RPCs allege discrimination by authorities in fuel allocation for sheet and latex transportation and power generation
Calls for sweeping and bold reforms to resuscitate the industry, including allowing hybrid dollar auctions
Calls for additional help to increase production to improve dollar revenues and measures to reduce high COP
The government’s inability to allocate fuel quotas to Regional Plantation Companies (RPCs), along with continued power outages and ill-informed policymaking, are tying up Sri Lanka’s commercial plantations. Due to the lack of fuel, all leaf and latex transport operations have been severely affected and there is insufficient fuel to run the emergency generators.
As a result, the Planters Association of Ceylon (PA) has demanded that the authorities take immediate action to prioritize Sri Lanka’s plantation industry, which contributes over $1.5 billion in revenue. export from Sri Lanka.
Commenting on the dire situation, PA media spokesman Dr Roshan Rajadurai warned that the government’s continued failure to give any priority to the needs of PRCs and the wider industry, as well as the A series of catastrophic policy mistakes had led to serious disruptions in production. and transportation and rapidly escalating tea production costs by around 30% from the start of 2022.
“The RPCs will no longer be able to continue their operations as usual if real and meaningful solutions are not provided immediately,” Dr. Rajadurai stressed. “Despite our essential contribution to the Sri Lankan industry and economy, the authorities have not understood our value. Instead, they have continuously discriminated against RPCs even in the past, compared to other players in the the export industry and the rest of the plantation sector.
“Our sector was severely disrupted even before the current domestic economic crisis by ill-informed policy decisions, including the totally irrational ban on imports of essential agricultural inputs. The problems we are currently seeing across the economy are directly linked to this unplanned, unscientific and short-sighted policy approach,” Rajadurai added. “While the government has finally publicly accepted the failure of this policy, the once vocal proponents of these unsubstantiated claims are no longer visible, although the industry continues to pay the price, despite our repeated warnings and admonitions about the harmful effects of such a policy.
While the government reversed its decision to ban imports of agricultural inputs such as fertilizers, recommended weedkillers, fungicides and pesticides, these have not been available since April 2021. The bureaucratic processes required to Lifting the bans takes a long time and has hampered imports, creating severe shortages. In addition to these challenges, the depreciation of the rupee and the global increase in commodity prices have led to a spike in the prices of these essential inputs. For example, the price of fertilizers used for tea has increased 25 times compared to before the ban; from around Rs. 30,000 per metric ton (MT) of urea to Rs. 750,000 per MT and prices continue to rise.
As a result, the cost of producing 1 kg of tea has now risen to nearly Rs. 800. However, at the Colombo Tea Auction, the Net Selling Average (NSA) of high grown tea does not was only around Rs. 717, until the end of March 2022.
In addition, the unavailability of inputs will reduce yields and quality in the long term. Despite better weather conditions compared to last year, the industry has seen lower tea and rubber harvests this year, compared to the corresponding period last year, as the lack of agricultural inputs such as fertilizers, weedkillers and fungicides is beginning to make itself felt. Since tea and rubber are perennial/long term crops, such adverse yield effects could be felt throughout the productive life of the plant. Rubber crops have also been affected by fast-spreading diseases such as plague. Without the necessary inputs to stop their spread, the disease has already resulted in a 30-40% crop loss.
Tea plantations operate around the clock and require uninterrupted electricity to do so. If, for example, the withering operation is disturbed/interrupted for a few hours, bacterial contamination occurs, drastically reducing the quality of the tea produced. Recognizing this, authorities allocated fuel quotas to the rest of the industry’s value chain so they could continue their business by running their generators during power cuts, but RPCs were inexplicably ignored.
Transportation of inputs and raw materials such as green leaves and latex to and between large areas of land in trading estates and transportation of produce to Colombo have also become extremely difficult due to lack of fuel. This will lead to the complete collapse of the real estate operations and as a result, the PRCs will not be able to operate the estates, which will lead to serious and serious social unrest in the current volatile situations in the country. Over a million people reside in the country’s vast commercial real estate sector and their livelihoods are totally dependent on the plantation economy.
For the plantation sector to continue operating, uninterrupted electricity and fuel – including for internal transport – must be provided as a priority. Since suppliers are now also demanding foreign currency payments, the PRCs also urge the authorities to allow tea producers participating in the Colombo Tea Auction to obtain their foreign currency payments from tea exporters.
A hybrid system, which allows exporters to pay tea growers in foreign currencies and local tea buyers to pay in rupees, is prudent and fair, given the way other export industries are allowed to obtain payments in foreign currency. Notably, 95% of Ceylon tea is exported and the industry is a major generator of valuable foreign exchange for the country.
In view of the steep increase in the cost of vital agricultural inputs, the RPCs also urge the government to include the commercial plantation sector in any beneficial program through which these inputs are made available to producers, using funds from multilateral agencies. . The RPCs provide a range of services and care to a population of over one million residing in the estates and also support smallholders by processing their tea leaves and rubber latex, serving as a vital cog in the industry supply chain.
In the medium to long term, the RPCs consider the development of stable policies, developed in consultation with industry practitioners, to be essential to the growth and economic sustainability of the plantation industry.