Country opened
to European enterprise
Who would have realised
that a new chapter of such great consequence
was going to open up for the tea industry when
the clock struck twelve midnight on 31st December
1899. It ushered in a period of great importance,
not only for the industry but also to the entire
nation.
It has been said with a great deal of truth,
that the British acquired this country not by
deliberate intent, but by accident. They moved
in fast with no exact knowledge of their final
destination. They came in to fulfil their urge
for adventure, to seek their fortunes and enlarge
their possessions. In the process the British
nevertheless were able to lay the foundation
for a great empire of modern times in this island
of Ceylon.
Ralph Fitch was the first European to land in
Colombo on 5th March 1589. This laid the groundwork
for many other European to stream into Ceylon
250 years later to establish the plantations
in the primitive forests of the backwoods of
Central Island. The British sailor, Robert Knox
followed, but was kept a captive under King
Raja Sinha 11 in Kandy from 1660 to 1679.
In the meantime the Portuguese who happened
to be the first European settlers in the country
appeared in Galle in 1505 and moved to Colombo
in 1519. They were unsuccessful in moving to
the central hills, and their influence was mainly
confined to the Maritime Provinces.
The first Dutch ship arrived in Batticaloa on
31st May 1602 and after 54 years of war, intrigue
and manipulations between the Portuguese the
Dutch and the Kandyans, Colombo was ultimately
taken over by them on 12th May 1656.
In 1796, Dutch holdings had to be abandoned
when a British expedition from Madras threatened
their supremacy in the island, and at last Ceylon
became a Crown Colony in 1802. The most important
economic event that followed during the British
period was the opening of the island to European
enterprise. The second important event was the
acquisition of the Kandyan territory in 1815.
With it, British took possession of the entire
island.
Construction of the necessary infrastructure
found essential for the promotion of an agriculture
economy commenced thereafter. It was Sir Edward
Barnes who laid the foundation for future development
of the island by his prudence in constructing
roads and bridges during the period 1824 to
1834. His first task was to construct the great
highway into the hill-country.
Many commercial enterprises followed. In 1820,
Mr. George Bird commenced coffee planting in
Kandy, and in 1824 opened up his own plantation
at Sinnapitiya near Gampola. This project, in
a sense was the real beginning of what has since
grown into the vast plantation industry of the
present day.
Recorded in buried musty files are the land
sales during the early days. It contains a story
of individual enterprise, hardship, fortune
and heartbreak that would fill many a volume.
Within nine years, Crown lands totalling 294,526
acres were sold to Ceylonese and Europeans.
These new settlers pushed their way initially
into the valleys of Dumbura, Ambegamuwa, Kotmale
and Pussellawa.
Some were genuine planters but most others were
just futures traders, who were always found
in a venture of this kind. All the undisturbed
jungles surrounding Pidurutalagala, the highest
point in the island was soon converted to fields
of coffee. After having completed their task
on the western highlands, they spilled over
to the rolling grasslands of Uva.
Sir Emerson Tennant compared this period of
land development in the country to the gold
rushes in California and Australia. The main
differences however were that “the enthusiasts
in Ceylon instead of thronging to dig up, were
fast burying their gold.”
This was a reference to the disaster that overtook
Ceylon in 1845 due entirely to a financial crisis
originating in England. Most panic-stricken
landowners abandoned their properties; still
others sold their holdings for a mere song.
The government was called in to intervene. All
development works were halted, and instructions
from Colonial Office were “save and hoard
revenue.”
Adversity has its uses, and with it, a new era
dawned for the plantations. The immediate result
of this temporary setback was a return to financial
sanity and an arduous rebuilding of the industry,
all but ruined by ill-luck and senseless speculation.
Those who stuck to their possessions and those
who followed them later set about their task
in a more sober disposition. This was a trying
time for the estate owners with their problem's
manifold. The recruitment of labour from South
India, their transport to the plantations, the
complexities in the upkeep of a large work force,
were just a few of the major issues
At this stage, the planters felt the need to
form an organisation to safeguard their interests.
Most of all, they needed an association to speak
authoritatively on their behalf and to deal
with those responsible for the administration
of the island. It was Mr. George Wall who drafted
a circular letter proposing the formation of
an Association. As a result, about hundred coffee
planters met on February 17th 1854 in Kandy,
and under the Chairmanship of Captain Keith
Jolly, the Planters Association was formed.
The advancement and progress of the association
were so fast that within two years, 27 Planting
Districts were carved out. There were 404 plantations,
and 80,950 acres under coffee yielding 325,438
cwts of coffee per annum. During this period,
roads were extended, old constructions put in
order, and rivers bridged. Amidst this upsurge
in activities, the Planters Association continued
to grow rapidly watching over planting interests
and voicing the viewpoint of the planter to
the government.
Next most important event to take place that
sealed the bond of reliance between the state
and the private sector was the creation of the
Ceylon Chamber of Commerce on March 25th 1839.
There has never been in the history of Ceylon
where the private sector had not participated
in economic development, nor has there ever
been a time when private industry had not play
its part in creating national income, in replenishing
the public revenue and in providing other services.
The state and the private sector have always
been partners in progress. The Ceylon Chamber
of Commerce has always helped to promote the
economic development of the country, nurtured
its commerce, created appropriate machinery
for all the processes connected with trade,
and endeavoured to maintain high standards of
business practices and morality.
During British rule in the island, it used to
be said that the policy of the government in
regard to economic, commercial and even fiscal
questions were dictated by the Planter’s
Association and the Chamber of Commerce, and
the voice of Queen’s House and Downing
Street was merely the echo of the voice of these
two associations. Whatever justification there
might have been for this belief, the fact remained
that they were the only two organised bodies
that existed in Ceylon at the time that the
government was able to consult.
It was the coffee industry that revealed the
rich possibilities for plantation agriculture
in Ceylon. Several original members of the Chamber
joined this new enterprise followed by many
Government officials, including the Governor
himself who risked their own money to see the
industry off the ground.
The overall development of the country during
that time was entirely due to the expansion
of the coffee industry. New roads, towns, bridges,
railway and the sheltered port of Colombo came
into existence on the rising tide of the “bitter
berry.” A banking system, engineering
workshops, hotels and department stores, and
a flood of imported goods followed, to make
life a little pleasanter. .
Export of plantation coffee reached its peak
in 1870 at 885,728 cwts. With smallholder coffee,
this figure increased to 1,054,030 cwts. The
end of coffee as a plantation crop came in 1889
when exports fell to less than 100,000 cwts.
The great coffee industry built by private enterprise
collapsed in the 1880’s stricken by a
deadly disease that made its appearance in 1869.
Within twenty years the entire industry was
ruined. Banks failed, agency houses went into
liquidation, and most planters rendered penniless.
Other crops were tried out but salvation was
found in the substitution of tea for coffee.
This switchover is considered one off the brightest
chapters in the story of private enterprise
in the country.
By the turn of the century, tea had taken over
and was on its way becoming the staple export
of the country, exporting 149,265,000 pounds
of tea to many parts of the world. New markets
were developed in the New World. Methods of
cultivation and manufacture were improved and
soon tea planting became more scientific and
more profitable.
The speed and efficiency with which the new
plantations were developed are well illustrated
in the success story of Mariawatte Estate Gampola.
One hundred acres were planted in 1879. In 1884
and 1885 crops of 1,092 lbs and 1,180 lbs were
harvested. For many years it continued to give
crops of over 1,000 pounds per acre
The growth of the tea industry is reflected
in the following figures.
1873 23 lbs
1888 23,000,000 lbs
1903 151,000,000 lbs
1953 338,500,000 lbs
Earliest reference
to tea
Tea, although not indigenous
to Ceylon, had attracted much attention in the
Island. A few experiments had been carried out
even before coffees become a major export crop.
Commercial exploitation of tea in the British
Colonies commenced with the discovery of this
plant growing wild in the forests of Assam in
1830. It was Lord William Bentinck, the then
Governor General who set up a tea committee
in 1834 to investigate the possibilities of
its commercial cultivation in the Presidency
of Bengal. In 1836 the first Assam grown tea
was sent to London.
Ceylon received the first consignment of tea
seeds from Assam at the Peradeniya Gardens in
December 1839.
Wolf made the earliest reference to tea in the
island in 1782 when he wrote that “tea
and some other sorts of elegant aromatic, are
not to be found here. Some trials had been made
to rear them, but without success. It is the
same with sugar; as a rarity, indeed, it may
be had here, but not in such quantities as in
the fields of Batavia." Captain Robert
Percival, who was present at the capture of
the Island from the Dutch in 1796 giving an
account of the natural productions, had the
following to say.
“But it was not sugar alone that Ceylon
seemed destined to afford to the general use
of the western world; the tea plant has also
been discovered native in the forests of the
Island. It grows spontaneously in the neighbourhood
of Trincomalee and other northern parts of Ceylon.
General Champagne informed me that the solders
of the garrison frequently used it. They cut
the branches and twigs and hang them in the
sun to dry; then they take off the leaves and
put them into a kettle to boil to extract the
juice, which has all the properties of that
of the Chinese tea leaf.”
He proceeds further to say that the government
of the day nor the public seems to have taken
much notice of this fact until after the coffee
enterprise became a partial failure. Even at
that stage, Percival was convinced that the
Ceylon tea would supersede the use of the Chinese
article, as also of the Assam type. The quantities
however were not sufficiently large enough to
be appreciated.
According to Tennant Dutch had attempted to
cultivate tea but without success. Cordiner,
in 1805 say that the tea plant was growing wild
near Trincomalee, and that the soldiers dried
the leaves, boiled them, and preferred the decoction
to coffee. Bertolacci contradicts a report current
in his day (1813) that the tea plant grew wild
in the forests of Ceylon, and yet Bennett, thirty
years later, bravely published a coloured plate
of a species of an indigenous tea plant. This
he did however, on the authority of Assistant
Staff Surgeon Crawford who in 1826 sent him
the specimen from Batticaloa, of which however
Bennett could never find another in the Mahagam
Pattu.
Tenet, on better authority mentions that the
leaves of the “Rannawara” were infused
in the South of Ceylon as a substitute for tea,
the plant being called the “Matara Tea
Tree”. Dr. Trimen, who took over the directorship
of the Royal Botanical Gardens at a time when
coffee was failing as a commercial crop, described
it as a small tree common from coast to Dimbulla,
with leaves often strongly serrated, for which
the name of “Roxburgh” was adopted.
The tea plant was first introduced in the British
time under the direction of Governor Stewart
Mackenzie in 1839. Dr. Trimen who succeeded
Thwaites as the Director of the Royal Botanical
Gardens, in his report published way back in
1886, cleared all doubts regarding the introduction
of tea to Ceylon. .
Facts with regards to the first introduction
of Assam tea into this colony are as follows:
-- “In December 1839, Dr. Wallich, the
eminent Indian Botanist, at that time as head
of the Calcutta Botanical Gardens, sent to Peradeniya,
seeds of the then discovered “Indigenous
Assam Tea," and these were followed in
February 1840 by 205 plants. In May, the Superintendent
of Peradeniya, Mr. Normansell, sent several
plants to Nuwara Eliya, and a person supplied
to look after them. This was after representations
were made to the government that tea was likely
to prove a “new and profitable speculation,
and a valuable source of revenue to the government."
