Smallholder subsidy scrapped, fertiliser in dollar crisis
View(s):Fertiliser importers are struggling to find dollars from banks as Sri Lanka’s dollar crisis looms large and the state plans to scrap tea subsidies to smallholders. The order for fertiliser for the tea industry has run into problems as banks refuse dollars and if orders could not be placed by Friday there will be further delays in importing in time.
The government is planning to order 30,000 MT of Muriate of Potash (MOP) and a total of 90,000 MT of Sulphate of Ammonia (SOA) for the tea industry. But as an initial move fertiliser importers have been requested to purchase only 30,000 MT of SOA due to the prevailing high prices in the world market.
One importer pointed out that the situation was aggravated by the fact that the government owes importers Rs.26 billion in subsidy payments to them. “For the last three months they have paid only peanut figures,” he said adding that as a result they were compelled to obtain loans to pay the suppliers.
He noted that for a certain part of the importation they were able to get Letters of Credit (LCs) opened but the banks are struggling to get the dollars and that is the main issue.
On the other hand since companies had to obtain loans to pay suppliers their flexibility with the banks have reduced and they are unable to open LCs.
“We have contracted with the supplier to supply but now with freight rates soaring importers are jointly importing the stocks of fertiliser with one vessel and so, till all LCs are opened they cannot ship,” an importer said.
While the original plan was to import by early December, now the imports will arrive by the second week of December. The 30,000 MT of MOP will be purchased from Latvia or Belarus and the 30,000 MT of SOA imported from China will take about 21 days to ship.
The larger importers namely Hayleys, Baurs, CIC and Agstar have been asked to bring down the initial stock of 30,000 MT of SOA.
Due to the cost factor smallholders that earlier, under a subsidy scheme, paid Rs.1,500 per 50kg bag of fertiliser will now be compelled to purchase the same amount at the rate of about Rs.7-8000.
Importers noted that since fertiliser prices in the world market have shot up the government is planning on not providing subsidies to the tea sector since they are a commercial venture generating profits.
Plantation Ministry Secretary Ravindra Hewavitharana told the Business Times that they will not be subsidising fertiliser for the smallholders and the subsidy will be given to only those producers using organic fertiliser. This is a critical moment that the entire world has faced because China has limited their supply and India has ordered a larger quantity, he explained.
He noted that due to the abnormal prices in the world market for fertiliser the government has asked
for only 30,000 MT to be ordered initially.
He also said that these prices are expected to come down later at which time they will bring down the required amounts of chemical fertiliser as an immediate solution to the tea growers.
At present fertiliser prices have soared in the world market from the previous US$300 to US$500 per MT.