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One of the integral components of the Government's proposed plans of deregulating the economy will be the plantation sector. Regional Plantation Companies (RPCs) will be given the option of diversifying into other areas such as power generation, tourism, gem mining etc for which the state will relax the rules.

According to the strategy envisioned by Plantation Industries Minister Lakshman Kiriella, one of the main areas that could be promoted in plantations will be tourism, a subject close to his heart and ethos, being his first Cabinet portfolio. He stresses on the scope of eco-tourism and adventure tourism.

"The opportunities are stupendous. It is up to the private sector to pick up the ball and run. The Government will certainly help. The state has stopped doing business," he articulates.

Here, the Attorney-at-Law turned Cabinet Minister is in conversation with the Daily News on a divergent set of core issues ranging from a wage structure based on productivity, estate housing- a sore point in the industry, forming an umbrella organisation for the tea rubber and coconut industries in the form of a Federation, Regional Planation Companies exporting teas direct, surpassing the auctions and making Colombo the region's tea hub in collaboration with neighbouring giant India.

by Ravi Ladduwahetty

Q: News reports indicate the percentage of value added tea exports declining in recent years. Some key players including the Brook Bonds and Liptons Divisions of Unilever have closed down. Your comments ?

A: The Government is no longer in business. All estates have been privatised. All Regional Plantation Companies (RPCs) are in the hands of the private sector. The Government does not export tea like before where agencies like Consolexpo (Sri Lanka State Trading Consolidated Exports) Corporation were in business. But, I am aware of the problem. I have already spoken to some of the leading agencies about this. We hope to take remedial action in the future.

Q: From a point of geographical proximity, Sri Lanka is a small country. The main arable land is in large blocks and in the context of the Regional Plantation Companies. What would you do to increase their productivity ?

A: This is a very interesting question because tea small holders produce 64 % of the tea in about 30 % of the land whereas large companies, with about 70 % of the land extent is producing around 30% of the tea. So, we have had negotiations with the CEOs of the RPCs regarding increasing yields. Yields have increased generally in the last few years but far below the yields of other countries and tea small holders. They must go for modern techniques to improve yields.

Q: You announced that you were going to liberalise the plantation sector as a measure of boosting confidence of the investors and donor concerns. You said that plans were underway for gem mining, tourism, power generation, diversification of crops etc. Can you elaborate on the scope of such ventures ?

A: It is up to the investors to come up with the proposals for joint ventures etc for these projects. The Government has stopped doing business. They will have to find the investors. The Government will not step in to find the investors. The Government will relax the existing rules which will benefit the investors when they come up with viable projects for these Regional Plantation Companies. For instance, if an investor wants to invest in a hydro-power generation company in the plantations, then we will relax rules and provide approvals so that investor will have security in investments.

Q: So, how do you see the prospects for these type of investments ?

A: I have been repeatedly saying that the RPCs have been under-utilised. They depend only on the main crop such as tea, rubber and coconut. There are a large number of projects that can be done in these estates such as power generation, gem mining, tourism, forestry and environment etc. If the RPCs move out of the beaten track and move into new areas, I as the Plantations Minister and as the Golden Share Holder, will relax the controls to bring in investors.

Q: There are classic examples innovative ideas in this context. For instance, The Aitken Spence Group has converted a tea factory (Hethersett estate) at Kandapola into a hotel. The shifting room of the factory is the dining room of the hotel. The roller room is the bar. The dryier room is the reception. The withering tats are the rooms. Those estate infrastructures have been yet preserved. As a former Minister of Tourism, how do you see tourism developing in the plantation sector ? Do you have other such creative ideas ?

A: This is exactly what I say. There are 23 RPCs and each one of them should be innovative. The Government will always be there to help them. As a former Minister of Tourism, I propose that eco-tourism could be promoted for which there is a lot of scope. Q: The contribution made by Tea Small Holders to the national tea production has been growing steadily. In 1980, the Tea Small Holders' contribution to the national production which was a mere 16% of the 191 million kgs, has risen to 43% of the 284 million kgs in 1999. They have outdone the RPCs. Your comments ?

A: They must improve their productivity. The small holders have put the RPCs to shame. The small holders must answer this question and not me as the Minister of Plantation Industries!!

Q:So, how do you think that the small holders have increased their productivity ? What is so special about them that the small holders could do and the RPCs could not do?

A: What the Tea Research Institute people told me was that the small holders being small and basis people. They do implement instructions from the TRI to the very letter. The RPCs consider themselves experts and they reject the advice given by the TRI.

Q: Given these parameters, what is your vision for the plantation sector ?

A: My vision which encompasses the industry is deregulation for which I have appointed a committee. They say that some of the regulations in the industry are archaic and I wish to simplify them. Some of the regulations should be there as there is a necessity for the Government to mediate. Deregulation is the first step and the agreements with the RPCs will be relaxed. If the need arises, the Government will assist them. This will be done within the next three months. However, this should not be treated as the freedom of the wild ass.

