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Tea crisis: Who deceives whom?

28 May 2015 - {{hitsCtrl.values.hits}}

On reading and hearing of the views expressed by the Planters’ Association, the writer was tempted to pen a couple of lines himself. Most of the issues have been discussed over and over and heard frequently and repeatedly but no remedy has been elucidated.

The writer’s association with the plantation industry is over 40 years and thus knows a little bit of the plantation history. The writer is very clear in his mind with regard to what took place in the plantations with Land Reform Commission Stage I in 1973 and Land Reform Commission Stage II in October 1975.
The writer remembers the expansion of Sri Lanka State Plantations Corporation under the Chairmanship of Clifford Ratwatta and the formation of the Janatha Estates Development Board (JEDB) in April 1976 with K.H.J. Wijedasa as the Chairman. Thereafter, in July 1977, after the general elections, President J.R. Jayewardene appointed Lasantha Fernando to the JEDB as the Head of Administration and was part of the JEDB management team for seven years from August 1, 1977 to June 30, 1984.

JEDB and SLSPC
The writer knew exactly how the plantations were developed under the two state organisations. Perhaps, only a few people knew the facts and statistics of the nationalized plantations from the inception and unfortunately the two people who knew the subject - Kolitha Ratnayaka and T.P. Gunawardena - are no more.

After the general elections in July 1977, all estates taken over by the Land Reform Commission (LRC) were rationalized systematically on electoral basis and some estates were exchanged between the JEDB and Sri Lanka State Plantation Corporation (SLSPC) for effective regional management. About 40,000 acres of prime coconut land taken over by the LRC were given to the Coconut Cultivation Board and National Livestock Development Board to develop the dairy industry. The JEDB was given the balance 25000 acres of coconut, which were attached to Chilaw and Kurunegala regions.

Fortunately, under the management of state ownership, very generous foreign funding was available through the World Bank, ADB and other multilateral agencies to revamp the plantations after nationalization. As a result, most estates in JEDB/SLSPC were in good agricultural order at the time of privatization in 1992, nobody could deny this fact. A fair portion of 25 percent to 30 percent of the acreage on each estate had been replanted by the JEDB and SLSPC during the 17 years state management in addition to what had been replanted by the former owners prior to the LRC take over. Therefore, all estates that were privatized were viable and the few estates which were considered not viable were not privatized and remained with the JEDB and SLSPC.

Purpose of privatization
The purpose of privatization was to harness the resources of the private sector for the development of the plantation industry, as the government could not continue to fund the plantations with other development projects in hand. However, what happened thereafter was the complete opposite. Certain management companies did not infuse new capital and depended on bank borrowing and were only interested in skimming the plantations by charging high management fees and paid no attention to replanting and development.

Cost of production
On average, the cost of production (COP) for Sri Lanka’s tea sector is approximately US $ 3.6/Kg - among the highest in the word. This has affected the country’s competitive position in the global arena. The primary determinants of COP in the tea sector include labour productivity. In this regard, it is clear that the wage bills of most estates are inflated, mainly in view of the low productivity levels of their labour force. For instance, wages make up approximately 60 percent of the cop.

Reasons for low productivity
There are several reason for the low yields. It is accepted that Sri Lankan yields have been lower than those of competing countries. The yields of the smallholdings being higher than those of Regional Plantation Companies (RPCs) may be due to better labour productivity and bush productivity although the RPCs disputes this. Once again the writer does not wish to be controversial and his personal view is that low incidences of replanting and infilling have affected yields in Sri Lanka. The logical means of increasing productivity on plantations is replanting and infilling. According to accepted norms, replanting rate of 2 to 3 percent is essential to obtain sustainable improvement in yields. Currently, it is around 0.6 percent. It is known that over 50 percent of the tea plantations are over 100 years old.

Although the management contracts made it mandatory to replant a minimum of 3 percent per annum, most of the RPCs ignored these conditions.

Unfortunately, the golden shareholder, who was unaware of what was happening in the RPCs, did not monitor this important condition in the agreement. All subsidies including fertilizer available to the smallholders were made available to RPCs without discrimination. Financial assistance to construct new housing for labour on estates was made available through the Plantation Human Development Trust (PHDT). Therefore, there is no valid excuse for RPCs to neglect replanting. The tea smallholders who produce 70 percent of the national tea crop with their limited resources have replanted most of their land and increased the yields by 200 percent and do not complain about the productivity of workers.

The Planters’ Association of Ceylon, which acted as the ‘guardian angel’ to the industry from colonial times, is equally responsible for the confusion in the plantations and for covering up the shortcomings of RPCs. Had the RPCs followed the conditions in the agreement they signed in 1992, all RPCs would have replanted more than 66 percent of their acreage during the last 22 years of private management and there would not be any old seedlings tea in the plantations and the low commodity prices they complain now would not have affected their cash flows. The writer does not think that there is at least one RPC which has replanted 66 percent of the acreage out of the 22. Some believe that replanting is a ‘waste of money’ and they are only concerned about return on investment (ROI). The writer wonders whether the current minister of plantation industries is aware of this situation in the plantations and the mindset of these people who are ruining the county’s wealth.

What is the remedy?
For the national interest, irrespective of who owns the plantations, those who have underperformed and violated the conditions in the management agreement should be taken to task. There are many investing public who yearn to invest in plantation agriculture if the opportunities are available to them.
There is a marked variation between estates and smallholdings. For an example, Powysland Estate, Agrapatana is currently yielding more than 3000Kgs/Yph with only 52 percent VP and even some seedlings are yielding 3000Kgs/Yph and this estate won the Presidential Award at national level for the Best Tea Property at the Plantation Ministry Awards held in November 2014.

Conclusion
The main problem as the writer could see is the low yield on the plantations, which they do not wish to admit. No point blaming the unions and workers for not cooperating to increase productivity. Let the writer ask a question -- How could the workers increase productivity with under fertilized and 100-year-old tea bushes in some estates which fit only for firewood? This is the result of not replanting at the correct time.

(Lalin I. De Silva is the former Editor of the Ceylon Planter’s Society bulletin)

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Tea crisis: Who deceives whom?

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