Again in April 1842, another instalment of Assam
plants was received from Dr. Wellich, and in
October some of these were sent to Mr. Mooyart
at Nuwara Eliya with directions to cultivate
them, but was not sure as to what became of
them.
By accident he met in London E. F. Gapp, to
whose care the plants had been sent. He was
at that time tutor to the son of Sir. A. Oliphant,
Chief Justice of Ceylon. He informed that in
October 1842 he received the plants from Mr.
Mooyart at Nuwara Eliya, about thirty in number,
and cleared a piece of jungle for them on Sir
Anthony’s land. They were doing well when
he left the island a few years after. Mr. Gapp
thinks the ground was somewhere in the neighbourhood
of the present Queens Cottage. Some of the Nuwara
Eliya plants were put out near Essex Cottage,
now Naseby tea plantations, and it may be worth
a search to discover whether these plants are
still in existence.
Worms' brothers of the Rothschild family had
in 1841, attempted to raise the Chinese tea
plant on a correctly prepared clearing on Rothschild
estate Pussellawa, and later on Labookelle on
the slops of Ramboda Pass. Manufacture was undertaken
with the assistance of a Chinese tea maker.
The project was abandoned due to high costs
involved, which often exceeded pounds sterling
5 per pound. Many other planters too tried growing
tea as a subsidiary crop to coffee, but all
failed due to the high cost involved in its
manufacture. Very little headway was made during
the initial stages to expand its cultivation.
Though the first attempt at manipulating the
leaf was a total failure, the tea plants flourished
well.
When the above properties were taken over by
the Ceylon Company Ltd. in 1865, they found
a small extent of tea on Condegala on the Ramboda
Pass, growing well, and soon they began to pay
attention. An Assam tea planter of some experience
was employed to manage the estate, assisted
by Bengali coolies. The experiment did not prove
a success. This in a way prevented other planters
from taking to tea planting in a big way.
In the meantime, Mr. P.D.Millie claims to have
planted tea in Punduloya in 1861. Mr. David
Baird Lindsay too says that he had obtained
Assam tea seeds in 1864, and had them planted
in Rajawella, Dumbara. His tea manufactured
from trees six feet tall, were unsparingly condemned
in Mincing Lane, and very little was heard of
the Dumbara teas thereafter.
In a much quieter way, and as early in the field,
the then proprietors of Loolecondera estate
Hewaheta, Messes G. D. B. Harrison and W. M.
Leake and later the Anglo Ceylon and General
Estates Company Ltd. who under the careful management
of Taylor, were able to acquire the highest
eminence among Ceylon teas.
Taylor on Harrison’s orders, collected
tea seeds from the Peradeniya Gardens and planted
them along the roadsides in 1866. Further, Mr.
W. M. Leake, being the Secretary of the Planters
Association, was able to influence the Governor
to send Mr. Arthur Morice an experienced coffee
planter on a mission to India to inspect and
report on the Assam tea districts. The report
that followed was well accepted by the planting
community. This report persuaded Mr Leake to
order for his firm M/s Keir Dundas & Company
a consignment of Assam hybrid tea seeds in 1866.
These seeds were handed to the care of Taylor,
who in turn planted them in a clearing of twenty
acres,
In almost four year's Taylor was able to sell
his teas in the Kandy market. The samples forwarded
to London however were also well reported on,
and this convinced them to extend their cultivation
further. Taylor, being a perfectionist, was
involved in the manipulation of the leaf, so
as to obtain the best possible results. He was
lucky to have served under Mr. Jenkins, an Assam
tea planter, who knew all the complexities of
tea manufacture.
He was able to draw on his knowledge, and before
long Taylor too became an expert tea maker and
began to produce teas equal to Assams in preparation
and quality. The Company continued to import
Indian tea seeds on a regular basis, and Loolecondera
teas began to be classed as being equivalent
to the best in the world.
Loolecondera soon was acclaimed the showpiece
in local tea planting. In 1888, the twenty year
tea bushes were reported to be growing vigorously,
and in 1891, Taylor himself reported that the
“tea fields were as good as ever, giving
the same crop. It had been fertilised once only
with caster cake in the beginning of 1885."
Taylor died on 2nd May 1892, and his successor
Mr. G.F. Deen reporting on the same fields twenty-seven
years later, had the following to say. “They
are still full of vigour, showing no signs of
decay and up to date the oldest tea fields have
been giving yields at the rate of 471 pounds
of made tea per acre. It is still flushing and
yielding well."
Commercial planting
of tea
It was not until 1867 that
tea came to be grown commercially, and it was
James Taylor who proved on Loolecondera that
tea could be grown profitably as an alternate
crop to coffee that was on its way out. Had
it not been for the pioneering efforts of the
British planters who took to tea with confidence
rather than with despair, coffee would have
gone on its way and thousands and millions of
people the world over would not be enjoying
“Ceylon” tea today?
With the coffee industry fast failing, the British
planters had a choice of other products such
as cinchona, cardamoms, cocoa, Indian Rubber,
Liberian coffee, and many others, but only a
very few turned out to be as promising as tea.
It was the belief, and often remarked, that
the western and the greater portion of the central
divisions of the island were evidently intended
by nature for tea growing. “Leafage”
is the predominant characteristic of the vegetation,
and the constant humidity and the almost uninterrupted
monthly rainfall, often so averse to blossom
and fruit formation, were the ideal conditions
in which the tea plant ought to flourish, and
bring forth flushes more abundantly.
With the future of tea now looking bright, the
problem of obtaining planting material in sufficient
quantities to meet the ever-increasing demand
surfaced as a major restraint to its steady
progress. A large quantity of plants of both
the Assam hybrid and the Chinese variety was
distributed from Peradeniya and Hakgala Botanical
Gardens during the period 1873 and 1874. These
were found insufficient, and the planters were
forced to turn to India for the supply of Assam
tea seeds. A considerable business in tea seeds
resulted during the initial stages, but with
the steady growth in the tea coverage, a great
deal of local tea seeds was available from the
older plantations.
It was reckoned that the rush into tea planting
at the initial stages had been to some extent,
hampered due to the scarcity and comparative
dearness of tea seeds. Most of the planters,
who were recovering from the coffee crash, found
it difficult to invest in tea seeds that were
selling at around Rs.50 to Rs.80 per mound.
The cost of planting up an acre for seed alone
was found to be more for tea than for coffee
or cinchona.
The importation of tea seeds in sufficient quantities
commenced from about 1882, but by 1898, in consequence
of a temporary depression due to poor tea prices,
and adverse exchange rates, imported Indian
tea seeds became difficult of sale. This provided
the enterprising tea planter, with a supplementary
source of income by producing the much-needed
seed and raising young plants locally.
Elphinstone, a pioneer coffee planter, who witnessed
the conversion to tea, was quick to take advantage
of this difficulty, and became the forerunner
in the sale of tea seeds in the country. In
1882 he was able to raise an extra Rs.16,000
from the sale of tea seeds from Horagalla estate
(Nagastenne Group) Dolosbage. By 1890, there
was not a single planting district in the island,
in which tea did not dominant, except perhaps
in places such as Dumbara, Pangwilla, and in
lower divisions of Matale, where cocoa was being
tried out.
The part played by the private sector comes
into prominence from thereon. The introductory
care taken by the Worms Brothers in the promotion
of coffee and then tea cultivation in the country
cannot, at this stage be disregarded. “The
Worms brothers belong to a remarkable family,"
says Ukers in his book All About Tea. The eldest,
Solomon, was the first Baron de Worms, son of
Benedict Worms of Frankfort-on-Main, and his
spouse, who was the eldest sister of the Baron
de Rothschild.
The brothers were born traders and adventurers.
They were both members of the London Stock Exchange.
The sprit of adventure made Maurice to set sail
East in 1841, and Gabriel followed him the following
year. They set themselves up in shipping and
banking business, with Maurice looking after
the planting end in the up-country. He inaugurated
the planting enterprise in the country with
some Chinese cuttings, which he brought home
after a voyage in 1841.”
Subsequently, the Ceylon Company, which later
was renamed the Eastern Produce and Estates
Company Ltd. imported Indian labour, and under
the direction of Mr. Jenkins, a retired tea
planter from Assam, were able to make tea by
hand in a temporary factory at Condegala and
at Hope.
The 2000-acre Rothschild estate at Pussellawa
was well known for its completeness and efficiency,
and was considered a model for others to review.
For over twenty-five years Rothschild tea was
the standard for quality in Mincing Lane. With
the start made at Pussellawa, they soon reached
out and opened Keenakelle in Badulla, Meddecombra
in Dimbulla, Thotulagalla in Haputale, Condegalla
and Labookelle in Ramboda, and Norwood in Dickoya,
with the total holdings of 7318 acres. They
held these properties for twenty-four years
and sold them to the Ceylon Company for Pounds
sterling 157,000, considered a record transfer
of European-owned assets.
Whilst on this subject, mention must be made
of the other famous coffee estates that went
over to tea. There was Delta estate, adjoining
Rothschild on the one side, owned by Rev, James
Glenie, and Captain Harry Bird’s Black
Forest where Mr. F.R.Sabonadiere, the founder
of Sabonadiere & Company Colombo resided.
.
The progress made into tea was rapid, but there
was a period of mistrust that existed between
1867 and 1874. The rush into tea really started
in 1875. The extant under tea increased from
350 acres in 1874 to 1,080 in 1875, and by 1883
the tea coverage had expanded to 32,000 acres.
By mid 1875, tea was growing in thirteen districts
out of the thirty-seven planting districts then
recognised. There were no tea plantations north
of Kandy, and none on the Uva side. Hewaheta
no doubt is indicated as the oldest stronghold
of the tea plantations, but what is most significant
is the rate of development that took place in
the district of Nuwara Eliya and Yakdassa. In
1875, when James Taylor had planted 100 acre's
tea in Loolecondera in Hewaheta lower, Jenkins
on Hope in Hewaheta upper had expanded the tea
coverage to 136 acres.
In most cases, estates opened up in the Nuwara
Eliya district had been mainly for growing tea,
and it is only for this reason that it had acquired
the proud title of a “Tea District."
The leading planter in this district was L.A.Rossiter
who in 1875 owned 203 acres. Rossiter remained
the owner and superintendent of Fairyland (35
acres) Hazelwood (18 acres) and Oliphant (150
acres), with Alston Scott & Company as agents.
He also owned Florence in Yakdassa comprising
100 acres of prime tea. He had been operating
extensively in the purchase of suitable tea
lands, and amongst them was Ratnillakelle, which
he named the “Great Western” estate.
Other plantations were Pedro (35 acres) owned
by F.Bayley and Tullibody (50 acres) owned by
G.Armitage, both under the supervision of E.A
Watson.
During the initial stages, it was the China
jat that was widely used in the country with
good results, and the reports received from
the London brokers had been vary favourable.
It was Dr Thwaites, the then director of the
Botanical Gardens who directed the public to
the advantages of this hardy plant. At the early
stages, there were doubts as to the suitability
of Assam jat at elevations above the limit of
coffee.
This impression however was dispelled when Assam
varieties were found flourishing well at the
Hakgala gardens in the 1860’s. In 1872,
Dr Thwaites saw no reason why the sides of the
higher mountains should not be covered with
tea, and by 1875 the cultivation of tea in the
island was an established commercial success.
