The government has threatened to take over two plantations companies if they don’t come up with the plan to cut losses and overcome a financial crisis.
Under a plan to assess the financial soundness of the plantations, two plantation companies were summoned on Tuesday for a discussion and asked to present a proposal to overcome its crisis or the government would otherwise be compelled to take over these estates.
Plantations Ministry Secretary Ravindra Hewawitharana told the Business Times on Thursday that Kotagala and Agarapathana Plantations under the Lankem Plantations had been asked to submit a proposal on how they plan to overcome their current financial problems.
“We examined their financial situation and performance and profit and loss – everything was inquired into – we asked them to come up with a new proposal unless otherwise we are going to take it back,” the Secretary said.
Participating at the meeting were representatives from Lankem Plantations, the Plantations Ministry, the Treasury, Public Enterprise Department, Plantation Monitoring and Management Division and the Company Estate Reforms Tea and Rubber Estate Related Crops State Ministry and the State Minister Kanaka Herath.
Mr. Hewawitharana explained that taking over the RPCs from the companies was a far-fetched process and in this respect had requested the Attorney General’s opinion. It was pointed out that now the onus is on the company to turnaround the plantations and requested that the mother company infuse capital into these.
The Secretary also noted that RPCs had been given complete freedom in the running of the operations of the plantations. Pulling up plantations for poor financial performance is happening for the first time in eight years, Mr. Hewawitharana pointed out.
He pointed out that these two plantations had defaulted in the payment of EPF and ETF, the lease rentals as entered into in the agreement.
In this respect, Mr. Hewawitharana stated that they had previously issued a warning letter as well in January this year to the plantations insisting that they come up with a plan of action to overcome their financial crisis particularly since Kotagala had defaulted on its lease rentals and Agarapathana since they were creating a negative net worth situation and asked that the mother company infuse capital into the plantation.
He pointed out that Agarapathana was facing “unreasonable debts” and had obtained bank overdrafts and had to settle statutory dues as well.
Agarapatana Plantations has a total land extent of 6,688 hectares under cultivation which includes 6,361 hectares of mature tea and produce the Uva high-grown variety, Lankem Plantations website stated.
Kotagala Plantations is a tea and rubber company with the tea sector harvesting the bulk of its tea from the Western high-grown Dambulla district and a lesser extent from the low grown Kalutara area, the company website stated.
Kotagala Plantations CEO Mahen Madugalle told the Business Times on Thursday that they had delivered a presentation on a few items to the ministry and that the Deputy Minister was also there. He refused to provide details.
In this respect, the authorities have categorized the RPCs based on their financial performance and grouped them accordingly under A, B and C. About seven plantations have been identified as having a poor performance and they are likely to be summoned for a review meeting in the weeks to follow. The identified seven are: Madulsima Plantations PLC, Balangoda Plantations PLC under the Stassen Group, Maturata Plantations under the LOLC Group, Maskeliya Plantations under the Arpico Group and Agalawatte Plantations.
Moreover, the authorities have also requested the state run plantations operating under the JEDB and the SLSPC banners to also come up with possible joint venture businesses that could be carried out alongside the tea plantations.