Elkaduwa Plantations reeks of malpractices, mismanagement
Sembuwatte lake at Elkaduwa estate
State-owned Regional Plantation Company (RPC) Elkaduwa Plantations that has wreaked havoc with numerous alleged malpractices and mismanagement is currently on a restructuring drive following the Committee on Public Enterprises (COPE) calling for a full report on the issues. Disciplinary action has also been taken against several of its staff amidst litigation over money owed by a tea company and encroachment of property by villagers. The plantations company had been called before the recently appointed COPE panel on April 6 where discussions centred on its current performance. The company at present is running at a loss due to mismanagement of its properties, sources said adding that it could be turnaround, “if Elkaduwa Plantations comes under a good management team”
Following the request by COPE, the Public Enterprise Development Ministry is yet to appoint a new management with a Board of Directors that was lacking since January this year to manage the plantations company. It was observed during the COPE meeting in Parliament that it was not possible for the management in place up to January to effectively carry out the activities at the plantations since there was no adequate authority to do so. Elkaduwa Plantations Company Ltd was established in 1982 and re-registered in 2007 under the Companies Act with the objective of cultivating and producing all types of agricultural produce and to carry out any research or development projects or operations in connection therewith. In addition it was approved to rear, breed and farm livestock.
At present it cultivates tea, rubber, coconut, coffee, cocoa, cloves, pepper, cinnamon, timber and cashew on 1,492 hectares of land with about 340 hectares given to outside parties for cultivation. In the last two years of its operations, i.e. 2014 and 2015, the company’s Board of Directors has not held the required monthly meetings but had met six and seven times over these two years, respectively. With no targets and no responsibilities assigned to the managers for achieving of targets the company functioned despite a Corporate Plan in place for a three year period 2015-2017, a Business Times investigation showed. Further, irregularities that had occurred at the company were that since the Annual Reports had not been duly authorised they were not tabled in Parliament since 2011.
Financial portfolio
Financial records of Elkaduwa Plantations indicate that the company was running at a loss since 2011, which analysts however say is not unusual due to the current situation in the agricultural sector in terms of exports of tea, rubber, coconut and other crops. Better management however was proposed to correct the situation to become self-sufficient, which was the view of the state as well. The company has nine estates namely Bandarapola, Elkaduwa, Hunugala, Pitakanda, Ratwatta, Selagama, Hapugaspitiya, Millawana and Nalanda. Hapugaspitiya was the only estate that had recorded gains since 2011. Losses from the estates were reported at Rs. 31.3 million last year compared to Rs.12.2 million in 2014, Rs.46.2 million in 2013, Rs.17.5 million in 2012 and Rs.25.7 million in 2011, accounts indicate.
In fact, the company accounts indicate that the made tea crop per hectare as per the standards of the tea industry of being 1,050 kg per hectare was not met in the last two years on the Bandarapola, Elkaduwa, Hunugala, Pitakanda, Ratwatta and Selagama estates. Further, records indicate that no new cultivation had been carried out during the 5-year period from 2011 to 2015. According to the financial results of Elkaduwa Plantations for the 3-year period of 2014, 2013, and 2012 losses accrued at Rs.60.2 million, Rs.65 million and Rs.31.4 million, respectively the probe revealed.
Tea factories brew vice
Meanwhile, in a bid to salvage the company, the green tea leaf was sold to various private individuals and in 2006 and 2015 an agreement was reached with Pride Tea Company (Pvt) Ltd, to lease out one factory in each of the respective years for manufacturing the green leaf. But payments by the company were defaulted on the lease agreement that had accumulated to Rs.33 million since July 2015, investigations showed. Following the new government assuming office, the new Ministry had issued orders to stop supplying green leaf which was carried out since December 20, 2015 to Pride Tea Company. When COPE met this year they had stated that Elkaduwa Plantations should initiate legal action against the Pride Tea Company for the amount that was due to them following which the company had submitted documents to the Attorney General’s Department in this regard.
It was also found that the company had failed to take action against Agri Squad, a subsidiary of the Janashakthi Group, that had not paid the annual lease rental of Rs.400,000 on the 125-hectare land of the 358-hectare Nell Olla Estate. Further, Agri Squad had allowed another person to enjoy the tenure of the land without authority as a sub-lessee of that company. The contract had been to cultivate mango and cashew over a 30-year period. Elkaduwa Plantations’ five tea factories, was also said to have not taken action to initiate work at one of the four factories closed down and leased out to external parties nor had the plantation firm collected the income from these factories regularly.
Allegations of staff malpractices
The COPE committee had stated at the April discussions that disciplinary action should be initiated against the officials at the Elkaduwa Plantations who were allegedly involved in malpractices causing mismanagement at the company. In this regard, it was found that allegations of financial misappropriation were levelled against two key officials who were reinstated despite pending court cases. So far no action had been taken against these officials despite a letter by the Director General of the Department of Public Enterprises making comments regarding them.
Allegations had been reported against a senior official during his tenure at the Millawana Estate in Melsiripura. Following investigations a charge sheet dated October 2, 2010 was issued against the official and was interdicted official documents show.
One of the charges against the official was that he had misappropriated money and abused authority of the position held by withdrawing funds and not maintaining records of the said transactions between two different entities within the plantations company. It is alleged that this individual had misappropriated money amounting to Rs. 1.1 million on the pretext of commencing a farm project and further money amounting to Rs.132, 094 was also said to have been misappropriated and another Rs.240,000 and Rs.175,000 obtained as loans but not declared as being used. The official was alleged to have misappropriated the Rs.1.1 million when it was found that a Rs.2.1-million loan had been obtained from the plantations worker housing society to be paid to the estate.