Taylor sold his first lot of Assam hybrid tea
in Kandy in 1872, and in the following year
23 pounds were valued at Rs.58 and sent to London.
Expansion of tea cultivation thereafter was
accelerated, and the two Botanical gardens were
hard pressed to supply the industry with the
required planting material.
Large quantities of Assam seeds were imported
from Calcutta, but such imports had to be suspended
subsequently, due to the possibility of contamination.
This led to the establishment of local tea gardens
for the propagation of seed.
The Ceylon planter had much to learn, and he
did it with undiminished anxiety and consecration.
This led him to install, in place of coffee,
a speedily spreading and rewarding industry
that helped to win back his earlier losses.
Ceylonisation of
the tea industry
The correct sense of anticipation
applied by the first batch of Ceylonese who
ventured out to cultivate tea during the latter
part of the 19th century is amply demonstrated
in the courageous manner they faced the problem
of over production and poor prices that surfaced
during the early stages of the 20th century.
They were faced with virtual destruction at
their very first attempt at cultivating tea.
The dumping of poor quality teas in world markets
by the pioneer tea cultivators, reached critical
proportions in 1900, when the locals were just
beginning to market their own teas. The prices
slumped to uneconomical levels. These pioneers
who initiated tea production in the country
were able to successfully over ride this crisis,
with hopes of s brighter future.
The second decisive similar period surfaced
during the period 1920 to 1921. Their determination
once again saw them through, but the rush into
tea by the Ceylonese entrepreneurs slowed down
during this difficult period. This depression
however was short lived, and the remarkable
recovery of the plantation industry created
a great sense of self-satisfaction among the
business community in the island. What had looked
as a major economic disaster had turned within
a few years into a notable success.
The low country Sinhalese in a way captured
all the opportunities that the fast developing
economy of the country had to offer. It was
very likely that one could locate them at the
helm of any flourishing commercial venture even
today.
The island had been fortunate in many aspects.
The climatic conditions ensured that tea could
be plucked all the year round, unlike in Assam,
where the crop is seasonal.
The entire structure of the tea enterprise,
and most of the subsidiary commercial agencies
were owned and controlled almost exclusively
by non nationals, whose main concern was to
remit home as much of the profits as possible.
The local involvement in the economy of the
country was limited to transport and food production.
They nevertheless saw great visions unfolding
in tea once again. They were gearing themselves
to play a more active part in the plantation
economy of the country, which earlier had been
controlled by the British interests.
This rapid recovery that coincided with the
switch over from coffee to tea, obscured the
obvious fact that Ceylon was once again becoming
dependant on a plantation economy, a reality
that became apparent during the world depression
thirty years later.
While the Britishers were in the process of
consolidating themselves further in the country,
there was an undercurrent moving towards a progressive
form of Ceylonisation.
The leftist political parties, and the trade
unions were responsible for the revival of nationalistic
sentiments, which began with the independence
movement in the early 1920’s. They not
only wanted political freedom, but also wanted
to enjoy a greater stake in the country’s
economy.
This movement was gathering momentum, and this
nationalistic fervour began to manifest itself
during the worldwide trade recession, which
lasted from 1929 to 1934. This demand was voiced
with even greater urgency after the political
reforms of 1931 that ushered in universal franchise
and an elected parliament with a Board of Ceylonese
Ministers.
The initial outcome of this was the rationalisation
of the management of the larger plantations
held by the British. This no doubt agreed with
the government’s policy of Ceylonisation,
but when this plan was stretched to its logical
end, many European planters were found out of
employment.
According to a report issued in 1952 by the
Commissioner of labour, out of a total of 1912
executives on the plantations, only 684 were
Europeans.
The agricultural sector, with tea as the main
export crop; fell under the direction of the
Minister of Agriculture D.S. Senanayake who
later became the Prime Minister of an Independent
Ceylon. He led the country in a series of agricultural
reforms, but his main concern was to ensure
that Ceylonese individuals controlled the tea
industry. He feared the formation of trade unions
on the plantations, and moved the Legislative
Council in 1947 to disenfranchise the Tamil
plantation workers.
Although the policy of Ceylonisation was clearly
laid down, its execution was to a great extent
hampered by the straitjacket of colonial control.
London buyers controlled the retail business
so that the producers could not overpower the
multinational buying agencies. The Russian market
that proved a great potential for Ceylon teas,
was lost after the revolution of 1917. In fact,
the tea industry became a virtual prisoner of
the London tea market.
Government acted fast
In a bid to encompass this
problem, and to improve the position of the
tea industry the government was quick to react,
and a series of structural changes followed.
The Tea Research Institute was created in 1925
to improve the technical side of tea cultivation.
The Tea Propaganda Board was established in
1932 to promote the sale of tea in foreign markets.
The International Tea Agreement of 1933 helped
to level off global over production. Ceylon
became a party to the Imperial Preference Agreement
signed in 1933 to safeguard tea and rubber prices
in London. Through the medium of the Companies
Ordinance of 1937, the government actively promoted
the formation of rupee companies. The Bank of
Ceylon was established in 1942 to assist the
Ceylonisation policy of the government.
At the time of independence in 1948, sterling
companies based in London and managed by British
controlled agency houses in Colombo owned two-third
of the tea sector. Banking, insurance, shipping
services too was controlled by them, while marketing
arm was totally in the hands of the Metropolitan
concerns.
The government in their determination to Ceylonise
the tea industry went further to introduce export
duties on tea. It now became apparent that the
government’s intentions were that the
tea industry would be the milch cow, which would
finance the overall development of the country.
Exchange control regulations were promulgated
in 1939 and the repatriation of capital halted
in 1957. These measures caused increasing hardships
to sterling capital invested in the country.
It was at this point that the flight of British
capital commenced. East Africa offered a stable
economic and political alternative for British
investment.
The flight of capital once begun could not be
halted. Sterling estates were being sold steadily
through the 1950’s on a piecemeal basis
to Ceylonese companies and individuals, thus
threatening the output and productivity of the
entire industry. This situation reached such
alarming proportions that the government was
compelled to pass the Anti-Fragmentation Act
of 1958 to prevent wide-scale splitting up of
large properties.
This process got further aggravated when in
1956 Mr S. W. R. D. Bandaranaike for the first
time mooted the concept of nationalisation,
though it took a further two decades to become
a reality. Meanwhile the uncertainties brought
about by political independence augmented by
reservations regarding the future of the tea
industry, led still more Britishers to sell
their shares in the plantation companies.
Largely the opportunities to own tea estates
and purchase shares in sterling companies operating
the tea plantations came the way of the Ceylonese
only during this period and after the World
War 11. This was the second opportunity the
local landed gentry enjoyed to participate in
land transactions with the British. The Ceylonese
however was quick to seize new investment opportunities
when they did come their way.
This process of transfer of ownership in the
plantations was aided to a greater extent by
the Korean boom of the 1950’s, which urged
commodity prices to rise in consequence. This
excess wealth in the hands of the estate owners
and the trading community was invested in securing
plantation shares or in purchasing the properties
outright from the British.
These events opened up new vistas for the Ceylonese
to enter into a field that had hereto been exclusively
dominated by the Europeans. This was only one
aspect of the problem. The local participation
was only at the production level, but was forced
to leave the actual task of marketing Ceylon
teas with the Europeans for a further period
of about four decades.
In 1930 sterling companies owned about 80% of
the tea, and 50% of the rubber plantations.
By 1952, this figure had shrunk to 50% tea,
and 38% rubber, and by 1958, it slumped further
to 37% and 13% respectively.
According to Snodgrass, many of the capital
transfers had taken during the period 1950 and
1960, and a sum of Rupees 182 million had been
credited to sterling accounts in England by
local investors mainly to finance foreign estates
and agency houses.
During the period 1935 and 1958, the sterling
companies had sold 35,845 acres of tea of which
locals, 3,044 by other sterling companies, 5,028
by small holders, and 769 by the government
had purchased 27,400 acres.
In order to assist the local estate owners to
finance these purchases, the government established
the State Mortgage Bank in 1931, the Agricultural
Credit Co-operation in 1943, and the Bank of
Ceylon in 1942. The government was forced to
extend further facilities to the plantation
sector when the boom of the 1950’s ended.
Ceylonese participation
in tea cultivation restrained due to lack of
capital
It is said that the tea
industry in the country was launched on the
graveyards of the old coffee plantations. It
may not be altogether true, when taking into
consideration the newly planted tea areas in
the South. It is recorded that practically all
plantation crops had been tried and tested in
the Southern parts of the island.
The Arabs first introduced the coffee plants
to Sri Lanka. This plant originally grew wild
in the gardens of the enterprising Southerners,
and around temples in which its beautiful scented
flowers were used for decorative purposes. During
the Portuguese occupation of the island from
1505 to 1665, no attempts were made to cultivate
coffee. After the expulsion of the Portuguese
by the Dutch, attempts were made to cultivate
other commercial crops such as cinnamon, and
it was only in 1740, an attempt was made to
cultivate coffee.
Tea on the other hand was comparatively a new
fashionable idea to the locals in the South,
and what is most significant is that local entrepreneurs
undertook large-scale cultivation of tea in
these areas. Through their involvement in agriculture
for centuries, they had acquired the inherent
skills, and cultivation of tea did not pose
much of a difficulty.
Most of the tea plantations in the South were
opened only at the beginning of twentieth century,
and the sprawling acres of tea seen in this
part of the country stands as a tribute to the
local pioneers who ventured out in clearing
vast tracks of virgin jungle, which was found
less attractive to the Britishers. The Knowledge
gained in other agricultural ventures was applied
to tea with great success, and with it the low
grown segment began to develop.
The process of Ceylonisation of the plantations
during the early stages could have been accelerated
had it not been for the difficulties encountered
by the Ceylonese in obtaining capital for investment.
The essential prerequisites for the establishment
of a plantation economy were cheap land, and
capital at competitive rates of interest. Unfortunately,
all these dependent factors were denied to the
Ceylonese, when they decided to enter the planting
fraternity in the late 19th century.
Land values had appreciated, labour by then
had been unionised, and above all, the required
capital was not available through the normal
channels. Had it not been for these impediments,
the local entrepreneurs would have entered the
agricultural field much earlier.
Trade at that time was the biggest money-spinner,
but it was totally controlled by the Indian
traders with wide connections in India, Africa
and the Far East. Production and trading in
tea and rubber were in foreign hands. They further
manipulated the local tax structure to favour
the sale of British goods in the country. Locally
produced goods could not compete with imported
varieties. All the projects, which guaranteed
high returns, required capital. It was readily
available to the British, but denied to the
locals.
Sir Emerson Tenet, a keen observer of nature
in the island, reporting in 1885 had observed
that there was not a single Ceylonese capitalist
in the sense in which the word would have been
used in England. He would have had little reason
to change his mind, had he was alive in 1915.
The wealth of the country was in the hands of
the British.
The small Ceylonese trader too found it difficult
to compete with the traditional Muslim trader,
the Chettiar, and other minor groups who had
established trading outlets all over the country.
When the Ceylonese were denied access to lending
institutions that were controlled entirely by
the British, they were forced to turn to the
Chettiars, referred to as the merchant bankers
from South India, for their requirements of
capital.
