- Stress budget proposal to redistribute lands held by RPCs will have “ruinous impact”
- Say proposal limiting each RPC to 5,000 acres lacks clarity
- Claim if implemented, banks, which have extensively lent to RPCs, will be in jeopardy
- Caution against detrimental impact the proposal could have on investor confidence
- Charge govt. for lack of consultation before such serious proposal
The Planters’ Association of Ceylon (PA), the industry body representing the country’s regional plantation companies (RPCs), yesterday raised serious concerns over the 2017 budget proposal to redistribute sections of the lands held by the RPCs, stressing that such a move could have a “ruinous impact” on the country’s plantation sector and the overall economy.
The 2017 budget, which was presented last week, called for a reduction in the maximum acreage that can be held by any standalone plantation company. Without being allowed to consolidate, each RPC is proposed to be drastically reduced down to a maximum extent of 5,000 acres. The government also issued assurances in the budget that employment for estate workers would not be disrupted as a result of the new proposals.
“The association noted with strong concern a distressing lack of clarity around the core aspects of last week’s budget proposal — from its overarching goal of fragmenting the country’s plantation estates, which would compromise the sector’s ability to compete with economies of scale, to a complete lack of any legal, regulatory or procedural mechanisms to enforce the overhaul called for by the government’s proposal,” the PA in a statement said.
As it pointed out, in the case of some RPCs, the proposal could result in a slash of RPC estates from 25,000 acres down to 5,000, all with no clear mechanisms for objective evaluation of the lands, a review and appeals process or plans for the relocation of estate communities as a result of the proposed restructuring.
With substantial extents of RPC land having previously been advanced as collateral to obtain bank borrowing, the PA cautioned that the country’s banking sector could also be placed in jeopardy by the radical alterations proposed in budget 2017 as a result of the high exposure that the banking sector maintains to date in the plantation industry.
Similarly, the PA cautioned against the detrimental impact that the proposal could have on domestic and international investor confidence, given that the government’s proposed measures would only be possible through the revocation of the 53-year lease agreement, which was the legal basis upon which the RPCs were charged with taking over the management of Sri Lanka’s plantation sector.
“With 23 years currently completed on the lease, the government’s proposal to disregard this agreement and totally disrupt the investments that have been made into these estates, half-way through a lease agreement, could only be seen as arbitrary and retroactive in nature,” the PA charged.
In addition to concerns over the instability the proposals could directly cause in the plantation and banking sectors, the PA also warned against the injustice that such measures would cause to RPC shareholders, which are comprised of a diverse spectrum of respected institutional investors and private investors.
All the RPCs are publicly listed companies at the Colombo Stock Exchange.
Meanwhile, the PA also protested against the total lack of transparency and consultation in the formulation of the government’s budget proposals, despite the country’s finance minister claiming that wider consolations were obtained from all stakeholder, professional and trade
union groups.
“The association noted with dismay and disappointment that the government had excluded all major stakeholder groups from the discussion when formulating such a radical policy for the plantation sector. The association noted that such a lack of clarity would only serve to create uncertainty and instability among stakeholder groups,” the PA noted.
The PA concluded its statement by calling on the government, even at this late stage, to enter into discussions with them and all the major plantation stakeholders as a matter of urgency to engage in an open and fair discussion to arrive at an equitable and fair arrangement to all stakeholders which furthers the long-term sustainability of the plantation sector.
“A further point of serious contention was the lack of consideration afforded to the impact of the proposals on RPC liabilities, which in turn are funded through borrowing from the country’s domestic banking sector,” the PA noted.
