Tea factories on a shutdown spree

Several tea factories are closing down due to the falling prices of tea as most are finding it hard to survive in this sector where the production costs have shot up.

“Every week one or two factories are closing down in the South of the country,” Hayleys Plantations Managing Director and for mer Planters Association President Roshan Rajadurai told the Business Times.

He noted that the high cost of production is dampened by the low prices with high growns recording prices at Rs.450 and the national average at Rs.500.

Changing consumer preferences and a dip in demand and production levels have contributed to the current crisis.

Unless there is large scale mechanisation on virgin lands producers will have to sustain production at these levels, Mr. Rajadurai noted.

Stable prices at auctions must be achieved and it is important to ensure that a different wage model is established for company estates in addition to sustaining the existing marketing and finding new ones, he said.

With factories closing down this would mean that the leaf collector and bought leaf supplier are out of business and so tea planting will not become attractive to them, he explained.

Sri Lanka Factory Owners Association President Harith Ranasinghe confirmed this stating that

currently there are about 48 factories closed down out of a total of 720 factories that includes RPC factories as well.

He noted today about 30 factories are operating only about twice or thrice a week and some are servicing only the bought leaf suppliers and not their loans since they are unable to pay it back due to the high interest rates and high cost of production.

Factory closures started since the end of last year, he said adding that if the government does not provide any support more will have to shut down operations. Most factories that shut down were in the mid grown areas, Sabaragamuwa and Galle and Matara areas.

Mr. Ranasinghe noted that they had complained to Ports, Shipping and Southern Development Minister Sagala Ratnayaka last week as well seeking some form of relief however, nothing had come through. He also pointed out that Cabinet had approved an open ended proposal to grant relief to the factories with no mention of how much or what kind of relief will be provided.

Moreover, the industry states that they have been repeatedly requesting authorities to charge the Economic Service Charge from the factories on the 32 per cent of the revenues earned by them and not a 100 per cent revenue since 68 per cent of it is paid to the supplier.