Prior to the establishment of an organised financial
market in the country, commencing with the Bank
of Ceylon, it had been the Nattukottai Chettiars
who provided the Ceylonese the finances to indulge
in trade and commerce. Only a few living today
will realise this fact. From about 1875 to 1925,
the Chettiars had been actively involved in
the financial dealings in the country. During
this half-century, they had helped in no small
way to promote the economical well being of
the country.
They were emigrant traders from Chettinad in
South India, who were ultimately called upon
to set up the economic and the credit structure
in the country, at a time when the locals were
looking forward to holding a stake in nation
building. The dominant role played by them as
private bankers, money lenders, financiers,
and traders during the early stages of the country’s
economic upsurge cannot be taken light of. In
recognition of the financial assistance rendered.
Their name became synonymous with private banking.
They were regarded as the most fascinating of
all the non-indigenous business communities
that had traded in the country. They were a
closely knitted community with very little intercourse
with the outside world. Hindus by religion,
they devoted a considerable amount of their
time to religious activities.
They were known to honour their social and business
obligations without any deviation. They followed
a code of business ethics, which was not common
to other foreigners trading in the country.
The Ceylonese had implicit faith in the Chettiars.
They borrowed freely from them, and also invested
their savings with them. They were always assured
of a good return on their investments.
Money was often given to them for safekeeping,
and the strong box in their houses was considered
as secure any deposit vault in a British bank.
They enjoyed a high reputation in the pawn broking
business, and the Ceylonese preferred to deal
wit6h them rather than with their local counterparts.
The Nattukottai Chettiars were the forerunners
in modern day finance companies. More than 505
of the deposits of the early finance companies
came from this community. They took risks in
speculative ventures that the British banks
avoided. The current position however is different.
It was the disappearance of these Chettiars
from the local money market that paved the way
for the rapid expansion of the native finance
companies.
The harsh words such as: Jews and Shylocks”
that were used to describe these people seems
unjustified. At a time when the British banks
mistrusted the indigenous population, it was
this community that took all the risks to lend
to the locals. Their interest rates may have
been on the high side, but they were only lending
money they had borrowed from the banks. Further,
they had to safeguard themselves against bad
debts, which at that time was a common feature.
During the early stages, they assisted the smooth
conduct of trade with India by discounting the
excess Sterling Bills for rupee bills. This
paved the way for them in their new role, to
become the middleman between the banks and the
local population who required capital. The British
held the Chettiars in high esteem too. .
Coffee was abandoned in the early 1870’s.
It was mainly for tea, and later for rubber
that the Ceylonese agriculturist and the businessperson
needed finance and credit. During this time
of need, it was to the Nattukottai Chettiar
that the local entrepreneurs could turn to for
financial assistance, as they were regarded
as the official money lenders to the nation.
Coffee was abandoned in the early 1870’s.
It was for tea, and later rubber, that the Ceylonese
agriculturists and businesspersons required
finance and capital. During this time of need,
it was to the Nattukottai Chettiars that the
local entrepreneurs could turn for financial
assistance.
The highly complicated nature of local mortgages
did not prevent the Chettiar from investing
in them. The large scale opening up of jungle
land by the locals, for the cultivation of coconut,
and later tea and rubber, would not have become
a possibility, had it not been for the financial
assistance available from the Chettiar community.
They were not rigid in their dealings, and they
were always ready to accommodate the businessmen
and the speculator, the exporter, and the landowner
trying to raise a dowry for the unmarried daughter.
They were very liberal in the securities they
secured from the borrower, but the fundamental
accusation against the Chettiar revolved round
“interest rates.” The degree of
risk was reflected in the interest rates charged,
and they were worked depending on the circumstances
of the case.
It is most unfortunate, that the people of the
country were not sufficiently trusted by the
British lending institutions. The Ceylonese
from the very outset, were compelled to turn
to the Chettiars for financial assistance, due
to the indifference on the part of the British
to lend to locals. This meant that the Ceylonese
borrowers from the very commencement of a plantation
economy were loaded with high interest rates,
unlike the British whom had it cheap all the
way.
The Chettiars continued in this role until about
1925, and with the world wide depression of
the early 1930’s, the government was compelled
to undertake the task of providing the necessary
finances to the fast developing economy. State
sponsored institutions such as the State Mortgage
Bank were set up in 1931. The bank of Ceylon
followed in 1941, and the Agricultural and Industrial
Credit Corporation were structured in 1941,
for the sole purpose of offering financial assistance
to the local segment of the business community,
who had no access to foreign lending institutions.
With most credit functions being undertaken
by the state, the volume of money lending businesses
of the Chettiars was further reduced.
Vane Ena Lena Shena Letchiman Chettiyar was
a famous money lender who conducted a brisk
business in Galle, at a time when there was
a burst of economic activities in the Southern
districts. The original set of Ceylonese who
changed their scope of activities from trade
to agriculture, was a brave lot. They opened
out vast tracks of virgin jungle for the cultivation
of a crop established by the British. The names
of these prominent planters from the South would
have appeared in the books of record maintained
for the conduct of his business several times.
Following in the footsteps of the original Chettiars
was C. P. Haley and Company. They conducted
a thriving business in general merchandising
in Galle. In a bid to attract additional business,
they too commenced lending money at cheaper
rates of interest to those offered by the Chettiars.
In this manner they were able to obtain a fair
share of the business conducted in the southern
province.
Development of
the smallholder sector
The plantations in the
South were opened up during the early part of
the twentieth century. It was no doubt an uphill
task all the way, but they took it on the stride,
and although the start was difficult, the Korean
Boom of the 1950’s provided them with
the much-needed capital, and assured them of
a steady growth for the future.
Another important event that affected the progress
of this sector came about with the Land Reform
Law No 1 of 1972. Until the above reforms were
enforced, there was no law in the country that
fixed a sealing on land ownership. By 1972,
there were about 5,600 owners of agricultural
property who had nearly 1.3 million acres with
an average land holding of 200 acres, as against
the national average of 0.36 acres per person.
The maximum extent of land that may be owned
by any person was defined as follows.
If such land was exclusively paddy land, 25
acres, OR
If such land does not consist exclusively of
paddy land, then 50 acres.
Under this new law, land owned by public companies
and religious institutions was exempt. It was
at this stage that the expansion of the smallholder
sector really developed.
According to a survey conducted in 1874, the
total population of Ceylon was 852,000 of which
47% lived in the Maritime Provinces stretching
from Chilaw to Tangalle, reflecting a very high
concentrating of people along the seacoast.
All of them were not Sinhalese. Many were Europeans,
but there were also Chettiars Burghers and Malays.
In addition, there were regional distributions
between the low country Sinhalese and those
of the Kandyan provinces.
British as the Colonial masters accepted the
differences present among the Sinhalese, but
established a judicial and administrative system,
which held all people equal before the law.
Under the British, no one was discriminated
against, and everyone benefited from the expanding
economy. Casts became increasingly a matter
for political concern, although a differentiation
was generally made on an occupational basis.
In the case of the Sinhalese, the community’s
major internal division has been geographical
between the Kandyan families and the aristocratic
families in the low country. Their respective
economic resources broadly reinforced this division.
The Kandyan families, holders of Nindagam (Kings
land) found themselves reduced to poverty after
the unification of the country by the British
in 1815. Many of the low country aristocracy
however maintained or enhanced their economic
power through the cultivation of commercially
viable lands in coconut, rubber tea and other
products.
The people of the low country had been greatly
influenced during the long years of colonial
rule. They had been constantly exposed to the
economic propositions and activities of the
West, whereas the Kandyans prided themselves
on embodying the virtues of Sinhalese traditionalism.
The people living in the Maritime Provinces
on the other hand were considered more responsive
to changes, and after having acquired all the
trading skills of the foreign invaders, they
came to be regarded as giants in commerce trade
and industry, though out of proportion to their
numerical size.
The older families from Moratuwa and Panadura
such as the De Mels, the Peirises, and the De
Soysas were heavily involved in the estate owning
sector, chiefly in coconut and rubber, and later
tea. The older generation followed a pattern
of accumulation rather than entrepreneurship,
while the younger generation took up too commercial
and trading activities.
A great deal has been said about the British
planter who started a great plantation industry
in the early 1830’s. Very little is known
of their local counterparts who alongside the
British helped to establish a plantation enterprise
in the island at about the same time.
The Native Era
The period 1900 to 1920
has been referred to as the “Native Era”
for tea planting. There were feverish activities
directed towards converting vast tracks of land
in the Gampola, Pussellawa, Badulla, Galle and
Matara districts into tea lands.
These areas were full of promise, and provided
the new comers ideal conditions to make a start.
The other wealthy families who had already commenced
with coffee were fast converting them into tea,
along with their European counterparts.
Ever at this late stage the expected government
assistance did not come the way of the local
entrepreneurs. Instead, they were placing further
obstacles in the way of the industry among the
Sinhalese. Notwithstanding all impediments,
the locals were gradually expanding their tea
coverage in their gardens. During the early
stages, unknown to the government authorities,
many responsible villages were purchasing tea
seeds and plants on a regular basis at the rate
of Rs.10/- per thousand, for inclusion in their
home gardens.
When this tendency became more noticeable the
state took notice, and the Government Agent
Southern Province in his administrative report
for 1890 had recorded that “the natives
are going in extensively for tea planting,”
and reporting in 1893 he had said that “Sinhalese
tea gardens are especially numerous in Wallaboda
and Talpe Pattus.” The growth of the smallholder
sector in the country could be traced to this
period. Although its development had been slow
during the initial stages, it ultimately proved
to be one of the most effective growth areas
in the country’s tea industry.
Along with the development of the small holder
sector, there was also the wealthy families
from the Southern Province, very often sons
of acclaimed agriculturists, who, after having
acquired the necessary skills in planting from
their fathers took to the cultivation of tea
in a more serious manner. They are well known
for having invested widely in tea and for conducting
their businesses with considerable success in
the twentieth century.
The second push into tea, and this time to purchase
developed properties from sterling companies
came their way after Independence. The uncertainties
created as a result of the Second World War
and granting of political independence to Ceylon
in 1948 offered the Ceylonese further opportunities
to expand their holdings in tea.
This was a chance they were all waiting for,
as they were now able to venture into an area,
which up to this time had been the exclusive
fortification of the British. They were now
in a position to savour the odour of upcountry
teas and have a stake in its decision-making.
They accepted this opportunity with open arms.
In this instance, they were able to penetrate
the hill country by purchasing outright well-developed
properties from the British.
A revival of nationalistic sentiments at some
time or other is the natural desire of people
who have been subjected to long periods of foreign
domination suffers from, and in this case Ceylon
was no exception. Although this sensitive issue
was freely discussed from about the early 1920’s,
it only remained a far cry until the colonial
office gave a greater measure of self-government
to people of the island. The originator of these
changes was Lord Donoughmore. The new constitution
drawn by him was designed to provide the training
ground for the day Ceylon was to run for her
own affairs. This constitution came into operation
from 1931.
This form of political thinking and the changes
that were taking place in this field gave perceptiveness
to the events that were in store for the country.
The average citizen was no doubt going to be
a stakeholder in this new economic order.
