Plantation industry needs long-term Master Plan - Malik Fernando

In a press statement this week, Director Operations of the MJF Group, Malik J. Fernando, the owners of the international Dilmah brand has called for a Master Plan for the plantation sector. Fernando says an industrywide Master Plan is required for Sri Lanka’s 150-year-old plantation industry to re-align itself with internal and external changes and to remain competitive.

“We need to develop a common Master Plan that all stakeholders, including the Government can work towards. Tea, the main plantation crop, requires long-term strategic direction, but right now, this is lacking. The entire plantation industry needs 5-10 year rolling plans to enable long- term planning and financing of the required investments,” Fernando said.

Changing landscape

Fernando, who joined the MJF Group as a Management Trainee 25 years ago oversees the diversification activities of the Group, said the current production model for tea is unsustainable given the high production costs, low yields and volatile market prices.

“The industry is badly affected by high costs and low yields. Tea prices were record high for the past 2-3 years cannot be expected to remain at this level continuously,” said Fernando.

With a 30% wage hike in June 2011 is unsustainable with some high grown estates already losing as much as Rs 150 per kg of tea. Fernando points out that the Sri Lankan tea industry is uncompetitive against international competitors.

“As wages are 60% higher in Sri Lanka than in Kenya, and worker productivity is 60% lower in Sri Lanka. The daily labour wage is now over 150% of the value of a kilo of tea sold at the auctions. This is only 80% in Kenya,” explained Fernando.

Meanwhile, yields are dropping as tea companies cannot afford proper agricultural practices.

This combination of rising production costs, lowering yields and price uncertainty, Fernando, says, “is deadly”.

Re-aligning the tea sector

To re-align Sri Lanka’s traditional tea sector and face the future, Fernando says government support is needed in long-term financing and regulatory changes. As for financing, Fernando suggests a model similar to India’s ‘Special Purpose Tea Fund’ for replanting, infilling and rejuvenation aged tea bushes.

“A similar program could be offered in Sri Lanka to all growers, both companies and smallholders. Export levy on bulk tea introduced last year can fund part of this cost. Bank investment funds from VAT savings could also be channelled for such activities. Out of Sri Lanka’s total 220,000ha of tea around 5000ha could be targeted for replanting annually, under an accelerated program,” suggests Fernando.

On the regulatory front Fernando suggests the Government consider lease extensions to 99 years, for companies that implement proper agricultural and management practices. Restrictions on land use, by Regional Plantation Companies (RPCs) should be reviewed, allow RPCs to diversify land use, and a hedge against a downturn in a mono-crop situation.

“We must move away from the perennial mono-crop model to a maximum land productivity model. Which means planting rubber, oil palm, fuel wood or other fruits or vegetables in fields that are not suitable for tea,” explained Fernando.

“To reduce fossil fuel dependence, around 20,000ha of fuel-wood was planted, with borrowed funds, a master plan with the approval of the Forest Department. But companies were not allowed to harvest the fuel-wood, even under supervised conditions.

This has contributed to the increase in the cost of production due to transportation of firewood and use of imported liquid fuel instead of renewable fuel-wood,” Fernando further stated.

“We must encourage scientific research on the latest technology such as nano technology, bioremediation techniques, soil organic enhancers and slow release fertilizers. Genetically modified plant material, integrated pest and disease management systems with biological predators, should be encouraged,” he said.

Change the traditions

Other tea industry traditions may also require changes to ensure Sri Lanka’s 150-year-old tea industry on a long-term viability.

“The Government should help meet the social cost of non-workers because 68% of people living on RPC estates are non-workers,’ points out Fernando.

Changes are already slowly unfolding. RPCs are starting to move to a bought leaf/ out grower model of self-employed worker/farmers, who are allocated specific lands and supply green leaf to the factories and work on their own time.

This ensures no flush is lost, maximizes field productivity and empowers the worker. A move away from a fixed wage also gives higher incomes and dignity of work. Part of the factory profits are shared with the farmer, who receives comprehensive extension services from the factory. This, being a successful global model, already practised in East Africa.