ 650-700.

What helped oil palm remain profitable was the low labour requirements amidst rapidly rising labour costs, which have haunted the tea industry and the higher profits per hectare from the oil palm, which helped keep the more widely cultivated tea operations afloat.

The future of oil palm remains bright with First Capital Research recently noting that global oil palm prices will continue to grow over the next few years and that the demand for oil palm as inputs for vegetable oil and biodiesel will increase until 2025.

Meanwhile, Poholiyadde said that diversification into oil palm is necessary in the low-lying areas, where rubber cultivation has become unsuitable due to the changing weather conditions and unavailability of labour.

“Many companies have chosen to diversify in the low country areas into oil palm considering the above-mentioned facts and in keeping with the government policy of cultivating a minimum of 25,000 ha of oil palm. This diversification takes place without any subsidy or any other assistance but the investment of the company’s funds,” he said.

Watawala is the current leader in oil palm with 3,157 ha of the crop in cultivation. Namunukula Plantations PLC, in which Poholiyadde is a Director, is second with around 2,041 ha in cultivation and plans to have over 3,000 ha in cultivation by 2022, while its related party, Kegalle Plantations PLC, has plans to cultivate 1,000 ha of oil palm.

Elpitiya Plantations PLC has 1,578.05 ha of oil palm in cultivation as well. A number of other RPCs too have diversified into oil palm or are considering it. (CW)