Amidst all these favourable changes taking place,
which indicated a boost to the economy of the
country, a dangerous sign of a trade depression
appeared from about 1929. This tendency developed
until the entire economy of the colony was suffering
from the effects of a worldwide slum that continued
until 1934. Prices of primary products declined
sharply in international markets.
This was a period of real affliction to both
the local and British planter. Salaries could
not be paid, and a few from the tea sector were
thrown out of employment, forcing them to seek
engagements elsewhere. Serious thoughts were
given to economising on production costs, and
the immediate of the plantation companies was
to rationalise their properties placing superintends
in charge of large units with a fewer assistants.
This trend coupled with the Ceylonisation policy
of the government changed the entire structure
of the plantations. A survey conducted in 1952,
it appeared that out of a total of 1,912 executives
on the plantations, only 684 were Europeans.
This depression in a way helped the Ceylonisation
policy of the government to become effective
within a short period of time.
When the depression was at its worst in 1932,
rubber that was mostly a local venture was selling
for only 8 cents per pound. Tea prices were
no better and could fetch about 33 cents for
a pound. The prudence of the government in introducing
income tax during this time was questionable,
but its introduction at the depth of the slump
would have relieved many of the landowners of
their tax obligations.
Unlike most other produce, tea took a longer
time to get back on track, as there was apprehension
regarding overproduction of this commodity at
that time. Further, it was during this period
that teas produced in Dutch East Indies (Indonesia)
entered the market. This tended to worsen the
situation.
Tea export quotas
introduced
During the period 1920
to 1930, the tea industry experienced boom conditions,
but the upsurge was confined to only production.
There was a heavy surplus of common teas in
the London market during the latter part of
1920 as a result of bumper crops in India. Ceylon
and Java. As a consequence, tea prices slumped.
This grave situation resulted in a general agreement
being worked out between the British and the
Ditch tea planting associations to restrict
voluntarily the 1930 crop. This strategy met
with only partial success due to the inability
of the Dutch to control exports of native grown
teas.
Continuous overproduction resulted in a further
dip in prices. It was finally agreed to restrict
tea exports for a period of five between the
major producers of tea, namely India, Ceylon
and the Dutch East Indies. This export regulation
scheme became effective from 1933.
A reduction in surplus stocks to normal proportions
could not be achieved within the stipulated
five-year period, and the scheme was subsequently
extended until 1954. For Ceylon a 15 % reduction
was negotiated based on the total exports of
1929. This was referred to as the “Ceylon
quota of exports,” which was maintained
at 213,794,225 lbs for the year. These quotas
were worked out each year for the different
countries, depending on the global situation.
The success of this project was mainly due to
the assistance rendered by the planters themselves.
Had it not been for this early intervention,
the tea industry would have headed for a total
collapse, and most to suffer would have been
the local entrepreneurs who were fast taking
over from the Britishers.
Political Prudence of Land Reform
Land settlement issues
in the country had remained a complex problem
from time immemorial, and have constituted the
flesh and blood of the country’s society.
Over the years, it had developed into a social
structure originating in family ties, religion,
and cast, race, and land owner-ship patterns.
The plantation industry had grown-up on Western
lines, and they had employed similar concepts
of agricultural practice. Subsistence agriculture
was converted to capitalist agriculture and
the labour force was regarded a rural proletariat.
The introduction of an export oriented plantation
system by the British created a host of structural
problems, commencing with unemployment, land
scarcities, food shortages, and a staggering
growth rate in other sectors, where the locals
had no stake.
A money economy soon replaced the traditional
agrarian economic order. The situation was further
aggravated by the promulgation of a series of
laws empowering the state to take over any uncultivated
land. The most objectionable of them all was
the Crown Land Encroachment Ordinance No 12
of 1840, and the Waste Lands ordinance of 1897.
These two laws were chiefly responsible for
disturbing the rural balance that had existed
in the country from ancient times. From that
point onwards, the state acquired a dominant
influence over land matters.
The state control of land in the 19th century,
led to large-scale alienation of land in favour
of British mercantile interests. Statistics
of land sales reveal that after 1833, over a
million acres had been sold to British planters,
mainly for the cultivation of coffee. This changed
the entire unsophisticated rural structure,
causing severe hardships to the agrarian community.
By the early 1930’s, landlessness in the
South Western Wet Zone had become a major issue,
which dominated the thinking of the administrators.
The rural population was fast increasing, and
an inescapable solution had to be found, before
it became a political issue.
At the 1956 General Elections, Coalition Government
between the Sri Lanka freedom Party and certain
Marxist elements ushered in a Socialistic era
led by Mr S. W. R. D. Bandaranaike. The party’s
Manifesto contained proposals for widespread
nationalisation of foreign-owned plantations,
banks, commercial and industrial establishments.
This was a blow that the private sector could
not withstand. Their hopes were naturally shattered,
but the government proceeded with their programme
of nationalisation, but at a slower pace.
Complete nationalisation would have come about
at a much earlier date, had it not been for
the unenviable situation of having its hands
tied by the dependency on the metropolitan markets,
and the goodwill of the British. Further, nationalisation
without compensation may have justified in terms
of economic sovereignty, but it was not a step
the government was prepared to take. The various
political parties forming the government had
conflicting views on this subject, with the
result; the question of nationalisation was
shelved, at least for a short time.
When the United front Government came into power
in 1970, attempts were made to change the economic
and political climate in favour of nationalisation
and they experienced a certain degree of success.
The introduction of the Anti-Fragmentation Act
and the Exchange Control Laws provided them
with the necessary political clout to take the
plantation sector further under their control.
The first act of nationalisation applied to
the operators of public passenger road transport,
and became effective from 1st January 1958.
Cargo handling operation were nationalised on
the 1st August 1958. The Bank of Ceylon, which
was started in 1939 with considerable private
capital, was nationalised on 27th July 1961.
The take over of the insurance followed. The
exclusive privilege of writing new life insurance
was vested with the Insurance Corporation of
Ceylon. In 1964 the Corporation was further
entrusted with the sole right to handle General
Insurance. The functions of the private Oil
Companies gradually passed on to the newly established
Ceylon Petroleum Corporation.
The nationalisation of plantations on the other
hand was carried out in two stages.
Land reform law
No 1 of 1972. Aims and objectives.
To establish a Land Reform
Commission in Sri Lanka named the (LRC)
To fix a ceiling on the extant of agricultural
land that any person may own in Sri Lanka
To provide for the vesting of lands in excess
of the ceiling in the Land Reform Commission,
subject to statuary leave in favour of the former
owner.
To prescribe the purpose and the manner of disposal
of lands vested in the LRC by the law in a manner,
so as to increase productivity and employment.
To provide for the payment of compensation to
persons deprived of their lands under the law
and for matters connected therein or incidental
thereto.
Until the above law was enacted, there was no
law in the country, which fixed a ceiling on
land ownership. By 1972, there were about 5,600
owners who had nearly 1.3 million acres with
an average holding of 200 acres as against the
national average of 0.36 acres cultivated per
person.
The maximum extant of agricultural land that
may be owned by any person was defined as follows.
If such land was exclusively paddy land 25 acres
or
If such land does not consist exclusively of
paddy land- then 50 acres. However, here too
the total extent of paddy land shall not exceed
25 acres.
Under this new law, land owned by public companies
and religious institutions were exempted. A
statutory lease in favour of the former owner
too was granted for a period to be decided by
the LRC.
At the time of the Land Reform Law, out of a
total geographical area of 16,228,220 acres,
about 13,120,510 acres were arable land, of
which 2,322,989 were under plantations. Under
this law, 563,411 acres got vested with the
LRC. The total extent of land vested with this
authority amounted to 136,353 acres, which was
about 23% of the total tea acreage sub-divided
as follows.
High Grown 50,630 Acres.
Medium grown 60,103 Acres.
Low grown 28,631 Acres.
Total 139,354 Acres.
The total acreage vested with the LRC under
this law was as follows.
Tea 139,354 Acres
Rubber 82,563 Acres
Coconut 112,523 Acres
Mix Crop 228,971 Acres
Total 563,411 Acres
The total declarations were 5,160 from 22 districts.
Colombo had the highest number of declarations
amounting to 2,856 from 1,479 individuals, followed
by Kandy with 548 declarations from 537 individuals.
The lands so vested were entrusted to the care
of a number of state run agricultural institutions.
The insurgency was officially credited as the
major reason for the adoption of the Land Reform
Act of 1972. This was used to involve the people
at grass-root levels, in their land distribution
scheme. This law was hailed as the most popular
piece of legislation ever to be passed in the
country.
With the implementation of this new law, ownership
and land control in the country were subjected
to radical changes, and a large proportion of
the available land came under state control.
Land Reform (Amendment) Law No 39 of 1975
The experience gained from the first attempt
at controlling the ownership of land in the
country helped the government to conduct this
operation in a more fitting manner. Unlike with
the first Land Reform act, the question of compensation
for the lands acquired under the second stage
had been settled in advance between the British
Prime Minister Harold Wilson and Mrs Bandaranaike
Implementation of the second stage of the Land
Reform Laws ended up a smooth operation. The
former owners in certain instances were made
temporary statutory trusties, and the fact that
they had by then a set of trained personnel
at hand simplified the entire process.
This law came into force on 17th October 1975,
and extended the ceiling on land ownership to
properties owned by public companies. At this
second stage, 396 estates owned by 232 public
companies were nationalised. Of the 232 public
companies, 87 were Sterling companies, and 145
were Rupee companies. The 87 Sterling companies,
owned 191 estates and the 145 Rupee companies
owned 205 estates. Of the 396 estates, 22 Agency
Houses managed 376 and 20 estates were managed
by owner companies.
Extent of nationalised land under the second
stage of Land Reform
Tea 292,126 acres
Rubber 110,021 acres
Coconut 8,036 acres
Mixed Crops 5,325 acres
Under this law too, there were certain categories
of holdings that were exempted and the same
system of statutory trusteeship as in the previous
case continued with the Agency Houses managing
the estates during the transitional period.
About 40% of the cultivated tea the Second Land
Reform Law affected lands. The larger estates
that were acquired were to be run as similar
units and they were transferred to the SLSPC
and the JEDB. The latter was incorporated on
6th February 1976 in terms of the State Agricultural
Act No 11 of 1972. The effective operation of
this organisation however began on 1st April
1976 when the trusteeship of the former Agency
Houses ended.
By end December 1976, 881 estates of the public
sector comprising 366,184 acres constituting
61% of the total tea area went under state control.
In the case of the private sector, 125,834 holdings
amounting to 594,481 acres forming 38% of the
total tea lands were nationalised and brought
under state control.
In 1977, the tea industry went through a series
of structural changes, which continued until
the end of July 1978. During this period, the
revisions were mainly directed at consolidating
their position and effecting changes for the
proper management of the properties, which ultimately
ended up by making the SLSPC and the JEDB two
of the largest management agencies in the world.
Current Outlook
British are noted to have
pioneered the propagation of tea as a plantation
crop. Commercial planting was undertaken for
the first time in India, and with its success,
Ceylon looked as good as any other place for
its cultivation. Prospects in the country were
found ideal. It offered all the opportunities
to procure a new product base for tea, when
trade with China was fast coming to an end.
