Business Times

Expansion of Oil Palm needs reconsideration

By Dr L M K Tillekeratne Former Executive Director, RRI

During the past few weeks there were reports in the local press that a decision has been taken to convert some of the low yielding rubber estates into oil palm to curtail the importation of palm oil into the country for edible and industrial purposes. When there was a similar attempt made by some interested parties in 2001 to diversify some rubber lands in Galle and Kalutara districts into oil palm, the Rubber Research Institute of Sri Lanka (RRI) and some environmental groups launched a protest and were able to convince the government in power at that time to stop the proposed program at its initial stages. By then 700 acres of rubber land in both Galle and Kalutara districts were planted with oil palm.

This proposal came up in 2001 because, the smallholders and estates, poorly maintained their rubber lands without manuring and maintainance since the South Asian financial crisis, which gradually lowered the natural rubber prices in the world market to below Rs 40.00 per kg level. As a result in 2001, the national land productivity of rubber in Sri Lanka fell to 794 kg/ha/yr comparing poorly with the level in other rubber producing countries in the world. Hence, there was a proposal for oil palm cultivation in such low productive rubber lands, aiming at a profit of about Rs 1.50 per kg of palm oil produced over the profit from a kilo of rubber. Fairly high labour requirement for rubber plantation was the other factor that influenced the oil palm plantation over rubber.

The years 2000 to 2005 were the beginning of the introduction of high yielding RRIC 100 series clones by the RRI in the country and hence the RRI scientists were optimistic with scientific facts in hands that the rubber productivity would rise sharply in the next decade and that income from the rubber lands would sharply increase thereby making rubber much more profitable than oil palm even at that price level. Based on this fact and also by carefully observing the increasing trend in the world market in the demand for natural rubber, they were able to challenge the misconception of those people that the NR prices will never improve and that the rubber industry is a “sun set industry”.

Even more than these economic factors, RRI scientists strongly felt that if oil palm is planted in Galle and Kaluthara districts where it had been planted, the impact of that on the climate and the environment of the country would be very drastic.

Based on a feasibility study carried out by the Coconut Research Institute (CRI) during this period, there was an attempt made by some plantation companies to plant oil palm in low yielding rubber lands in the above two districts in Sri Lanka on a loan offered by the Asian Development Bank. Their feasibility study indicated that planting oil palm in such low yielding rubber lands would help to solve the severe labour problem faced by the rubber plantations while helping them to gain an income of Rs 1.50 per kilo of palm oil produced over the income generated by rubber. RRI scientists were under the opinion that the low lying areas in the neighbourhood of oil palm plantations might go short of water for paddy farming and also that would even affect the availability of drinking water in the country too. This inference was made on the fact that according to the international data available, the oil palm tree transpires lot of water creating dry lands and hence there is a restriction even in Malaysia, which is the largest oil palm grower in the world today, not to allow oil palm plantations close to paddy farming areas.

Further, international scientific data reports that the oil palm tree transpire more water to the atmosphere during the droughts even more than during the wet seasons making the situation worse, whereas the rubber plantations act entirely in an opposite manner conserving water even by reducing transpiration rate during drought periods to very low levels.

This was of very great concern at that time to policy makers because, leading politicians of the Galle districts showed positive evidence to the fact that most of the traditional water spouts in the area had gone dry after the beginning of the oil palm trial at Nakiyadeniya estate in the Galle district.

As correctly predicted by the RRI scientists at that time and thanks to their efforts, the national productivity of rubber has gone up to over 1570 kg per hectare per year while the rubber prices have gone up to above Rs 500.00 kg level from the beginning of 2010, making rubber the most profitable agricultural crop today. The price of its competitor at that time, the palm oil, has fallen to Rs 190 kg now. Then if a correct profit calculation is made for the two crops today, can palm oil yield a profit anywhere closer to the profit generated even by the lowest yielding rubber estate in Sri Lanka? Then why is this conversion of low yielding rubber plantations to oil palm being considered without improving them under better management? For what benefit to the economy or to the environment are they suggesting replacement of rubber with oil palm? In Malaysia, the minimum annual oil yield required for generating a profit from oil palm fields is 14 Mt. From over 30 years experience in Sri Lanka, has any oil palm plantation in Sri Lanka been able to generate a yield anywhere close to this break even yield?

Have these oil palm promoters ever compared the fertilizer requirements for the two crops, rubber and oil palm? As every Sri Lankan is aware, the biggest burden to the government today is supplying fertilizers at subsidized rates for agriculture, because the price of imported Urea and Muriate of potash have increased by over ten fold during the last half a decade. According to the fertilizer recommendation of the (CRI), the requirement of imported Nitrogen and Potassium fertilizers to oil palm is 800% and 900% more than the requirement for rubber. Oil palm needs manuring once in every three months. With this huge fertilizer requirement, can oil palm give any profit at all? Who is going to find foreign exchange for this huge amount of fertilizer needed?

As far as the economy is concerned, at present the value of 35% rubber exported in raw form is $130 million per annum. By exporting the balance 65% in value added finished product form, the country earns $600 million while providing employment to over 30000 people. This amounts to about 6.5% of the country’s GDP.

As a result of converting 700 acres of rubber during the 2001/2 period into oil palm, we still import over 2500 Mt of raw rubber to cater to our local industries to generate the above income at a very high cost. If not for the effort taken by the RRI to stop this crisis in 2001/2 period, the rubber industry of the country would have been dead by now. Then what is expected by converting the so called low yielding rubber lands into a crop like oil palm at the expense of our flora and fauna?

The annual import of palm oil to the country for edible purpose and for laundry soap industry is only between 60,000 to 80,000 Mt and the total cost is $1.5 million. Is it comparable to the income lost from reducing the rubber production by converting rubber land to oil palm?

Further, crude palm oil is not an edible product and is used only in the laundry soap industry. Conversion of crude palm oil to the edible form to be used in margarine and cooking oil is a costly process, consuming energy. Have these facts been taken into account in these feasibility calculations? Then what is this great effort of a handful of people to go for oil palm plantation in Sri Lanka, keeping aside the possible damage done to the environment? It was reported by the environmentalists during the 2001/2 period that the entire Nakiyadeniya factory area was stinking due to the waste of the palm oil factory while even the coats of the dogs that were eating the oil waste, got severely effected by rashes and other skin diseases.

Taking all these points into careful consideration an expert panel comprising Dr U Pethiyagoda, former Director of CRI, Malcolm Peiris, Director Rubber - Pusssellawa Plantation representing the plantation sector, L Paranawithana, Chairman Rubber Cluster and the representatives of the BOI and Environmental Foundation Ltd concluded at the debate organized to discuss the repercussions of converting rubber lands to oil palm cultivation at the SLAAS auditorium on April4, 2002 that “costly mistakes should not be made. Policy decisions in this regard must be taken after a thorough assessment of relevant matters and not on the basis of a hastily prepared report after a brief visit to an oil palm growing area”.

We do not object to planting oil palm in areas like Vavuniya, Akkaraipattu and any other areas where other crops cannot be grown and does not create an impact on the environment. But certainly, oil palm is not a crop to be given any priority in the rubber growing areas in Sri Lanka even though it is more feasible to Malaysia and Indonesia where they have huge forest reserves to protect their environments.

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