RPCs should consider mergers, ownership transfers: Navin

19 September 2016 12:03 am - 0     - {{hitsCtrl.values.hits}}

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From Left: Plantation Industries Minister Navin Dissanayake (at the podium), Planters’ Association Outgoing Chairman Roshan Rajadurai, Plantation Industries Ministry Secretary Upali Marasinghe and Planters’ Association Incoming Chairman Sunil Poholiyadde
Pic by Nisal Baduge

By Chandeepa Wettasinghe
Sri Lanka’s Regional Plantation Companies (RPCs) should evaluate the possibilities of mergers or transfers of ownerships if they are not able to operate efficiently in the future, the country’s Plantation Industries Minister Navin Dissanayake said at the Planter’s Association of Ceylon Annual General Meeting (AGM) recently.


“The underperforming units would have to change their lethargic an indifferent approach, as there are new Sri Lankan conglomerates—and we saw that happening recently—who have shown interest of taking over RPCs,” Minister Dissanayake said.


He noted that he has already received numerous offers from entities requesting ownership in the RPCs.
The government is the Golden Shareholder in the RPCs, having veto powers over all shareholders, and Sri Lanka has a track record of going back and forth between nationalization and privatization.

The RPCs were privatized in 1992, being given a 50-year lease to operate the loss-making institutions, after they were nationalized in 1972.
Dissanayake said that if the RPCs are not able to perform at a level to help position Ceylon Tea as a global beverage, the possibility of mergers should also be explored.
“The current situation forces us to think outside the box, and maybe it’s time for some RPCs to merge so that the global opportunities can be better exploited,” he said.
Dissanayake’s comments come just a fortnight after Prime Minister Ranil Wickremesinghe said that the government would come up with a new model to restructure RPCs before the end of the year.
However, Dissanayake said that he would be willing to implement progressive policy measures including 99-year leases for the RPCs.


The RPCs, which had made Rs. 55 billion in capital expenditure including wide-scale replanting over the 24 years since privatization, do not appear to be willing to invest more now for replanting due to a 38-year period of return and the expiration of the lease agreements in 2042.


Dissanayake, who said that he was appreciative of the efforts the RPCs had taken in, added that he is open to dialogue with the stakeholders, and that proposals which have wide stakeholder approval will be implemented.
“I have some different ideas. That doesn’t matter. The industry must be driven by the stakeholders. Therefore a more meaningful and in depth analysis of where we should go and how we should get there should be taken,” Dissanayake said.


Planters Association Outgoing Chairman Roshan Rajadurei called on the government to treat RPCs the same as other tea producers in the country if subsidies are being provided.
“Unfortunately, the government in its inscrutable wisdom saw it fit to deny this facility and the concessions to the RPC producers, although RPCs too are producers selling the same type of products at the same auction to the same buyers,” he said.


However, Dissanayake said that the RPCs should have foreseen most of the ills that have befallen the industry, and should have acted years earlier to take precautions when the warning signs started to show.
Planters Association Incoming Chairman Sunil Poholiyadde too said that the only profitable RPCs today had taken decisive action over a decade ago.
However, supporting an anti-liberal trade policy, he noted that the industry needs protection to grow sustainably and compete globally.
“We cannot be another Kenya for tea or Indonesia or Malaysia for rubber. They plant in volcanic soil. Their yields are double and costs are half. Here, we need to have those tariffs, we need to protect the local grower by having whatever methods to protect the market in Sri Lanka,” he said.

Threat to promotions fund averted


Other ministries had not raised as big of a fuss publicly about the fate of their funds, and the second largest fund of Rs. 2 billion which was managed by the Sri Lanka Tourism Promotion Bureau was absorbed into the Treasury amidst industry protest.


The Tea Promotion and Marketing Levy, which had been introduced in 2010 had charged Rs. 3.50 per kilogramme of exported tea and, has accumulated over Rs. 5 billion till now.
While some of the funds had been utilized to become a brand sponsor of the Sri Lankan Cricket Team in the past, the global tea promotion campaign for which the majority of the funds were to be utilized had been delayed for over 3 years.


Dissanayake said that the new campaign, which had been tendered to Phoenix Ogilvy, would kick off in November.
“We still have around 80 percent of the money. Hopefully by October, November, we can start. We’ve got the visuals but we’re not very happy with the visuals. So we’re again talking with Ogilvy to get some more creative stuff going. We can be more creative,” he said.
Tea exports are also subjected to a further Rs.10 cess per kilogramme, which had originally been earmarked for promotions, but the past regime had passed a legislation which converted it into a tax funnelled directly into the Treasury’s consolidated fund.

Breakthrough in wage negotiations likely

Dissanayake noted that the negotiations, which were being monitored by the Hill Country, New Villages, Infrastructure and Community Development Minister Palani Digambaran were handed to Development Strategies and International Trade Minister Malik Samarawickrama.


“I generally do not interfere with affairs and the conduct of other ministers. The wage issue was handled by another ministry. However, I took the initiative of getting the wage issue centralized under one minister,” Dissanayake said.


He noted that the new proposal would bring in the proposals requested by all parties.
The wage negotiations have had major political undertones in face of the 1 million citizens living in RPC lands, with the Ceylon Workers’ Congress Leader Arumugam Thondaman, who is in the opposition, influencing the trade unions under his party to refuse the productivity based model.


However, reports now say that Thondaman is planning a crossover to the government, and Dissanayake said that his “main adversary Mr. Thondaman is my friend also now”.
Meanwhile, Dissanayake was critical of the methods the RPCs had used to conduct negotiations since the previous wage contract with the trade unions lapsed in March 2015.
“In the wage negotiations you are firm, very strong. You have come to the position of saying you don’t want anything other than the productivity based wage model coming in. but of course, 2 years ago, when the same negotiations happened, were you like that? Ask your conscience,” he said.


He noted that if the RPCs had pushed for a productivity-based model when the global tea prices were high, instead of pushing for it when the prices hit rock bottom, there would have been more space for negotiations.
Instead, Dissanayake noted that the RPCs had happily and kindly given the trade unions whatever the raises they had asked for every 2 years in the past, without being strong and negotiating for lower increments, and are now being strong when the situation calls for kindness.


While accepting that Sri Lanka’s wages in the tea industry are the highest in the world, Dissanayake noted that Sri Lanka is now a middle income country, and wages should reflect that as well.

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