Financial Times

Prawn farms struggle to recover losses

By Quintas Perera

Prawn farming thrived in the vast span of unused marshy land along the old Dutch canal in the Puttalam district in the mid-1980s. It reached a peak in 1994 and looked promising as a major foreign income earner with big companies such as Carsons and France Aqua maintaining large farms.

One of the abandoned prawn farms in Puttalam. Pix by M.A. Pushpakumara

After the 1994 elections the farms were attacked on the grounds that they were owned by UNP supporters and with it the industry started sliding.

The haphazard setting up of farms created havoc in the area causing environmental damage and conditions that gave rise to the spread of disease.

All the farms maintained by big companies were closed down.

After the prawn harvest, the water in the ponds is required to be emptied into the buffer zone. But intruders have set up farms illegally in the buffer zone, railway reserves and forest reserves.

The government has started closing down illegal farms and fifteen court cases have been filed. Courts have ordered seven farms to be closed down in six months.

Only less than 25 percent of a massive 20,000 acres of farms are now operative. Of the 12 processing plants only four are functioning.

The legal farms which were functioning well had borrowed heavily from banks. The collapse of the industry took them unawares and by July 1996 loans totalled Rs. 672 million.

This has now soared to a massive Rs. 1.7 billion of which accrued interest forms a major portion.

Since 1996, farmer organizations have been negotiating with the Ministry of Fisheries and other relevant authorities for remedial measures to revive the industry.

As a result, in 1996 loans were rescheduled for five years with a moratorium of 27 months. In 1998 Rs. 100 million was given to modernize the farms.

The Treasury recovered Rs. 180 million by way of a cess of Rs. 10 per kg of prawns. In 1999 the government waived 25 percent and the banks 35 percent of the accrued interest that had accumulated.

Concrete measures to resuscitate the prawn industry are long overdue. Illegal farms need to be closed and the Dutch canal reopened for the estuary to get clean water.

Already the private sector capital investment of Rs. 14 billion has gone into the industry which has a high employment and foreign exchange earning potential.

Two reports were drawn up with recommendations that a Debt Recovery Fund provide relief to the farmers and funds were allocated for the feasibility study to rehabilitate the Dutch canal.

Fisheries Minister Mahinda Wijesekera accepted the two reports to rehabilitate the industry and drew up a 100-day programme, but bureaucracy, lethargy and red tape appears to be delaying its implementation.

Delays in the decision making process led to banks starting to execute parate action to recover their dues by auctioning properties. The prawn farmers approached Lalith Kotalawala, Chairman of the Wayamba Economic Development Commission to resolve the problem.

He immediately agreed to freeze Rs. 300 million in loans obtained from Seylan Bank by the prawn industry and to a rebate on accrued interest.

He also has agreed to grant working capital to recommence farm operations.

While the Sri Lankan prawn industry is in decline, other prawn producing countries record a growth of 7 - 15 percent every year.

Thailand is the world market leader in prawn farming supplying around 300,000 metric tonnes per year and India around 150,000 MT.

The impact of the illegal farms and the spread of disease has been fatal for the industry.

In 1994 the average yield per acre was 2,500 kilogrammes but today it has declined to an all time low of a mere 263 kilogrammes per acre.

Sri Lanka's main market had been Japan while the United States has emerged as another important market.

Sri Lankan producers are unable to penetrate the European market as consumers there are highly health conscious and expect very high standards.

Prawn farmers are also at the mercy of processors, as there are only a few which dominate the industry and push down prices whenever there is a glut during the harvesting period.


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