Sri Lanka's tea smallholders, who account for 76% of the national tea output, are facing serious problems which they say could adversely affect the whole industry. "Tea smallholders are facing some serious problems that will directly contribute towards reducing the national tea output in the future. Unless mechanisms are developed to resolve these problems, Sri Lanka's tea industry is at risk," according to Neville Ratnayake, Chairman of the Sri Lanka Federation of Tea Smallholder Development Societies.
In a statement, he says smallholders have issues of increasing cost of production, mainly driven by higher labour costs, which is making the sector unsustainable. This is also preventing re-investment in land development and replanting, which is expected to hurt industry productivity and quality of "Ceylon" tea, in the future. He says that in the case of high grown and mid grown tea, the cost of production is actually higher than smallholder incomes.
"According to the Tea Research Institute calculations the production cost of one kilo of green leaf, in the smallholder sector, is Rs 43.19. However, the current price for high and mid grown green leaf, is Rs 40 per kilo, on average, which means smallholders in the mid and high grown areas are actually making losses," Mr Ratnayake noted.
Low grown tea on the other hand, is generating a marginal profit for smallholders with prices in the range of Rs 50 per kilo. However, this Rs 7 per kilo profit is seen as inadequate, given the cost of living in Sri Lanka. Therefore, to avoid losses, smallholders are compromising agricultural standards. This is expected to reduce tea yields in the future, he added.
"Our production costs have increased after the latest plantation sector wage increase in 2010. So to remain profitable farmers are cutting down on good agricultural practices like investing in land development. This means we can expect our yields to drop in the future," said Mr Ratnayake.
The quality of Sri Lankan tea is also affected because of pressure on profit margins.
"Sometimes farmers delay plucking tea leaves, to be able to pluck more in one round of plucking. But this means some leaves are too mature and the tea that is produced is not of the best quality," he noted.
A significant share of Sri Lanka's upcountry and mid country tea comes from smallholdings.
Smallholders say Sri Lanka needs to urgently develop existing export markets and find new export markets, while increasing tea outputs domestically, for smallholdings to remain profitable.
"Over the long term, we need to look at gradually doubling our yields from the current 300 kgs per acre, per month. This is possible with proper agricultural practices. However, we need to also increase our exports. This means we must increase market share in existing markets or, develop new markets for Ceylon Tea," the chief official representing small-holder societies, said.
A majority of Sri Lanka's tea smallholdings (approximately 80%) are below one acre. Many tea smallholdings are half acre or quarter acre plots and are a primary source of income for families. Sri Lanka has about 400,000 tea smallholders who support close to 2 million people. |
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