• Lost 90-100 Mkg of potential crop due to fertiliser ban fiasco
• Significant rise in fertiliser, other inputs, and electricity costs
• Sustainability initiative benefits do not flow down to industry
• Not harvesting tea at optimum levels, only 50-60% efficiency
• Industry must change and adapt, with flexible working system
• Need to change 150-year-old archaic and outdated model

Hamstrung by labour shortages, weather-related woes, high costs, and comparatively low returns, Sri Lanka’s plantation industry is hoping for some relief via Budget 2024 in terms of a tax concession, along with policy consistency.

Speaking to The Sunday Morning, Hayleys Group Managing Director – Plantations and Planters’ Association Spokesman Dr. Roshan Rajadurai asserted that the industry was sustaining a large number of people and it was essential to avoid any disturbance to the system.

Citing the fertiliser bans imposed by the previous Government, he pointed out that Sri Lanka’s tea production had dropped from 330-340 million kg to 250 million kg as a result of those fiascos. “We lost about 100 kg of potential crop which we had in our hands,” he added.

In the course of the interview, Dr. Rajadurai also outlined Hayleys’ sustainability initiative, which has been well received by the industry, and spoke on what the industry needs to get right to ensure sustainability and competitiveness into the future.

Following are excerpts:

How is the plantation industry faring at the moment and what are the key challenges?

In short, we are now facing the adverse impact of this climate scenario. We are having very, very dry weather, which is of course impacting crop production in tea. 

On the other hand, in terms of rubber, we have this pestalotiopsis disease which we didn’t treat at the appropriate time. It has taken hold and about 60% of the trees are infested or infected, so there is a crop drop there. Overall we see a drop in crops, naturally driving up the cost of production.

What would you list as the industry’s expectations from Budget 2024?

The main thing we want is a tax concession because 35% tax is unbearable for a volatile commodity such as tea and particularly agriculture, so that is really taking away money that we could reinvest or use for Good Agricultural Practices (GAP). That is number one.

Secondly, we need Government support in terms of consistent, sustainable policy. A classic case is the glyphosate fiasco. Up until that time we produced about 330 to 340 million kg of tea. With the glyphosate ban, we came down to 300 million kg. It didn’t take place in a month or two, but over time, you could see that from 340 million kg of national production, we came down to 300 million kg.

Then we had the fertiliser and agrichemical ban fiasco. From 300 million kg, we came down to 250 million kg. So over a span of about 10 years, we lost about 100 million kg of potential crop which we had in our hands, not something that we needed to generate. That’s a huge amount of money that we could have had. We had it in our hands and we lost it. 

The special situation in Sri Lankan agriculture, particularly tea, is that 95% of our production is exported because we can’t consume it locally – quite unlike any other tea economy in the world, probably except Kenya.

At auction level, 95% of the revenue that we earn is recirculated back into Sri Lanka because we only import some fertilisers and agrochemicals. Of that 95%, whether it’s a smallholder or a large company, the majority goes back to the worker. It’s an industry that sustains a large number of people at the lower end of the scale, who are reliant on organised agriculture production systems like tea and rubber.

If there is any fluctuation or any disturbance to that system, it is going to affect a whole mass of people. About two-and-a-half million people are linked to the tea industry alone, apart from rubber and coconut. This is the significance of the perennial crop or commercial crop industry. 

I believe that the Government has still not taken a full measure of the critical reality and critical impact that this industry has on the agriculture sector of Sri Lanka.

Are you expecting some of these issues to be addressed in the Budget?

We want the Government to permit the industry operators or stakeholders to manage their industry without undue interference or the irrational and foolish policies we had in the past. On that score, we are reasonably well supported now; they don’t interfere much in terms of agriculture practices like fertiliser and so on.

What we really look forward to is some sort of a concessionary support in terms of taxation, because that takes a huge amount. As for the private sector, with our lease rental the practice is that it goes up in line with inflation. Last year our lease rental went up by 40% because of the rate of inflation. Those are the significant issues that we have.

Of course now we have fertiliser available freely, but the costs of fertiliser, other inputs, and electricity have gone up significantly. However those are universal, not only for the plantation sector, so we have to just move on. 

The first International Plantations Sustainability Summit was held with your leadership and participation recently. What were the key takeaways for Sri Lanka? 

In time to come, consumer countries, especially those in the West, will demand more accountability in terms of sustainable practices. Unfortunately, although we are not the cause of the climate change that is happening, we have to pay the price by conforming – doing so many things and getting certifications.

In preparation for that, we started the sustainability summit so that all the stakeholders would have a good understanding of what is expected in the future and what good practices we need to engage in.

How was it received?

Very well. We had about 700 participants from 26 countries joining in via Zoom and we had about 400 people physically at the BMICH. It was welcomed because it was timely and it was the first time that a private entity had a global conference of this size and nature. 

We had very good input from leading experts from Sri Lanka. Some ambassadors delivered keynote speeches along with experts from some foreign and local universities. It went off very well.

Could you tell us about your drive to implement sustainable and Environmental, Social, and Governance (ESG)-driven processes and systems in the industry and what we need to do to get on track? 

The requirement is not mandatory, but it is an expectation from all the countries that follow the ESG framework. Actually it is the Environmental, Economic, Social, and Governance (EESG) framework now, with the economic aspect also included.

In the plantation sector, although we haven’t codified it as such, over the years we have done all these things in terms of sustainable practices. Otherwise, plucking or harvesting something every week would not have lasted for 150 years, given all the changes and the climate impact. That in itself is a demonstration that sustainability practices have been implemented throughout.