Q: What is the Government policy on estate wages ? News reports said that you are due to initiate a wage structure based on productivity. What headway has been made on this ?

A: That is the aim of the Government. We must have the support of the trade unions for that. When the wage structure matter comes up in June, we will take it up.

Q: The Agreement between trade unions and the Regional Plantation Companies is due to lapse in June. The RPCs say that they cannot afford additional wage increases without the increased profitability. Your comments ?

A:To run the estates at a profit is the responsibility of the RPC. They were given to the RPCs on the assumption that they could be run profitably. If they can't do that, the workers will be suffering. The Government is also concerned. There is a RPC which is running on an overdraft of Rs. 1000 million. The RPCs must keep their overheads low. There are a large number of complaints that the overheads of the RPCs are high.

Q: A frontline corporate leader Mr Mahendra Amerasuriya, in his capacity as Chairman of the Planters' Association of Sri Lanka, the umbrella organisation for the 23 Regional Plantation Companies, has charged that the Government is interfering in the RPCs too much, like the overgrown bully by virtue of its Golden Share. Will this continue even after the deregulation ?

A: I don't think that is correct. As far as I am aware, the Plantations Management and Monitoring Division of the Ministry has left the RPCs alone. We have complaints that we are not monitoring them enough.There are even some RPCs which are illicitly felling trees, according to the complaints received by the retired ex-planters who are acting against the national interests. Moreover, former Prime Minister Ratnasiri Wickremanayake as Plantations Minister left the RPCs well alone without any interference.

Q: What are the projected production figures for 2002 based on the assumption that there are no drastic fluctuations in weather patterns?

A: There should be a 20 % increase over the 295 million kilos for 2001 if the weather does not intervene.

Q: There are complaints that there is too much bureaucratic red tape in the Sri Lanka Tea Board. What is its future ?

A: My message to the private sector is to stop complaining. They should all unite and form a Federation. The problem is that there are around seven associations representing the industry each one for brokers, traders, tea factory owners etc. The same goes for coconut as well.

There are the Desiccated Coconut millers, growers etc. The problem is that when you help one group, the other side is disgruntled. Then they come to us. So, this is a ding dong battle. If they form a Federation, then the problems will be presented as a common issue of the Federation under one roof in one voice. That is what the donor concerns are also advocating. When that happens the Government will also listen.

Q: It is alleged that the premier Tea and Rubber Research Institutes are and not performing to the expectations of the private sector as far as research, deemed obsolete. It is also alleged that one of the main reasons for decline in rubber production is that new clones have not been introduced. Your comments ?

A: The private sector is always complaining. Why can't they have their own research without complaining about the TRI, RRI and CRI etc.? If they could have invested millions in buying tea estates, then they could invest a few millions and have research facilities as well. As far as the Government goes, it has stopped running business. For instance, if the tea estates are having a blight, then the Government will tell the method of getting rid of it.

That is how it happens in other countries. It is the private sector which runs its own research without depending on Government. On the other hand, if the RPCs want to start these research facilities, then the Government would get aid for them thorough donor concerns. They must take the initiative without complaining. There is an example in the coir industry where there is a research facility from USAID funding called the competitiveness initiative.

Q: The Ceylon Brokers' Association looks after the brokers' interests and the Colombo Tea Trader's Association looks after the traders' interests. There was a move to form the Tea Federation, an umbrella organisation for the tea industry which will also incorporate the producers and predominantly the RPCs. Now there is resistance as traders are feeling insecure that plantation companies will get the nod to export directly. Your comments ?

A: Even at present, 50% of the output of the RPCs could be exported directly. This is possible now. However, very few companies make use of this freedom and they opt to go through the auctions. The Government is funded by the ADB which is promoting the RPCs to form exporting companies for which US$ 15 million is available for each company as an outright grant. One company has already done that.

Q: Today, the Tea Small Holders are a resounding success. They have even launched their own share issue, which is the first of its kind in the world. They are manufacturing fertilisers, tractors etc. which were masterminded by former Prime Minister Ratnasiri Wickremanayake. What incentives or vision do you have for the Regional Plantation Companies in the same lines?

A:It is up to the RPCs to come up with similar ideas for which the Government will even help with donor assistance. For instance, there was a 1,500 acre plantation of coconut in the Mahaweli areas which was under drip irrigation. The trees will bear in three years. I visited it with the Prime Minister.

Q: What about an action plan to relax the sale and transport of timber in plantations ? What are the implications and what benefits do you envisage after the relaxation of the rules ?

A:There are some RPCs who are good and run them well while there are others who act mischievously. We cannot penalise the non-offenders. We will streamline the industry. Some say that they have the approval of the Forest Department for reforestation.