The said official had however settled this in two installments allegedly by a cash payment and later through a cheque drawn in favour of the society from a private company called Greenery Lanka, where the official told Business Times he was employed as a consultant.
Greenery Lanka Investment was a Board of Investment (BOI) project established on a teak plantation at Galewela that commenced with an investment of Rs.16 million in 2008. The firm was reported to use advance technology and hybrid varieties of teak on plantations in Anamaduwa, Kurunegala, Embilipitiya, Puttalam and Chilaw. It is believed that the Elkaduwa Plantations official’s ex-wife was a director of the investment firm. It is learnt that this firm is now defunct.
Later the said official had attempted to reach a settlement with the company which was shot down by the Treasury official present on the Elkaduwa Plantations board who believed this would serve as a bad precedent in future. However, it was found that the official had been reinstated, and he told the Business Times this was due to all cases against him being settled. The official currently has two cases on the alleged fraudulent usage of public property at the Matale Magistrate’s Court handled by the Attorney General’s Department; alleged use of public money claiming it was payment for another female worker in the Paldeniya Magistrates Court; and a case against alleged treasure hunting in the Millawana Estate at the Paldeniya Magistrates Court.
The said official told the newspaper he was clear of these accusations and that he was falsely charged. Meanwhile, another key official who had held three posts in a number of institutions including the plantation company in a senior capacity at one time and alleged to have drawn salaries from all, had also been subject to an internal inquiry due to his alleged misconduct and mismanagement while working on the plantations.
A charge sheet had been issued against this officer containing 14 charges and even though the officer’s replies to those charges could not be admitted, disciplinary action thereon had not been taken. One case, against another senior official at Elkaduwa Plantations, was settled this week when it came up at the Matale Magistrates Court.
But the said official had been reinstated even prior to this despite allegedly committing frauds against the company. This official was said to have misused public property causing higher expenses to the plantation company and was thereby interdicted following an audit investigation. He was later reinstated while there was a case against him in the Matale Magistrates Court. Another senior official at the Elkaduwa plantations was found guilty of four charges but had been given an appointment on one of its estates without taking disciplinary action. Several other staffers, COPE was told, had been involved in a number of other issues like appointments made without approval; employment of workers over 60 years; and inadequately qualified persons gaining employment. Disciplinary action against these individuals is yet to be carried out at the Elkaduwa Plantations.
Activities on the plantations
An allegedly unauthorised boat service and lake viewing was in operation at the Sembuwatte lake at Elkaduwa estate with charges being levied from visitors at the rate of Rs.200 from locals and Rs.1000 from foreigners. The agreement for the share of the profits entered into by the Estate Superintendent was 60 per cent of the fees for the Estates Co-operative Society as a result of which Rs.16 million had been paid to the society. An internal audit report had stated that Rs.4 million was earned per month for viewing the lake by tourists but this had not been accounted for and the money collected was misused, it was alleged at the COPE meeting.
An internal audit carried out on the Elkaduwa estate had reported that the money obtained from the boat excursions by a private company for Rs.3000 per tour for which approval was not obtained had accumulated an income of about Rs.4 million per month Further, Elkaduwa Plantations had not made contributions to the Employees Provident Fund and the Employees Trust Fund, Sri Lanka Planters Provident Association and the Estate Employees Provident Association amounting to Rs.223.78 million as a result of which a surcharge of Rs.80 million was imposed due to late payment.
Inadequate cultivation
During the meeting with COPE it was found that the coconut cultivation on 279 hectares was insufficient as there was only 26,432 coconut palms far below the expectations by government standards for 165 coconut palms per hectare that would amount to 46,035. Further, it was pointed out that the coconut crop for last year had been 915, 215 nuts whereas the standard number of coconuts per coconut palm is 72 per palm as a result the annual result should be over 1.9 million nuts. On seed tea cultivation of 323 hectares and twig tea cultivation of 17 hectares it was noted that this was handed over to the employees of the company and green leaf purchased from them at Rs.40 per kilo. But it was noted that there is no internal control over plucking and purchase of green leaf and the quality of green leaf from a hectare had been at a very low level.
The company had not accepted a bid of Rs.8 million for the sale of cloves of the Ratwatta Estate but had accepted the bid of Rs.6.15 million reduced to Rs.5.4 million. The bidder was said to have paid only Rs.3.5 million and the balance payment is still pending. On the contrary bidders said to have submitted bids had not actually submitted bids, it was discussed at the COPE meeting. Moreover, the company had plans to raise revenue of Rs.140.5 million this year by selling 18,811 trees of different varieties. But it was observed that though a more favourable, economical and efficient methodology should be followed in the sale of those trees , no such course of action was initiated.
In another development COPE was informed of encroachment carried out by villagers however, it is still being investigated as there is a possibility that some of the lands were held by these people for generations. Some of the villagers were noted to have relevant legal documents to prove the validity of the land they hold onto that could be part of the Elkaduwa Plantations but some do not. Following these issues and absence of a board and Chairman the COPE recommended the establishment of a new management by the Public Enterprise Development Ministry and called for a full report from Elkaduwa Plantations. The audit report for 2015 is expected to be submitted within one month to the COPE committee.