The outgoing Chairman of Tea Factory Owners Association (TFOA) Harith Ranasinghe said that the factory owners have invested heavily on their factories to develop the infrastructure and facilities, to upgrade our factories to international food manufacturing standards mainly by obtaining loans but the bank loan rates are doubled now. Bank rates are not at all favourable to sustain and support development of the Industry, he added.
At the Annual General Meeting held on 19 October, Ranasinghe mentioned that a few years back the loan interest rates were less than 10% and some low interest loan schemes also were available. As of now the interest rates have gone up by more than double. As such most of the loans have become unserviceable. Short term funds are costly which includes high service charges as well he pointed out.
The Ministry of Tea Industry should explore the possibility of obtaining a foreign line of credit at low interest rates for the long-term development of the tea industry, he stressed. The Broker advances helped the manufacturers, as a short time relief, but eventually led to many difficulties. The brokers must concentrate on selling the teas than giving out advances to the manufacturers. The easily accessible advances came very handy into the hands of the manufacturers which led to many malpractices by some of the manufacturers, such as paying unrealistic prices for green leaf and creating unhealthy competitions.
"Some factory owners have got used to this uncontrolled borrowing practice. It is like an addiction. It is very difficult to escape. We urge the Brokers to bring some control to their financing activities; otherwise we will all run a very high risk." As an outgoing chairman, Ranasinghe also suggested to introduce good agricultural practices to develop tea smallholders as part of sustainability of the tea industry.
He also recommended arresting the rapidly decreasing yields by supporting Infilling / Replanting / New Planting undertaken with focus on quality. He also suggested that the State to get involved and get others involved in making good quality vegetative propagated (VP) plants and prevents availability of low-quality plants. He also stressed the importance of ensuring availability of fertilizer at an affordable price, and also to show no mercy to those involved in adulteration. He even suggested that to Support factory process automation and quality improvement and mechanization of agricultural practices and for the tea industry officials to go back to basics in financial management /cash flow management.
He said the export of tea is a major foreign exchange earning channel of the country through agriculture. It is often forgotten that, tea is a large net foreign exchange earner and employer of a substantial percentage of the work force. He stressed that during the past five years, the Economic Service Charge (ESC) payments have become an additional cost to tea manufacture, which clearly became unserviceable.
He added that some manufacturers paid that tax on borrowed funds, fearing unbearable penalties. This payment cannot be set off against income tax, as we do not make such profits on tea manufacture. He said on their request the government intervened to get relief on ESC taxation. "The treasury has approved our request, the ESC to be made only on the 32 % share of the factory and not the share paid to the Greenleaf suppliers. We urge Minister of Tea Industry Navin Dissanayake to ensure that this be implemented without delay. "We request the Government to reduce taxation and form a low-cost funding scheme for factory development."