Following is the address by Mahendra Amarasuriya (Former Chairman Commercial Bank of Ceylon Plc, Planters Association of Ceylon, former Deputy Chairman Hayleys Plc & Talawakele Plantations Plc) delivered at the 158th Annual General Meeting of the Plantations’ Association
The PA is one of the oldest institutions in Sri Lanka. It has represented the plantation industry for more than 150 years. During the British Raj it was one of the most influential and dynamic institutions, greatly influencing the Social, Political, Economic activities in the country. In those days members of the PA were appointed to the legislative assembly and were able to directly influence political decisions.
With the state imposed land reforms in the country in the 70s, all Plantation company lands were vested in the state and the activities of the PA were curtailed. If not for the dedicated efforts of a few senior planters like the late Sepala Illangakoon and others it could have died a natural death.
In the 90s the nationalization process was reversed to a great extent by the government going ahead by allocating by a public tender, newly formed Plantation Companies to the private sector for management. Many companies which had managed plantations earlier and new entrants tendered for the 22 companies on offer.
The PA activities were revived and it now plays an important supporting role to the industry.
According to your Annual report total extent of the major crops handled under the management of the PA membership are as follows [Appox]
Rubber 49,000 ha
Tea 91,000 ha
Coconut and other products 40,000 ha
In percentage terms Tea accounts for 51% Rubber 27% and Coconut and other crops 22%. In Tea this represents 41%, Rubber 38% of the, estimated national extent of Rs 127,000 ha.
When considering the PA the importance of the above crops to the members is perhaps in the reverse order to what is depicted above.
Only two plantation companies have substantial extents of Coconut. Coconut however is socially, economically and politically, very sensitive. Despite the strong anti coconut lobby on the basis that although coconut is a vegetable oil it contains saturated fats and can contribute to enhance cholesterol levels in the blood, coconut consumption by Sri Lankans has not declined. On the one hand there is a natural population increase and thus greater consumption on the other hand new housing and construction results, in uprooting many coconut trees without any replacement of the trees thus removed.
Only organized attempt at new planting of Coconut on a substantial scale has taken place due to the initiative of the DC Millers Associations, through a new company, Mahaweli Coconut Plantations, which has planted 1500 acres under drip irrigation on Mahaweli land. Originally the intention was to have the entire extent under drip irrigation and they got a special subsidy from the government for investing in drip irrigation equipment.
As the plants matured drip irrigation was insufficient to provide a minimum of 60 liters of water a tree per day which according to them was the requirement of a mature plant. Then they resorted to flood irrigation as water was freely available. During the last year they harvested 3MN nuts which may not be that substantial at 2000 nuts per acres. However, they anticipate harvesting 5 to 6 million nuts this year which will increase the yield to 3 to 4000 nuts per acres. This new plantation will provide 3mn new nuts. Source of coconuts for the DC industry will therefore increase and also the total production in the country. I feel that a proper cost benefit analysis should be done to consider extension of such plantations as the capital expenditure on drip irrigation is substantial and in this particular plantation such costs were subsidized by the state. Furthermore additional suitable extents of lands may not be available in the Mahaweli area.
The Coconut crops generally depend on rainfall which affects the next year’s crop. Of course without regular fertilizer application the full potential cannot be realized and levels of fertilizer applied will also depend on the price.
Rubber has enjoyed a boom during the last few years. In 2011 all grades reached record levels but began to decline in the 4th quarter. Latex crepe which recorded an unprecedented peak of Rs 627/- in the first half tumbled to Rs 417/- by the 4th quarter.
Good weather, better fertilizer application by producers increased production to 158 mn kgs probably the highest recorded in Sri Lanka in recent times. When considering the fact that SL’s Rubber production was less than 100 mn kg and the average yield marginally over 1000 kg/ha in 2003/04, it is a very significant increase directly related to better prices. The national average yield was 1552 kgs/ha in 2011 which is a tremendous increase. The corporate sector however fell behind with an average of 888kgs. In comparison the Indian National yield was 1885 kg/ha. India and Vietnam are projecting to reach 2250 to 2500 kgs/ha by 2021. Should not our corporate plantation sector study this issue in depth and come up with short term and long term solutions?
