Plantation companies, in a bid to save the sector reeling from the 'tea' crisis which have yet again bled this quarter, are preparing a road-map in a last ditch effort to 'take' the industry forward, Planters Association (PA) officials said.
“We will be addressing various issues in this road map and especially on improving productivity, which is a major concern at present," Lalith Obeysekera, Chairman PA told the Business Times. He said the PA has also requested the government for relief measures by way of rescheduling Asian Development Bank loans, low interest debentures, etc as this year’s budget proposals. “We will meet next week to discuss about the road-map and this will be presented to the policymakers through the Ceylon Chamber of Commerce," he added.
The adverse weather conditions, worker wage increases (which don’t correspond to the productivity) and the recent shrinkage in the Middle Eastern markets have plummeted plantation firms' Cost of Production (COP).
“We're now selling high grown teas at a price range of Rs. 300 to Rs. 310. This corresponds to more than Rs. 100 loss per kg," a plantation company CEO said, noting that since 2002 most tea based firms weren’t running at a profit owing to the high COPs. “The tea production has dropped 30% to 40% with the price also dropping from Rs. 40 to Rs. 50 below last year which is a big issue,” he said.
He pointed out that the Middle East commands one third of the country’s high value teas and the crisis in that region, starting with the Libyan unrest has shrunk their purchasing power. “They try to economise on buying value added tea. Also the adverse weather conditions coupled with 28% increase in wages without corresponding improvement in productivity along with statutory requirements to grant facilities, etc to workers are affecting the industry badly,” he explained.
But Mr. Obeysekera points out that reducing costs in plantation companies is difficult. “Each plantation firm employs about 12,000 to 15,000 workers. This works out to about Rs 200 – 300 million per company only for the gratuity for a year. This will always be a hit,” he explained, adding that the plantation industry’s profitability cannot be compared with any other due to the large employee numbers.
Analysts say that all firms which are in 'pure' tea have bled this quarter, while other firms are 'really' taking a hit on tea and cross subsidising from their rubber plantations. The 'pure' tea firms which have made losses this quarter are ; Richard Peiris’ Maskeliya Plantations, Distilleries owned Madulsima Plantations, Hayleys managed Thalawakelle Plantations and James Finlays' Udupussellawa Plantations. |
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