Factories don’t brew tea anymore
Tea factory owners are facing bankruptcy in the wake of low yields and poor quality produce with some of them forced to close shop as well. The government is now trying to find ways to assist them to overcome their financial difficulties.
Plantations Minister Navin Dissanayake met Sri Lanka Factory Owners Association (SLFOA) members for a discussion at the ministry on Thursday where concerns were raised regarding factories facing bankruptcy and the request to provide a special loan scheme was made.
During the meeting SLFOA Chairman Harith Ranasinghe highlighted that about 23 of around 531 proprietary owned
factories had closed down due to bankruptcy and about 50 on the verge of collapse while about 12 have been put up for sale by the banks.
He pointed out that they were compelled to pay high interest rates and requested for factories to be provided with a special loan scheme similar to the Enterprise Sri Lanka system.
Mr. Ranasinghe told the Business Times that interest rates had risen by almost 6 per cent compared to the rates charged about four years back.
In this respect and due to the poor quality produce and low yields the factories were compelled to shut down. The minister was also asked to help them in trying to obtain a moratorium to negotiate and re-start those businesses that had shut down due to bankruptcy.
Moreover, the factory owners had also requested the Minister to ensure that they be brought under the same category as exporters when charging them the Economic Service Charge (ESC).
He pointed out that as manufacturers they were compelled to pay 0.50 per cent whereas the exporters pay a reduced 0.25 ESC.
The ESC payment was to be made for the total turnover but factory owners had to share 68 per cent of this turnover with the smallholder and retain the balance, he explained.
In this context they raised the fact that the Treasury should then ideally charge the factory owners only for their share of the earnings.
Factories were ridden with issues particularly due to the lack of crop as a result of which about 95 per cent of them were running under capacity, Mr. Ranasinghe said.
Factory owners had also raised the issue that a minimum amount of Ceylon Tea be blended with teas imported from Darjeeling and Assam and CTC main grades for re-export in a bid to sustain the auction prices.
Minister Dissanayake had stated that he would take up this matter at the board level and follow up with a discussion with other stakeholders and come up with a solution at the next meeting scheduled for next month.