RPCs benefit from low interest, inflation

Ramani KANGARAARACHCHI

The macro economic scenario with lower interest rates and relatively low inflation has benefited regional plantation companies (RPCs), Aitken Spence Marketing Director, Plantation Rohan Fernando said.

Speaking at a forum recently on currency fragility he said they will also see a level playing field in terms of corporate tax and also greater incentives for investments from April 2011.

However, in the last two years plantation sector earnings have significantly increased despite the strong rupee and the weakening of the dollar.

Fernando said export earnings in tea and rubber have risen to unprecedented heights in 2010 and plantation companies in particular have benefited from strong commodity prices for tea, rubber and palm oil.

Global tea shortages and increasing price of oil has seen boom prices particularly for rubber, whilst palm oil prices both locally and internationally have been at a high.

The growing concerns of plantation industries against a background of a fragile US dollar, would be in controlling cost of production at a domestic level.

"Sri Lanka has to compete internationally with low cost producers particularly in tea such as, Vietnam and East African countries," he said.

Currency fragility is not conducive for any industry particularly those that are export oriented like the plantation industry. Prior to 2009, the tea industry benefited by a depreciated rupee.

Sri Lanka today has one of the highest cost of production for tea. Therefore, the concerns are lower tea production caused by global warming and climate change phenomena, rising energy cost and rising wages without any link to productivity.