Historically there have been booms every 20 to 30 years. Unfortunately most booms are followed by busts.
Fortunately local consumption has continued to increase consuming over 70% of local production. Local demand will undoubtedly continue to increase.
We must appreciate the government’s efforts to expand production to Moneragala and even to some North East locations. Growth maybe slower in such dry areas but the greater number of tapping days available will compensate for the longer gestation period.
We still continue to export rubber as a commodity except special products like latex crepe and pale crepe. There were some efforts made to manufacture a special technically specified grade for the US market. I am not aware as to what happened to these initiatives. As long as we export commodities we will be subject to the vagaries of the commodity market. Instead if we can export a special product to satisfy customer’s particular needs we will be able to stabilize prices.
Tea plantation industry is facing yet another crisis. As mentioned in your Secretary General’s report, “Need for long term planting to meet future challengers, climate change, shortage of workers, rising interest rates resulting in high cost of funds, poor yields are some of the areas that need the attention of the Research Institutes with the necessary encouragement of the government which cannot ignore an industry that contributed Rs 346.8 bn to export earnings in 2011.”
These factors apply even more emphatically to the Tea plantation industry which earns around Rs 170 bn in export earnings. More so because Tea is planted on the most fertile lands in the country.
Basically the only answer is to increase productivity of all resources utilized by the industry.
It is one of the most large scale labor intensive agricultural crops. I am not being critical and I appreciated political social and economic pressures that would have been applied during the last negotiation for wage increases, but a 27% increase is obviously totally unsustainable without a corresponding productivity increase.
The first collective agreement of 1998 revised the wage package to Rs 101/-. Now the wage package is 515/- per day, an increase of around 500%.
The Tea prices have undoubtedly increased but not in the same proportion nor stabilized at profitable levels. It appears to be a never ending battle to achieve economic viability.
The question is how do we achieve an increase in Human productivity. Dr Dan Seevaratnam has stated that the Human Resource is the greatest wealth in the plantations. There are many challengers regarding the Human Resources. One of the most important is the retention of workers the other is to increase their productivity.
Most children of plantation workers do not want to succeed their parents they are better educated and aspire for white collar workers. Others even prefer manual work in a city rather than engage in a rigorous field job.
More plantation companies have endeavored to improve the status of the workers by using a more dignified nomenclature to describe their workers such a “tapping technician” instead of “tapper” and” plucking assistant” instead of “plucker” and so on.
What impact this has had is probably best known to the industry. It should however be extended to all levels of workers.
Regarding Human productivity there are many challenges. Firstly until the crop yields are increased one cannot expect workers to harvest more than what is potentially available in the fields. For instance when Indian Rubber tappers have fields yielding over 1500 kgs/ha to tap, their productivity will exceed that of Sri Lankan tappers who tap fields yielding around 900 kgs/he in our plantation companies. The same prevails in the Tea plantations with yields around 1200 kgs to 1300kg/ha. A need to replant vigorously is the obvious solution but not easily achievable as indicated later.
Various types of mechanical Tea plucking machines have been experimented with giving mixed results and at present does not appear to be a suitable alternative. However if labor shortage becomes acute the plantations will be compelled to rely on mechanical harvesting, maybe at the expense of quality. I am not aware as to whether any electro mechanical tapping techniques have being tried out by the Rubber research institute experimentally or in commercial applications. Presently with good prices and good wage incentives sufficient pluckers maybe attracted to plantations. However, should the prices decline there could be pressure on the ability to employ sufficient pluckers to meet the requirements.
As mentioned above incentive wage packages have been used extensively for all crops with good results but may not be applicable throughout the year.