Of course, now we have put new labels and codified it or organised it. That is a requirement in terms of the environment, consumer expectations, the climate change impact, the world holding the supply chain accountable for good governance and other desirable practices, and human quality and other development goals that the world expects the producers to conform to.

The unfortunate situation is that the benefits of all this work do not flow down to us. That is very clear.

We have been harvesting for 150 years. Have we been replanting successfully in the last several decades?

Replanting is a necessity in terms of replacing the old stock. But currently the reality is that, because of the nature of the industry – it’s not a phenomenon confined to Sri Lanka but is happening all over the world – there is an outflow from normal agriculture to other, more desirable jobs. Agriculture is considered to be a job of last resort.

Even if you replant, the issue is that we cannot and we are not actually harvesting the already-available tea at optimum levels; we are harvesting only at about 50%. I don’t think any businessman with common sense would go and invest more while he already has an asset which is operating at 50%.

The issue is not our ability, commitment, or willingness to replant. To maintain one hectare of tea, you need about 1,000 workers. In an environment in which we already cannot pluck the existing tea extent, what is the commercial benefit of putting in money which will take about 35 years to recover while not harvesting what you already have?

We are plucking at about 50-60% efficiency. When we should pluck about four rounds, we are plucking only two-and-a-half rounds at most. Without replanting, what we must do is harvest the crop that we have; then we don’t have to replant. 

How can the labour shortage facing the industry be addressed in a sustainable manner?

That is irreversible. People’s expectations, hopes, and aspirations are not confined to doing manual work. A farmer’s child would not want to go back into the paddy field. This is a phenomenon that is quite natural all over the world.

We have to make the industry change and be flexible and adaptable to the current requirement. That is why we have offered a flexible working system over the last 10 years which adds dignity to their effort called the revenue share model, where they are not like daily paid workers or hired workers; they are more like entrepreneurs. 

The work is the same, although the model that we work with is not rigid, unlike working in an office. We have offered a system which is flexible, where you can go in the morning at your convenience, pluck your output and hand it over. If you finish, if you’re smart, if you’re efficient, you can leave early.

However, for some strange reason, the stakeholders are not accepting it – probably because they feel that if they move away from the system and get the workers to become entrepreneurial and self-managed, they might lose some of the leverage that they have. But we have explained it to them and of late, I can see some positive thinking on this aspect from the unions.

They also know that if the plantation industry goes down, the workers who are engaged have no other higher educational qualification or skill to migrate to higher-paying or higher-skilled jobs. Of course they can go and work as construction workers, but that’s worse than working on an estate. On the estate you are with your family, you have housing, health, and sanitation, and you’re in your own home environment. 

If the industry collapses, the people who will be most impacted are the daily-paid HR – the on-the-ground field workers comprising 99% of the workforce – so I think they have to take a long-term view.

All over the world, migration is a natural phenomenon. We understand that perfectly and that’s why we are flexible and are adopting a system that can accommodate both interests – their interest to be employed at home in familiar surroundings and at the same time with a different model, an entrepreneurial or self-managed model, where they are not like hired labour. This is like a smallholder model. 

Sri Lanka exports 95% of its tea. What are the main markets we are present in and how has the global downturn affected our exports?

Our main markets are still the Middle East and the CIS countries. They are in the top 10, but the price that we receive is comparatively very low. The countries that pay us top prices are not even in the top 10 markets, so there is a conundrum. 

People who buy a lot of tea pay us comparatively low prices and people who pay high prices buy a very small quantity of tea. The UK buys less than 700,000 kg out of our 300 million kg production. 

There is also always a global oversupply of tea; this year we have oversupply of about 250 million kg – almost Sri Lanka’s entire production – so that will have a significant impact on trade. Also, especially with climate change, people prefer cold drinks to hot drinks. These are the challenges that we have to face in the coming days.

In that backdrop, what does the local tea industry need to get right to ensure sustainability and competitiveness into the future?

In terms of the local tea industry, the corporate sector, we really need to change the 150-year-old model, which is archaic and outdated.

This model may have been suited 75-100 years ago, where the management had absolute control over the workers and workers were more or less dependent on the work on the plantations because of the smaller size of the economy and diversification, but now the economy has opened up and there are so many other better-paying jobs outside the agriculture sector, so this out-migration will continue. 

However, if you look at the reality, estate workers, their homes, their gardens, their community – it’s all a community thing. That is the peculiarity of the estate sector: they live, work, and eventually die in the same place. It’s a continuum. The children’s schools, their places of worship, their communities – everything is tied down to a particular location. 

In terms of education, about 50% of the people have studied only up to Grade 5 and about 1-2% have passed O/Levels. With this situation, all can’t migrate out, so in my opinion this system has to prevail. But youngsters are going out, which we encourage. 

We need to have a thriving, sustainable plantation industry, but with a different model, where the workers also take responsibility for their own future, where they can chart their own course. That’s a different work model that we are proposing, a revenue share model like in the smallholder sector. 

I don’t think we’ll have to experiment, because within a span of 30 years, they have trebled their extent. This is a manifestation of the success of that system. Of course, the corporate sector people are much better off than smallholders in terms of the total package, so we need to change the model and change as an industry.

We also need to promote and leverage our tea in a more aggressive and more favourable manner. Currently we are selling about 80-90% in bulk or packet form, with no real value addition. We need to take up that pathway in terms of adding value, promoting, and leveraging our tea as a healthy, green drink. The minimum use of agrochemicals is in tea, more than any other crop. 

I think our marketing side has to push aggressively, find new markets, and strengthen the established markets which we are fast losing. Due to the glyphosate fiasco, we lost the Japanese market. Once the competition comes and takes a niche, it is very difficult to displace them. That’s what has happened to us.