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Subsidies not the way forward for any industry: Harsha

8 September 2015 02:53 am - 0     - {{hitsCtrl.values.hits}}

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By Chandeepa Wettasinghe
Subsidies given to industries will not be sustainable in the long run and there will be winners and losers in capitalism, ruling coalition parliamentarian and economist Dr. Harsha de Silva said at the Tea Exporters’ Association Sri Lanka (TEA) AGM held recently.

“There is a problem in the industry (tea) and we all understand that. When the industry came to the Prime Minister a few months ago and said, ‘the companies and factories are in trouble’, the government acted on that request and an estimated Rs.900 million had been allocated,” Dr. de Silva said.

The action was miscalculated at the outset with just Rs.416 million a month allocated in the interim budget and including only the smallholders and excluding some plantation companies which needed the support due to guaranteed high wages the smallholders do not have to bear.

Smallholders make up nearly 70 percent of tea production and are present in the lower elevations. Further, of the 700 tea factories in the country, over 400 are in the smallholder areas.

“The government didn’t ignore your requests. The government came to the rescue at least to an extent possible when you needed our help. But subsidies are not going to sustain the industry in the long term,” Dr. de Silva rationalised.

Already, a number of smallholder tea plantations and factories are going up for sale in the southern districts despite the subsidy, according to former TEA Chairman Niraj De Mel.

“A lot of the factories have been put up for sale in Matara and Galle. This is good development. They came the wrong way. Let the bad ones get out. Let the good ones producing good quality leaf stay. Same goes for exporters, brokers and producers,” he said.

Plantation company leaders have said that the smallholders deteriorate the world’s best Ceylon Tea brand due to poor leaf.

De Mel noted that the local industry is badly planned compared to Kenya, the largest tea exporter in the world.

“Kenya produces more tea than Sri Lanka with 80 factories. There’s some method in how they do it – a lot of vision, good direction. Here earlier, the criterion was the availability of leaf. Today it’s how much you pay the politicians,” he added.

In a recent address to the gem industry Dr. de Silva too had stressed the importance of businessmen to play by the rules and not becoming cronies.

He said that the social market economic policy advocated by his government will ensure a socio-economic net for producers and labourers who fall too far.
“We believe if you work hard and play by the rules, you should be able to get ahead in life. But we must not forget that those who own the capital don’t necessarily receive what they put in. Labour must also be part of the equation. It cannot be an appendix,” Dr. de Silva added.

He stressed that industries must go into productivity-based models where those working hard will earn dividends.

The regional plantation companies are set to reach Rs.11 billion in accrued losses by the end of this year.
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