The logical means of increasing productivity of plantations is re planting both in Tea and Rubber where as the plantation companies have recorded average yields of only a round 1300kg/ ha for tea and 900kg/ha for Rubber. These yields perhaps can be doubled by replanting. However the crux of the matter, is it viable, to be carried out in the plantation at present as the return on investments may not justify such an exercise. The gestation period for a new plantation of tea is around 4 years including rehabilitation of the land and in Rubber it could be 5 to 7 years. The investment required cannot be justified on the basis of present cash flows for Tea. In Rubber however, it may perhaps be viable with the high prices prevailing and the fact that old Rubber trees are marketable for various timber products or used as essential firewood.
There is a definite need for support from the government in a concerted re-plantation program and every effort should be made as in the past to persuade the government to subsidy the Tea and Rubber plantations in the corporate sector. It is my view that the plantation industry must compute objectively, the cost of replanting that can be sustained and viable and request the government for the balance expenditure required to complete such a program. This would be a huge outlay on the part of the Government but considering the fact that unless replanting is carried out in a vigorous manner the industry will be unviable the authorities concerned may be convinced of the dire need to support such a program.
Considerable investments have been made in upgrading factories but more effort must be made to automate every possible factory process in order to reduce the labor employment with a view to reduce the cost of production.
Many factories are following the “5S” procedures and even embarking upon HACIP certification but there is still room for further development
The reputation Sri Lanka had for excellence in both Tea and Rubber does not appear to be any longer prevailing due to a number of reasons. Due to government control and bureaucracy the out puts from the research institutes do not appear to meet the needs of the industry. Due to a variety of reasons there are many vacancies in the heads of divisions of most of the research institutes and as such research work has been not directed to meet the needs of the industry.
Privatization of these institutions maybe the best answer but not politically feasible. One alternative is perhaps for companies to fund special research projects directed towards meeting their particular needs and done in collaborations with the research institutes.
Tea hub Vs Pure Ceylon tea
The controversy regarding the need to import teas from other sources in order to blend with pure Ceylon Tea and market in price competition with other Teas in the market has been strongly advocated by the Ceylon Tea Traders Association [CCTA] and the Tea Exporters Association [TEA]. The advocates of this strategy claim that this is the best way to market Tea in the global tea market where competition from multinationals, who blend their tea in other destinations, is the solution for increasing Tea exports from the country.
This controversy was also prevalent more than 10 years ago when I happened to be the Chairman of the Planters, Association. We were able to resist the proponents of blending Ceylon Tea with cheaper Teas for marketing at that time. Once again this demand has come to the forefront. Maybe due the marshalling of several diverse forces.
The way forward
It is not for me an outsider to suggest to veterans in the plantation industry as to how they should move forward. All I can say is the off quoted “Think outside the box” However, let me put down some thoughts for your consideration.
1. The need to persuade the government to invest in a subsidized replanting program. Since most effort made in this directions in recent times have not been successful, I suggest that the industry hires services of a reputed Institute like the Institute of Fundamental studies to carry out an overall in depth study of the industry to recommend short term and long term interventions. Dr Saman Kelegama I believe is the ideal person to carry out such a study as he is very conversant with the plantation economy.
2. Incentivize the research institutes to perform more effectively specially in the vital field of mechanical harvesting, increasing yields, and reducing gestation periods with faster growing clones.
3. Diversify cultivation of Tea and Rubber as much as possible by planting other crops like Cinnamon, Pepper, Clove, Nutmeg, Arecanut, Oil palm etc. Wherever agro climatic conditions are suitable.
4. Embark on Tea tourism as the tourist industry has been given special emphasis by the government.
5. Finally I am making a revolutionary suggestion. That is to lease the cultivable land to the workers and be Tea factory owners plus facilitators of good cultivation practices. This may be perceived as politically suicidal for any government. It will also be resisted by all the Trade Unions as they will not be effective in their Trade Union activities when people are lease holders and cultivate their own lands. As you are well aware this practice generally prevails in Kenya and is very successful.