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No tea sector moratorium for 3rd wave

26 May 2021

  • Only impact of first wave covered

  By Imsha Iqbal    The Cabinet-approved moratorium on capital and interest payments of tea factory loans is no longer in effect, The Morning Business learns.  Speaking to us, Sri Lanka Tea Board (SLTB) Chairman Jayampathy Molligoda confirmed that the aforementioned Cabinet approval only applied during the first wave of the pandemic. However, the SLTB introduced a few other financial assistance schemes, noted Molligoda, including for the installation of solar panels, maintaining quality nurseries, and providing organic fertiliser. Solar power panels were given to factories interested in reducing their energy costs and shifting to an environment-friendly energy solution. Thus, with the assistance of banks and the Ceylon Electricity Board (CEB), factory owners could get loans at lower interest rates for installing such panels, while the CEB agreed to charge a lower price per unit of power. Talking about the quality nurseries, the SLTB Chairman said that when regional tea plantation companies and smallholders did not undertake tea planting, the SLTB set up quality tea plant nurseries. There were plant nurseries, but only at the regional level. Thus, the SLTB was able to contribute to growing 38 million plants, which could be planted over around 6,000 acres. The funding for this programme came from the SLTB with the support of the Tea Promotion and Strategic Plan Fund as a loan.  Regarding the moratorium, the SLTB Chairman said that it came into effect at a time when the industry was facing numerous issues, including low prices, declining production, and an unusual level of competition stemming from malpractices such as the adding of sugar to tea consignments. This eventually led to the closure of tea factories, while the remaining had to run at a loss. To cope with this situation, the Cabinet agreed to a moratorium on tea factory loans. At the same time, starting from 2020, with the commencement of the online tea auction system, prices moved upwards eventually, despite lower production during the first quarter of the year. In time, production rose and the majority of factories could turn a profit; however, Molligoda stated, this does not assure the industry’s sustainability, as it is merely short term. Nevertheless, the earned profit contributed in improving the cash flow and mitigating losses. The factories get 32% of the auction average as their revenue, while only 16% is paid to tea smallholders under the Reasonable Price Formula (RPF) of the Tea Control Act. Thus, the tea factory owners started making profits. By now, therefore, there is no necessity for such a working capital arrangement.  The SLTB is a state-owned, apex body for the tea industry in Sri Lanka. The Board monitors, develops, regulates, and promotes the national tea industry to the international market.  Speaking to The Morning Business, Plantation Minister Dr. Ramesh Pathirana said that since there is no restriction to tea plantation and production, he does not believe such assistance is necessary. Instead the Minister said: “We (the Government) are duty-bound to look after estate workers as well as the Samurdhi recipients due to the prevailing situation.”


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