Chinese tea exports (averages, thousand of tons)
1831-1860 37.6
1861-1890 111.0
1891-1920 97.9
1921-1950 55.3
Growth in tea cultivation during the early stages
was fairly rapid mainly due to the vast expansion
undertaken in bringing large tracks of abandoned
coffee under tea. The first commercial patch
planted by James Taylor in 1867 as a pilot project,
remained as the nucleus for further expansion,
and extensions were rapid thereafter. Before
long, Sri Lanka was on its way, establishing
tea as a major agricultural crop, and in just
one and half decades almost 68,000 hectares
had been brought under tea cultivation.
Although tea planting was rapid, commercial
production of tea took a much longer time to
reach favourable levels. During the pioneering
days it took almost six to nine years to nurture
a tea bush to maturity. It was only in the early
1930’s that Sri Lanka’s tea production
reached the 100 million kg levels.
Expansion in Tea Production
| Year
|
Production |
Percentage
Growth |
| 1930 |
100
m kg |
---- |
| 1940 |
120
m kg |
+20
% |
| 1950 |
138
m kg |
+15
% |
| 1960 |
197
m kg |
+
47 % |
| 1970 |
212
m kg |
+
70 % |
| 1980 |
191
m kg |
--
10 % |
| 1990 |
233
m kg |
+
22 % |
| 1998 |
280
m kg |
+
20 %. |
The impressive performance
of the tea industry up to 1970 could be gauged
from the above tea production figures. The largest
growth rate in the country is recorded for the
period 1960 to 1970, when production increased
from 197 million to 212 million kg. This expansion
was completely overshadowed by the drastically
reduced growth rate recorded for the following
decade. The period 1970 to 1980 was a testing
period for the country’s tea industry,
and it took almost two decades thereafter for
the industry that had shown so much promise
earlier, to once again get back on track.
The problems the tea industry had to face during
this time were many. In addition to the sudden
reversal in production trends, tea prices too
reached uneconomical levels, which threatened
the very existence of the industry in the country.
Tea being an agricultural product, is subjected
to vagaries of nature, and as such, yearly variances
are of little significance. In this instance,
an attempt is made to ascertain the general
trends in tea production patterns in the country.
The indisputable attempts made during the initial
stages, to establish tea, as the primary agricultural
crop, after the failure of coffee, no doubt
paid dividends. Tea production peaked way back
in 1965 at 228 million kilos. Subsequent events,
that led to a sudden reversal in production
trends however occurred at a time when the tea
industry was fully geared to face any eventuality.
Weather had not been too adverse during this
period following the boom period of 1965. In
1983, Sri Lanka’s tea crop declined to
179 million kg matching up to mid 1950 levels
of production. It was only from about 1984,
that the tide changed once again, and the tea
industry started to enjoy a new lease of life,
with low grown varieties offering vast potential
for growth.
Declining trends
in tea production since 1965
A rather noticeable feature
that emerged after having established a record
crop in 1965 was the declining trend in tea
production. This was no doubt a unique feature
that acted in complete contrast to world trends
existing at that time. Other major tea producing
countries in the world were expanding production
during this period. The global tea crop in the
period 1965 to 1977 rose by 51%, while the output
of tea in Sri Lanka declined by 9%. In 1978
tea production was running about 6% below 1977
levels, and this trend was only arrested in
the early 1980’s.
Sri Lanka enjoyed a very healthy crop increase
during the early stages of the industry, and
continued so up to the peak production year
of 1965. Annual production more than doubled
in the period 1939 to 1965, with the output
moving from 107 million kg to 228 million kg,
recording an annual growth rate of 3%. The declining
trend became a cause for worry from about 1967,
and during the ten years that followed, production
decreased on an annual rate of over 1%, and
declined by 12% during the period 1976 to 1977.
The initial growth in production that peaked
in 1965 was entirely due to increase in yields
per acre, and not due to any substantial increase
in the area under tea. The phenomenal increase
in yields from 382 kg per hectare in 1939 to
746 hectare in 1965 was attributed to increased
use of fertilizer and improved agricultural
practices.
The prime cause for the sudden drop in production
thereafter is ascribed to the unexpected fall
in fertilizer application since 1964. According
to records maintained in the fertilized corporation,
the use of manure peaked in 1964, a year before
the country recorded a burst of growth in the
sphere of tea production. Thereafter, fertiliser
applications declined at a rapid rate decreasing
by almost 40% in the decade 1964 to 1973, against
a production drop of 7%. The use of fertiliser
improved marginally in the following years,
but production continued to decline to reach
196 kg in 1976.
A decision taken by the Tea Research Institute
in 1959 to recommend the widespread replanting
of old seedling tea with high yielding colonel
tea also contributed to a great extent for the
steady fall in crop due to large extents going
out of production. This recommendation was based
on a series of experiments carried out on a
pilot project at Talawakelle. It was found that
yields virtually doubled on colonel varieties.
Large scale re-planting gave way to in filling,
without taking into consideration the high risk
associated with such an undertaking.
To make this arrangement more appealing to the
producers, the government went on to offer a
subsidy of Rs 6180 per hectare in 1959. It was
presupposed that with this subsidy, re-planting
would take place at about 2% per year. At this
rate of improvement, it was calculated that
within fifty years the entire tea area would
be under high yielding varieties. In-filling
at that stage was considered a wasteful expenditure.
Unfortunately, the re-planting rate never reached
expected levels, and the in filling of vacancies
was not resorted to as earlier. The inevitable
did occur. The bush density decreased, and with
it the productive base eroded, leading to a
consequent decrease in yields. The failure to
maintain bush density led to a series of other
problems that had devastating effects on tea
production. The failure to maintain a proper
tea cover not only eroded yields, but also adversely
affected fertilizer efficiency, increased plucking
costs, and accelerated soil erosion.
The indirect consequences of a steady fall in
production levels were also grave. Investments
in the tea-processing sector during the early
period of steady expansion were maintained in
keeping with the improvement in crop. With a
decrease in leaf production, the producers failed
to update and increase factory capacity.
During the period 1957 to 1966 tea production
increased by 50 million kg, but the factory
capacity by only 31 million kg. The work piled
up in factories has continued up to recent times.
To promote investment in this field, the government
once again offered assistance to the plantation
sector to be utilized for this purpose during
1966 and 1967. Despite all these financial attractions,
only about 63% of the targeted funds were utilised.
The situation deteriorated further, and all
the neglects and oversights accumulated over
the years were passed on to the cooperatives
and other statutory bodies created under land
reform during the period 1972 and 1975.
The general decline in productive expenditure,
which led to the sharp decline in tea production
in the country, could be attributed to two very
apparent causes. This was a period when the
world was experiencing an over supply situation
that caused prices to fall relentlessly. From
1955 to 1974 the decline in real terms was about
73%, and the most shattering erosion occurred
in the period 1960 to 1974, when tea prices
declined by about 60% in relation to other primary
commodities.
No immediate let up in the situation could have
been foreseen at that stage, and the future
for tea projected only a melancholy picture.
In addition to the surplus created among the
traditional tea producers, there was the news
that fresh lands were being opened up in Iran,
Turkey, Argentine, and in new regions in East
Africa. The use of high yielding clones by these
new comers, who had gained sufficient experience
watching the performance of others, were going
to aggravate the situation further. On the disposal
side, the projected improvement in consumption,
did not offer much hope for bridging the gap
between supply and demand. It was felt that
further expansion in the production base would
lower tea prices beyond economic levels.
All these problems reached critical proportions
in the early 1960’s. From that point onwards
tea plantations were forced to reduce recurrent
expenditure. Consequently, output declined further.
It reached a stage that the only pre-occupation
of the planter was to find ways and means of
reducing costs.
The other major cause for reducing investments
in the plantation sector was the threat of nationalization.
This intention of the government was for the
first time made public in 1958, although it
took a further seventeen years for its implementation.
This took the form of a government policy, and
in this atmosphere of uncertainty, investments
in the plantation sector plunged further.
With vast cut backs having now commenced, the
government was for the third time forced to
mediate to salvage the plantations, which were
fast heading towards a serious catastrophe.
The state had no option but to offer a series
of aid packages that included among others,
a fertilizer subsidy, a tea chest subsidy, and
an export duty rebate worked on the basis of
realization prices based on a sliding scale.
Despite all these attractive offers, producer
margins continued to decline, and by 1975, the
speculation had come to an end for the private
sector. The plantations were nationalized.
Threats of nationalization, sluggish markets,
depressed tea prices, both in rupee and real
terms, the virtual disappearance of profit margins,
and cash flow problems, explain the reasons
for the sharp decline in production and investment
in Sri Lanka’s tea industry. All the above
cause and affect factors occurred in Sri Lanka
during the period under review, and the country
remained unique in this regard. The position
was different in other countries. It was a time
when both private and public funds were freely
available to improve the industry, and our competitors
made use of this opportunity to steal a march
over Sri Lanka. This, no doubt was a trying
time and it took a long time to get the industry
back on course.
New trends in tea
production
The older generation of
tea planters would recall the directions and
the standard curriculum they had to follow as
junior superintendents. These standard instructions
were worked out through years of observation
by the senior management, and accurately recorded
for the guidance of their juniors.
From the very inception of the tea planting
in the country, monsoons came on time; with
the result all routine agricultural strategies
were pre-determined. One of the standard orders
that used to be often repeated to the field
staff was to guarantee that the bulk of the
tea crop was harvested during the first six
months of the year. It was not an order to strip
the tea bushes, nor meant to artificially promote
growth. The flush came regularly with the monsoon,
and it was there for harvesting.
Regularity of monsoons in the early days made
agriculture a child's play. It was most undemanding,
and manageable, unlike today, when delays and
total failures of the monsoons have become the
order of the day. These uncertainties have been
the chief hostile elements in the implementation
of a proper agricultural policy for the country.
These regular faltering in weather conditions
have often stalled many ambitious schemes that
had been carefully blueprinted on several occasions
earlier. Agriculture today has entered the realm
of uncertainty, and its advancement is a matter
that is left entirely to the weather gods.
Under normal circumstances Sri Lanka would obtain
about 40% to 60% of the rain from the North
East and the South East monsoons. Inter-monsoon
conditions would provide the balance rainfall
needed for the country. The south central hills
have a considerable influence on the climate
of the country, because of the small land area
involved.
Sri Lanka is said to enjoy two general categories
of rainy seasons. In addition to the regular
monsoons that blow over the island, the country
also enjoys on a periodic manner, inter-monsoon
conditions. Although the duration of the inter-monsoon
situation is less than those of the monsoons,
its contribution towards the countries total
rainfall is remarkable. When monsoon rain sets
in, the sky remains overcast for much of the
day, and severe cloudbursts could occur day
or night. Inter-monsoon rain is generally confined
to the second half of the day following hot
sunny mornings.
On the basis of the time of occurrence and the
cloud movement, the two monsoons could be further
subdivided conforming to four seasons. The first
inter-monsoon sets in March and lasts until
mid May. The South west monsoon proper follows
and remains in force from mid May to September.
The second inter-monsoon lasts from October
to November, followed by the North East monsoon
in December, which extends up to February the
following year.
The South West monsoon is regarded the longest
rainy season and lasts for almost four months.
It provides sufficient rain to the South West
lowlands and the western highlands. It drops
much of the rain in the southward regions of
the South central highlands and only the dry
winds blow over the North eastern sector, thereby
creating a drought. The second inter-monsoon
could very well reach cyclone conditions as
it is caused by depressions in the Bay of Bengal,
and often result in heavy thunderstorms. These
rains are well distributed throughout the country.
