by Chandeepa Wettasinghe
A leading tea exporter in the country recently called on the government to set up a social market mechanism to support tea business outfits that are facing difficulties.
“The government could establish a ‘distress relief fund’ by diverting a percentage of taxes and cess collected from the tea industry, to meet specific events of distress,” HVA Foods PLC Chairman Rohan Fernando said in the company’s latest annual report. For decades, the smallholders who dominate tea production in Sri Lanka, have benefitted from socialist policies such as price guarantees and vast subsidies, promised in exchange for election votes.
“We sincerely hope the government would take pro-development policy decisions based on market economy as opposed to politically driven subsidies and price guarantees,” Fernando said.
He said that the tea industry cannot reach its true potential if people engaged in commercial agriculture are always given free hand-outs.
Since smallholders are protected through price guarantees, they do not take the trouble to reinvest in their businesses with replanting and other agricultural practices, technology or improving human capital.
Fernando, who is also the Chairman of the Tea Exporters Association, had in the past said that smallholders pluck poor quality or even mature tea leaves instead of the bud and two tender leaves, in order to maximise volumes and gain greater profits gained through price guarantees.
He had noted that this practice has created a downward pressure on the auction prices at the Colombo Tea Auction.
Fernando’s calls for a separate comes at a time when the Finance Minister is attempting to absorb all funds outside the Treasury’s to consolidated fund, such as the Tourism Promotion Fund and the Tea Promotion Fund into the Treasury. Plantation Industries Minister Naveen Dissanayake is said to be dragging his feet with regard to transferring the Tea Board’s cess fund.
The current government had come into power promising social market policies such as the one suggested by Fernando, but has remained in a damage control condition since taking over, and has continued to provide mercantilist and socialist benefits cultivated by previous regimes.