Sri Lanka’s struggling tea factories are likely to receive a financial relief package with the intervention of the Plantation Industries Ministry.
Sri Lanka’s tea factory owners on Tuesday held extensive discussions with the senior bank officials with the participation of Plantation Industries Minister Navin Dissanayake.
The Sri Lanka Tea Factory Owners Association (SLTFOA) claims that over 100 factories have been struggling to service Rs.5 billion worth of outstanding loans. The loan facilities of 33 such factories have already gone into the non-performing loan category.
Hence, the association seeks to reschedule those loans and convert them into payable amounts with low interest rates, similar to the schemes under Enterprise Sri Lanka.
The number of factories seeking financial relief has risen to 110 as of yesterday, triggered by the dwindling tea yields, high interest rates and declining tea prices.
The SLTFOA officials noted that there might be more factories seeking financial relief in the country.
The senior bankers who participated in the meeting extended their fullest support to the tea industry.
Dissanayake agreed to hold further discussions with the bankers to find a solution for the current crisis faced by the tea factory owners.
He also notified to the tea factories that he intends to discuss the issue with the Cabinet of Ministers to obtain a financial relief package approved for the industry.
The SLTFOA requested the government to intervene to halt the sale of tea factories and collaterals on the non-performing loans of several tea factory owners.
“We also requested to get a moratorium on sale of factories and collateral. We want that immediately,” a senior SLTFOA official said.
Yet, the factory owners have obtained the loans to develop their factories several decades back, when the interest rates were below 10 percent. As the interest rates rose to 14-16 percent, some tea factory owners struggled to service their debts.
Further, the majority of tea factories are running under capacity due to the shortage of green leaves.
According to the SLTFOA, most of the factories are running at 50-70 percent capacity while some are running below 50 percent.
The current low tea prices have further worsened the debt servicing ability of the tea factory owners.
Despite the favourable tea prices at the Colombo Tea Auction during the first few months of the year, the prices of low-grown teas have declined.
The SLTFOA warned that if urgent measures are not taken, it’s inevitable that a considerable number of tea factories will close down, impacting the tea production capacity of the country.