As a rule the South west monsoon provides rain
to the south western and adjoining sectors,
and the North east monsoon to the rest of the
country. The inter-monsoon rain on the other
hand is well distributed throughout the country.
Up to recent times, about 60% of the year’s
tea harvest was collected during the first six
months, and with it a chain of administrative
problems would emerge. April, May and June were
regarded as the best cropping months, generally
referred as the “rush” period. In
addition a “mini rush” would emerge
during the latter part of the year. This was
a period that most bulk buyers would look forward
to operate forcefully in Colombo.
This was a period the tea prices would invariably
decline, sometimes to unrealistic levels. Offerings
at the weekly auctions would become unmanageable
and sales would close long before schedule dates.
Backlogs would result, creating cash flow problems
to the producer.
Tea production appears to be better balanced
today with a surge in low grown production.
There is a more appropriate distribution of
crop today, and this situation seems acceptable
to both the buyer and the seller. These changes
to cropping patterns in the country, which is
of a recent origin, are mainly due to the perceivable
position low grown teas have acquired in the
recent past. The location of the low grown sector
is such that it enjoys a good spread of rain
throughout the year. Today, low grown production
has superseded all other categories, and this
sector commands a strong position in Sri Lanka’s
tea output by contributing more than 50% of
the total.
All indications are that there will be a further
improvement in their contribution towards the
national crop. It is the performance of low
grown teas that will determine the future cropping
patterns of the country. A change in the cropping
patterns has already emerged, and with these
changes, Sri Lanka’s future crop projections
will have to be recast. Tea production in the
higher elevations still follows the old pattern
of providing the bulk of the crop during the
first half of the year, but with the low grown
sector now showing such potential for growth,
there is every possibility that new trends in
tea production will emerge in the future.
Latest prognosis
Nationalisation of the
plantations in Sri Lanka did not come as a surprise.
It was a topic that was freely discussed, and
made public at least two decades before it was
ultimately enforced, although its applicability
in the existing framework, was questionable.
With the threat of nationalization, productive
expenditure on plantations took a nosedive,
which ultimately led to a steep decline in tea
production.
The effectiveness of the private sector, which
by then had become established, was beginning
to show results. Their creative skills were
completely overshadowed by the disappointing
performance of the company sector. The general
neglect of the company owned plantations continued,
and no proper records concerning land utilization
were maintained. In this situation, no proper
assessment could have been made about the performance
of the public and the private sector.
After the land reform laws of 1972 and 1975
were implemented, vast structural changes took
place leading to the alienation of large extents
of land for projects unconnected with the tea
industry. Due to lack of reliable information,
the general performance of the tea industry
was understated, and the exact extant of land
under tea was always a disputed subject.
Up to 1986, the Tea Commissioners Division of
the Sri Lanka Tea Board maintained the extent
of tea coverage. They were based on the submissions
made by the tea producers, who had got themselves
registered with the department. This was no
doubt a very tedious operation, and the accuracy
of the final assessment depended on the correctness
of the individual returns.
According to the Tea Board statistics, the extant
under tea in 1960 was 185,000 hectares. A 20%
increase was recorded for the following year,
and the tea coverage was increased to 240,000
hectares.
Vast changes took place in the agricultural
sector during this period. Original tea tracks
round Kandy, which came under the classification
of medium grown teas, became the nucleus for
a series of development programs that resulted
in large extents of land coming off tea. It
was once again in the Central Province that
large areas were identified for diversification
under the National Agricultural Diversification
and Settlement Authority. The Mahaweli Scheme
too took a heavy toll of the tea lands in the
area. Without an accurate update of the situation,
the tea coverage in this area was superfluously
overstated, and the yields understated. These
changes mostly affected the medium grown sector.
To arrive at a more realistic figure, an aerial
mapping system was pursued in 1886, with foreign
collaboration, and a more functional land use
map covering the entire country was completed
in 1988. According to this survey, the total
area under tea had shrunk to 201,630 hectares,
from 240,000 hectares earlier, reflecting a
shortfall of 16%. As anticipated, the highest
shortfall was in respect of medium grown varieties.
This investigation, in a way was helpful to
identify in a broader assessment, the total
extant under tea, but it could not ascertain
the identity of the extents held under private
and the public sectors. A further classification
was found necessary, as a distinct division
was building up between these two sectors, with
the small holders making a strong impact.
Another tea land survey was carried out in 1994
to ascertain more accurately the tea coverage
held by the private and the state sector. The
Tea Commissioners division of the Sri Lanka
Tea Board undertook this project. At its conclusion,
a further decrease in the extent of the tea
coverage was discovered. According to the latest
findings, the total tea coverage had declined
further to 187,309 hectares.
With this new set of figures, Sri Lanka’s
performance in tea has been launched to a higher
elevation, According to this set of figures,
high grown varieties cover an extent of 51,442
hectares, having lost 30% of the coverage as
recorded in 1965. It was during this year that
the highest crop of 91 kilograms was harvested
from these areas, with a tea cover of 87,345
hectares. Production from these areas has declined
to 75 million kilos for 2001. Mid grown areas
have sustained the biggest loss, and has only
attributed 56,155 hectares to this sector, having
enjoyed a tea cover of 99,359 in 1968. The largest
crop from mid grown areas of 80 million kilograms
was harvested in 1968. For 2001, production
had declined to 53 million kilos.
Expansion of the low grown sector projects a
different picture, and is acclaimed today as
the only sector that has recorded an uninterrupted
growth rate, both in respect of the tea cover
and production levels. The tea cover under low
grown category in 1960 was only 48,113 hectares.
The latest figures indicate that this area has
expanded to 79,711 hectares. Correspondingly,
production has increased from 48 million kilograms
in 1960 to 166 million kilos in 2001. Today
the low grown sector contributes more than 50%
of Sri Lanka’s total production.
The performance of the tea industry in general
has now to be recast on the updated figures.
The current position shows up the industry in
better light than ever before. The national
yield has increased to 1,379 kilograms of made
tea per hectare from 1,045 kilograms per hectare
in 1993. Similarly, yields from high grown,
mid grown and low grown areas have automatically
enhanced to 1411 kilograms, 857 kilograms, and
1803 kilograms, respectively from 979 kilograms,
552 kilograms, and 1803 kilograms using 1992
registration.
Marketing Sri Lanka
Tea: The Challenges
The history of our tea
industry has an element that is unique and which
makes it off every other producer country, and
still has influence today. Our tea estates were
not originally planted as such. They were the
coffee estates crudely converted to meet an
agricultural and financial crisis. This belief
is still upheld even today that tea had been
planted on the graveyards of the old coffee
estates.
Although the coffee rust seems to have made
its appearance in early 1865, the hostile effects
of this frightful disease were not felt until
about the 1870’s, from which point the
crops started to drop. Options available to
the planters were few. Some interplanted the
dying fields of coffee with tea. Others made
a clean sweep and uprooted all, 1200 plants
to an acre. The stumps were either burnt in
the field or used as firewood. A few coffee
plants were exported to England to be used as
legs for tea tables. It was no doubt a difficult
task for the coffee planters, but they did it,
and out of the ashes raised an entirely a new
industry “Tea.”
It is for this reason that Sir. Arthur Conan
Doyle, in one of his works, pays the following
tribute to the Ceylon Planter who successfully
overcame the disaster that followed in the wake
of the deadly fungus.
“Not often is it that men have the heart,
when their one great industry is withered, to
rear up in a few years another as rich to take
its place, and the tea fields of Ceylon are
as true a monument to courage as is the Lion
of Waterloo. My story concerns the royal days
of coffee planting in Ceylon before a pestiferous
fungus drove a whole community through years
of despair to one of the greatest commercial
victories which pluck and ingenuity ever won.”
The first commercial planting of tea took place
on Loolecondera pioneered by James Taylor. It
is no doubt an undisputed fact that it was the
“Bitter Berry” that set the stage
for the country’s economic expansion,
but it was the emergence of Ceylon as a tea
producer that opened the brightest chapter in
the story of private enterprise. By the turn
of the century coffee was dead and tea stood
as the leader of a new Empire. Three acres of
tea in 1867 was transformed into 350,000 acres
thirty years later.
Tea comes of age
| Year
|
Area
( Hr) |
Exports
(kg |
Value
(Rs.) |
| 1873 |
113 |
23 |
---- |
| 1893 |
89,100 |
20,817,963 |
22,899,759 |
| 1920 |
163,620
|
83,986,468
|
80,781,537 |
| 1950 |
229,635
|
135,499,356 |
751,650,630 |
| 1990 |
221,535
|
215,213,647 |
19,797,011,862
|
| 1995 |
187,309
|
234,307,587
|
23,991,187,106 |
| 2000 |
188,971
|
287,971,003
|
53,035,725
261 |
| 2001 |
188,971
|
294,042,808
|
61,650,522,046 |
With the steady improvement
in the output of tea, the need for a proper
marketing system emerged. The first shipment
of 23 pounds of tea from Loolecondera estate
to London was recorded in 1873. Tea was then
considered only as a small item of merchandise.
There was a tremendous build up during the following
decade and about 90% of all the teas produced
were consigned to London. There were other markets
too that were showing interest in Ceylon tea.
By 1883, it became clear that a new marketing
system had to be set up for the disposal of
this new product, and auctioning of tea commenced.
By this time, Ceylon had become economically
tied to Britain as a major supplier of tea,
with production and marketing controlled by
British interests. Under these circumstances
it was natural that they were going to implant
in the country a system similar to their own
forms of business dealings. The first step towards
regularising the tea industry and trade was
the introduction of the middleman.
They needed a man in the centre to collect at
one end and share out at the other. Through
experience they had found it cheaper and more
efficient to employ middle man rather than for
either group to try to do the whole job themselves.
This led to the formation of various categories
of brokers, merchants, and wholesalers buying
and selling tea in Colombo, taking their respective
cuts down the line before it was finally dispatched
to the grocer overseas. This heavy reliance
of the tea industry and trade on these various
intermediary organizations founded by British
interests initially is amply demonstrated in
the manner in which tea trading is conducted
even today.
With the rank order of our major buyers changing
constantly marketing of tea become a complex
and a challenging issue, but our position as
the main supplier to world markets is improving.
The tea industry in the country was started
by the British, to supplement the loss of tea
business with China. Up to about the early 1970’s
more than 80% of our total production was absorbed
by the western world, with the UK in complete
control. Ceylon found sufficient protection
in the UK market to unload the bulk of our production.
Australia and New Zealand also depended on our
teas for most of their requirements. But unfortunately
they have diverted their operations to other
producer countries now. America and Canada however
have been supporting Ceylon teas from the very
inception. Although their intakes have shown
a decline in the recent past, they still remain
a force to reckon with.
Shipments to the Middle East were insignificant
and it was only from about the early 1930’s
that the Arab world cultivated the tea drinking
habit, and purchases remained small during the
initial stages. Iraq and Egypt have been our
long-standing and regular supporters of Ceylon
teas, and our connections with them date back
to mid 1920’s.
