Scenic Radella tea factory. Inset: Laknath Sanasuriya
Sluggish Sri Lankan tea industry is facing uncertain times and if the present trend continues the beloved Ceylon Tea may lose its global dominance.These observations were made by Laknath Sanasuriya, a young entrepreneur who has invested heavily in the local tea industry, in an interview with Sinhala-language Black Through White TV program.
“Tea which had been our top foreign exchange for a long time is now down to the fourth position, facing further trouble”, he said during a no-holds-barred interview, drawing upon his own experience as an investor in the struggling industry.
Currently, Sri Lankan tea exports earn a total of US$ 120 million annually, providing direct employment to four million people. About 150 factories have been closed down out of the total of 700 the country has. When a factory goes out of business about 250 also lose their jobs.
Two other most important exports in the island, rubber, and coconut, have already lost their international market, he said. The country even went to the extent of importing coconuts to satisfy the local demand. “If the present situation continues, before long, we will have also to import tea for our consumption,” he added.
“Ceylon Tea is our international brand. Some people living in other countries may not know our country but they know our tea. The name Ceylon Tea is like Toyota to Japan” says Laknath who studied in Japan for nine years before opening his own tea factory.
Tea is his family business. Sanasuriyas have been connected to the industry falling into the category of tea smallholders, providing their harvest to large tea factories.
“Around 1997 when we took our tea leaves to the factories we were not able to sell as there was a production surplus. But when micro-financing was introduced, tea growers resorted to taking loans to develop their estates and soon they found that debt-servicing took a huge chunk of their earnings. As a result, many growers left the tea industry or experimented with other crops to make a fast buck,” he added.
According to a recent article, Deshaya newspaper says out of a total of 700 tea factories 187 have been closed down. Another paper carried an article on November 17, saying that 16 factories in the Galle district alone had gone out of business in the recent past unable to service loans. “We started discussions with the government to find solutions to this problem but we are yet to receive a response. Most of the owners of tea smallholdings are between 40 to 70 years old living in rural areas providing employment opportunities to the people in these areas. When a factory is closed down about 250 people become jobless.”
Today there are laws to protect banks and other lending institutions while there are laws imposed by the labour ministry protecting the rights of the workers but there is not a single law to protect the entrepreneurs whose business sometimes get affected by unforeseen circumstances. “Then everybody – banks, other lending institutions and income tax department – are hounding us”.
“The law No. 4 of 1999 and the leasing act introduced in 2000 by former minister G.L. Peiris give the power to financial institutions to take over our business if we delay paying back loans. Even if we pay 70% of the loan the act still allows the banks to take over our properties. If people know everything about this law, I think, they will have second thoughts before applying for a loan,” Laknath added.
An amendment introduced by former president and present prime minister Mahinda Rajapakse in 2013 limiting the banks to take over properties worth below Rs. 4 million has done wonders to save the properties of smallholders. If not for this move the industry would have already gone out of business.
“When in 1962 former minister T.B. Illangaratne introduced the first laws two ministers, who were known to be poets rather than technocrats, signed the laws. The present acts are usually drafted by lawyers working for financial institutions. Though the state language of Sri Lanka is Sinhala all these laws relating to banks and financial institutions are in English which many borrowers do not understand,” he said adding that the collapse of the tea industry is mainly due to the government’s lethargy and total disregard. “There are no major overhead expenses for tea other than the imported fertilizer. When you speak of the garment sector everything from needles to cloths and expensive machinery have to be imported restricting the profit margins.”
When our coconut industry collapsed we had to import coconuts. “We made desiccated coconut for export but the products we imported were inferior to our coconuts and our exports lost its dominance in the global market. As our tea exports, which claim 4 percent of our GDP, is dwindling, countries like Vietnam, India, Kenya and China have taken advantage of the market share we have lost.
He feels that the government has to mechanize the cultivation for better results. “When I went to Japan to study in 2003 tea was plucked by hand. The paddy too was cultivated by hand and when I came back in 2012 the rice harvest was mechanized but still, tea is plucked by hand.”
“if the present trend continues without any government support, before long our tea exports will suffer the same fate as our coconut and rubber cultivations faced,” Laknath warned. – newstrails.com
