Sri Lanka's tea smallholders who contribute 76% of the country's tea production warn that the tea yield is dropping rapidly making the sector unsustainable. They noted that smallholder tea plantations which are over 30 years old will perish within the next four to five years if the authorities fail to address their current problems. They say they find it extremely difficult to make re-investments in lands development and replanting owing to high costs of production including higher labour wages.
According to Sri Lanka Tea Board statistics tea production of smallholdings dropped to 182.2 million kg in 2011 from 235.9 million kg in 2008. In 2009 it was 221.4 million and 2010, 183.1 million. Tea smallholders noted that this downward trend will continue in the coming years as no action has been taken to improve the productivity of tea small holdings.
Neville Ratnayake, Chairman of the Sri Lanka Federation of Tea Small Holder Development Societies, told the Business Times that the majority of the tea smallholders owning less than one acre were reluctant to carry out re-planting as they have to wait at least three to five years without an income until the new tea bushes can be harvested. The government has directed tea smallholders to increase productivity and quality by re-planting in at least 3% of total extent of tea cultivations annually providing a Rs. 300,000 subsidy. But the actual cost for re-planting is around Rs. 1 million per hectare of tea. Therefore smallholders found it extremely difficult to follow the government's directive due to their poor economic standard, he revealed.
Sri Lanka has about 450,000 tea smallholders who support close to two million people. "These smallholders do not want to replant because replanting would reduce their income", Mr. Ratnayake said. He suggested the introduction of other export crops such as pepper that can be cultivated in tea plantations until the replanted tea can be harvested.
"Unless mechanisms are developed to resolve these problems, Sri Lanka's tea industry is at risk," he added.
John Keells Tea Brokers said in a report that the declining tea prices witnessed from the second half of 2011 is expected to continue in the foreseeable future. In January and February 2012, sale averages at all elevations remained lower than last year's values for the same period "as political turmoil and economic sanctions in the Middle East hinder the most important market for Sri Lanka's low grown teas." Countries such as Iraq, Iran, Syria and Libya together total 55 % of the export market.
"The recent international trade sanctions imposed on Iran and Syria are beginning to take effect due to restricted access to international financial systems," the report said. "It is reported that Iranian importers are unable to guarantee payment, for imports of rice, wheat, tea, corn, and palm oil among others and payments will soon ground to a halt."
Sri Lanka Tea Factory Owners Association Chairman Kalana Dahanayake told the Business Times the cost of production for the tea industry has increased by 30% since mid 2011 which is unbearable for the factories. "With the increases in costs, especially labour wages, fuel, electricity and wood, manufacturing costs have increased and are in a range between Rs. 110-Rs.120 per kg," he said.
He disclosed that over 700 factories produce more than 328 million kgs annually. "There are 400 tea factories of smallholders in the low country, which is 95% of the total smallholder community of tea. To face the rising costs, the industry should increase productivity and look for new markets to export tea," he said. |
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