The natural adaptation of current trading patterns
in the Middle East was launched around the 1970’s
with the boom in oil prices and with the changes
that came about in the political structures
in these countries. For example, in Iran, with
the disposing of the Shah, what was once a sophisticated
open market turned completely into a controlled
economy? Similar if not identical changes took
place in Libya, Syria, Egypt and Iraq.
The abundance of wealth in the oil rich countries
saw the development of state subsidised food
supplies being distributed to the local population,
and this was a factor that spawned direct state
intervention. Simultaneously, the accelerated
development of the infrastructure within many
of these countries necessitated the recruitment
of an expatriate work force. This also increased
the market for tea in those countries.
The impact of all these changes was felt in
Colombo. Government buyers such as the Egypt
Trade Centre, the Iraqi Board, the Iranian and
Libyan state buyers and the Syrian Tenders continued
to operate on a regular basis in Colombo. In
addition, the government buyer for the USSR
purchased the finest of Ceylon teas during the
seasons.
Consequently, the producer was assured of a
minimum demand and a fairly predictable market
pattern, with a new level of prices being established
in Colombo. There was a sudden shift of interest
to these newly acquired markets, with the result;
some of our conventional markets were neglected.
Shipments to London auction were curtailed.
Price conscious Pakistan began to look for CTC
and cheaper quantities. The Oceanic countries
switched their purchases to their neighbours.
With the collapse of the OPEC Cartel, and with
the steady decline in oil prices, these countries
realised that a state controlled economy could
not be sustained for long, and were forced to
revolve back to private trade. Today, we see
a steady dismantling of the state funded giants.
The impact of these changes is clearly seen
in Colombo, and is basically twofold.
The vast homogenous markets are fragmenting
into segmented complex markets of opportunity,
demanding a variety of products, and lending
themselves to branding and niche marketing,
offering a stream of other opportunities for
marketers of tea.
The change in the market pattern on the floor
of the auction in Colombo and the demand generated
by one single buyer is fragmented into a series
of small orders staggered over a much wider
time frame.
It is vital therefore that markets establish
their brands early. The centralised marketing
efforts of the government’s tea marketing
authority must also recognise these factors
and participate vigorously to ensure that the
vital markets for Ceylon teas are not lost or
diluted in the long run.
It is appropriate at this stage to quote Philip
Kotler, the marketing guru who said recently
“Entire markets are disappearing as a
result of managed trade policies, advances in
technology, and innovative competitors. Mass
markets are fragmented into micro-markets. Power
is shifting from the producer to the retailer.
Multiple distribution channels are replacing
single channels.” He also added that “Branding
is a company’s prime means of getting
into and staying in the consumer mind, and in
the intensely competitive market place, the
company’s first order of business is retain
customer loyalty.”
Marketing strategies have chanced vastly in
the recent past, and will continue to do so
in the future. We should always be watchful
to identify new trends emerging in the marketing
field and take corrective measures to ensure
that Ceylon teas are not left out in the cold.
The marketing of our teas to these critical
markets will have to be handled judiciously,
and with the right amount of assistance and
focus from government authorities and marketers;
Ceylon could retain her share of the “consumers
mind.”
The public sector
verses the private sector
The tea land survey conducted
by the Sri Lanka Tea Board on the tea small
holder provides valuable information regarding
the steady expansion of private sector in the
recent past. On these findings it becomes obvious
that the future of the industry will to a great
extent depend on the performance of the small
tea cultivator that forms the core of the private
sector.
Sri Lanka’s total tea coverage according
to the latest findings is 188,967 hectares,
of which 56% is under public management and
the balance 44% under the management of the
small holder. After many years of uncertainty,
the latest figures have brought into sharp focus
the effects of the structural changes that have
taken place in the production of the tea industry.
Since the findings of the aerial mapping system
that was concluded in 1886, about 9% of the
total extent in tea had withered away. The public
sector records a loss of 25%, whereas the smallholder
sector has recorded a growth rate of 23%.
In the smallholder sector, 82,916 hectares are
cultivated by 206,652 tea growers, as against
106,047 hectares in the public sector with 404
management units. The status of cultivation
of both sectors seems well balanced.
A study of the distribution of smallholdings,
in relation to the extent of land cultivated
by each small holder is equally motivating.
The largest concentration of smallholdings is
found in the Galle (56,547), and Matara (44,051)
districts in the Southern Province. About 43%
of the small holders are concentrated in these
two districts. About 20% (49,161) of the small
cultivators are found in the Ratnapura district
in the Sabaragamuwa Province. In the public
sector, the Central Province with 205 holdings
controls 57% of the total extent of tea in that
category, with a high intensification of 42%
in the Nuwara Eliya district. The Uva Province
with 76 holdings controls 23% of the extant
under public management.
At the lower end according to size, there are
172,522 holdings that are less than one acre,
and 23,636 holdings between one acre and two
acres. The largest concentration of smallholdings
operates within this group. At the uppermost
end only 169 holdings of over fifty acres have
been registered. In most cases, particularly
among those belonging to the first group, tea
is grown as a subsistence crop, and occupies
only a portion of the individual holding. This
system, in a way, helps to bring about an ecological
balance and helps to protect the environment.
In this group 196,158 small cultivators are
responsible for the maintenance of 94%of the
total extent of tea under tea in that category.
The expansion of the smallholder sector has
followed a definite pattern, and had only penetrated
the higher elevations of high and medium classification
of today, with caution. This was considered
the domain of the British pioneer planters,
and left for their use. The growth of the smallholder
sector has been mostly cantered round low elevation
areas. Today there are 159,644 units involving
the cultivation of 56,644 hectares, and the
bulk of it is concentrated in the Southern Province,
with the districts of Galle and Matara acting
as the foundation for its expansion. The concentration
of the public sector in these regions is limited.
The future of the smallholder sector could be
further ascertained by the manner in which they
have managed their properties. According to
the survey conducted in 1994, about 68% of all
the small holdings were considered to have been
in a very satisfactory condition, with over
75% resorting to regular fertilizer applications
based on recommended methods. This is most vital
in tea cultivation, as it not only increases
the production of green leaf, but also improves
its quality, ultimately resulting in the production
of a better quality tea. From a long term point
of view the small holder is well geared to face
the future with confidence as about 70% of the
shall holder tea base is planted with high yielding
varieties.
The First Tea Auctions- A marketing system Somerville
initiated
The morning of 30th July
1883 like any other day was calm and peaceful
In Colombo Fort, despite the fact that it was
a Monday, the first day of a working week. There
was tranquillity all around the place, and the
tall “kalu imbul” trees that lined
Queen Street, now Janadhipathi Mawatha, had
cast intricate shadows on the dark kabuk roadway.
They are called rain trees from the circumstances
that at night, when the leaves fold into a kind
of a sack, the moisture condenses inside it,
and at sunrise when the leaves open it discharges
in a shower.
There were also the Suriya trees providing shade
to the many streets that bisected at Queens
Street. It flowers profusely with delicate primrose-coloured
blossoms, large and flamboyant, changing to
purple when they fade, and in form resembling
the single hibiscus. The only source of disturbance
was the sound of the distant sea pounding on
the rocks. Notwithstanding this slight disturbance
there was calmness in the air.
The subdued mildness of the day however was
deceiving, notably on that Monday evening in
the realm of the country’s first produce
broker. Within the lavish interior of the broker's
office with the frontage to Queen’s street,
the atmosphere was tense and widespread with
rumours. Wild tales regarding a tea auction
were the most recent conversation in the town.
It was to be conducted in the two-story buildings
that stood on the sight that Mercantile House
now occupies. There were more observers than
actual buyers, and many were there to criticise
the system rather than appreciate it. The faultfinding
types were many, and they had condemned the
auctions even before it started, but the more
temperate sorts were prepared to review the
situation more closely. Most producers were
ready to give this new concept in tea marketing
a chance. It was under this coercion that William
Somerville decided to hold his first suction.
Behind the closed doors of the Broking House,
a tall white-clad figure stood at his desk,
a wooden hammer in hand. He surveyed the gathering
with a ferocious look in his eye. He no doubt
was aware of the importance of the ceremony
he was about to perform. He was about to pursue
a new system of marketing for tea, and its success
was at hand. He was mindful of the criticisms
already made, but he was firm in his decision
to go through with it. To some it was yet another
page reclaimed from the British system. This
no doubt would have influenced his thinking,
but he was anyway the first to try it out in
the country.
He welcomed the gathering, in a very captivating
manner, and waited diligently for the handful
of buyers in the room to call out the prices
they were willing to pay for the five lots of
choicest Ceylon tea he was offering them. No
such sales had ever been conducted in that manner,
and that perhaps explains the reasons for the
inordinate delay in starting the sale.
Somerville was being disturbed by the minute,
and his flushed cheeks became bright red, when
a person from the audience initiated an altercation
with the seller, on the valuations placed on
the teas offered for sale. “We think your
valuations are far too high," said another.
Though completely agitated, William Somerville
stood his grounds and did not let himself be
intimidated. Although the hammer came down only
once, he had won the day. The first lot of 999
pounds that was described in the catalogue as
“Kabaragalla unsorted” packed in
50 lb. chest was sold for 45 cents per pound.
The rest were unsold.
In the marketing of Sri Lanka produce, it was
the first time that the “Gavel”
had come down to conclude a contract of sale,
and with it the authority of the gavel has been
established. Today, Colombo is considered the
largest auction centre in the world. It handles
around four to six million kilos per week, comprising
over 6500 lots. The first “knock”
of the hammer heard on this occasion is perceived
to reverberate over 6000 times each week in
the various auction rooms at the Chamber of
Commerce. The gavel that has been the emblem
of authority through the centuries has remained
so as the Harold’s wand for the transfer
of ownership. A verbal contract becomes an irrevocable
bond at the fall of the hammer.
Somerville would have been a disappointed person
with his first auction, but it was just a nondescript
sale of five lots comprising in all, about 140
chests. Little did he realise then, that during
the succeeding years, this rather vain attempt
at auctioning tea was going to be the foundation
on which the country’s entire production
of tea was going to be marketed. Today, Colombo
is the largest auction centre in the world,
thanks to William Somerville. Over the years,
this form of sale has been adopted for the marketing
of other produce.
It is most unfortunate that no proper records
have been maintained after this event, but the
Ceylon Observer of 30th July had the following
to say. “The first sale of tea in Ceylon
came off at the officers of Messrs Somerville
and Company. The results show that there were
buyers, but there is considerable difference
between sellers’ and buyers’ ideas
of prices, which will rectify themselves. We
congratulate Messrs Somerville on being the
pioneer to start a local sale and trust there
will be a long and prosperous succession.”
The First Tea Catalogue
The auspicious date was
30th July 1883, and the scene the offices of
Somerville & Company, Queen Street Colombo
Fort.
Lot 1 999 lb. Kabaragalla
unsorted in 50 lb. Chests 45 cents
Lot 2 2240 lb. Agar’s
Land in 50 lb. Chests Out at 50 cents
Lot 3 480 lb. Agar’s
Land in 40 lb. Chests 43 cents bid
Lot 4 1260 lb. Agar’s
Land in 42 lb Chests No bid
Agar’s Land in 2
lb Packets No bid
Lot 5 540 lb. Oodawarra
Pekoe in 99 lb. Chests No Bid
300 lb. Oodawarra BP)
360 PS) Out at 50 cents,
45 cents
450 Broken Mixed) No Bid