Then they have to get approval again. That is why the Government wants to streamline the work.

Q: The need to have a crop diversification program for the plantation sector has been seen as having the potential to turn around the industry. How would you set about the policy initiatives in this regard ?

A: You are quite right. In my very first week as Minister I told them to diversify. The RPCs will face problems in the future if not for diversification. The labour force is moving out for greener pastures due to inadequate housing. Around half acre should be given to the workers for cultivation so that the profits could be shared with the management. Not the 10x10 plots they have in front of the linerooms!! I am very keen on the agricultural diversification of estates.

Q: Currently, Sri Lanka is the largest tea exporter in the world. What plans have you formulated to make Colombo the tea hub, using the theme, value addition ?

A:The Prime Minister has a vision of making Colombo as the world's tea hub. I have appointed a Committee for this. We are planning to tie up with India. This will enable us to capture a major share of the world market. We have the expertise for blending and there are firm inquiries in Sri Lanka under brand names for export like London and Dubai at one time. Africa has some similar operations and we could have a similar situation for this part of the world.

Q:It is learnt that multinational giant- Unilever has invested well over a US$ 1,000 million (Over Rs. 93 billion) for a value added tea manufacturing plant in Dubai, where the employees are all Sri Lankans.

Another case in point, Sri Lanka's largest value added tea exporter- MJF Exports, has established tea bagging and packeting facilities in both Poland and India. Both opportunities have gone a begging from Sri Lanka. What policy framework would you formulate so that such opportunities would not elude Sri Lanka in future ?

A: We would expect them to stay in Sri Lanka and do business. As a Government, we cannot expect them from leaving the Sri Lankan shores either. This is what I say. If they want facilities to establish business, they must tell us what they want. That is why I have appointed a deregulation committee. That is why I want them to form a Federation. That is why we are getting ADB assistance to set up marketing companies. That is why I want them to speak in one voice.

Q: Responding to this, former Prime Minister and three times Plantation Industries Minister Ratnasiri Wickremanayake said that under the market economy investors have the right to invest overseas just as much as they have a right to invest in Sri Lanka. How would you view this argument in this context?

A: It is the market that decides the investment.

Q: One of the biggest social issues which is a sore point in the plantation sector today, is estate housing. How is the Government proposing to address this burning issue ? A: We have a plantation housing trust here. It has done a lot of work for the last five years which will be continuing.

Q: The subject of plantation housing seems to be handled by as much as three Ministries. They are the Ministry of Plantation Industries performing the function in its own right, then there is also the Ministry of Estate Infrastructure and the Ministry of Housing. Isn't there a conflict of interests ? How will these three Ministries coordinate operations to bring about the optimum results ?

A: We are working very closely with them so that we do not duplicate our work. The Secretaries to these Ministries are having deliberations so that we prevent duplicity.

Q: In sharp contrast to the success story in the tea industry, local rubber production has declined from 133 million kgs in 1980 to 105 million kgs in 1994 and 97 million kgs in 1999. What happened ?

A: Several rubber dealers have told me that if there is good rubber from the plantations that they will buy the entire stock. One rubber factory owner told me that if the rubber growers produce RSS1, that they will buy it in bulk in its entirety. But, the problem is that there is no high standard rubber. As a result, imports have been mandatory.

So, we have taken steps to form the Rubber Small Holders Authority in the lines of the TSHDA. It is called the Thuru Saviya Fund like the Thay Shakthi Fund. Rubber prices in the world markets have declined and rubber can be imported.

Q: International rubber prices are low and it is said that the manufacture of value added rubber products is the panacea to circumvent this hazard. What are your plans in this regard?

A: That is not the problem. If our growers produce good rubber, there are enough buyers. The future is value addition.

Q: Domestic coconut oil prices have tumbled and the import of vegetable oil has been seen as the deterrent to the development of the local coconut oil industry. What sanctions will the Government impose the importer to protect the local coconut oil industry ?

A: The problem is that we got 2 billion nuts when we need 3 billion nuts. There is a shortage in the market. Therefore, everyone is affected. So, we have decided to get edible oils so that people will get oil at lesser prices. The coconut prices will also go down. We have decided to import oil. This is for a limited period. The Desiccated Oil millers who got Rs. 35 million worth business will also lose their markets if we don't import oil and safeguard the market.

Q: Sri Lanka's national coconut oil industry is in a classical catch 22 situation. If you protect the local coconut oil producer by imposing higher tariffs for imported vegetable oil, the cost of the products of local manufacturers will undoubtedly increase. This will also escalate Cost of Living. How do you reconcile the two issues ?

A: This is what I said. There are various factions to an industry. When you try to appease one, the others will get disgruntled. The answer for all three industries will be to form Federations. We must have solutions to be fair to everybody.

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