Tea factory owners seek financial relief from govt
Amidst dwindling tea yields, high interest rates and declining tea prices, Sri Lanka’s tea industry is seeking a financial relief package for over 100 tea factories that are on verge of collapse.
Sri Lanka Tea Factory Owners Association (SLTFOA) members this Monday met Prime Minister Ranil Wickremesinghe and raised the issues faced by the tea factories and requested financial relief.
SLTFOA highlighted that these factories have been struggling to service Rs.5 billion worth of outstanding loans with 33 factories already gone into non-performing loan (NPL) category, as they were unable to service the loans.
Further, three of these factories have been put up for sale by banks. Therefore, the SLTFOA has requested a two-year moratorium on loans taken by tea factories with provisions to reschedule the loans into an affordable amount.
“We asked the government to reschedule those loans and translate them into payable amounts with low interest rates similar to the schemes under Enterprise Sri Lanka,” SLTFOA President Harith Ranasinghe said. The tea factory owners have taken loans to develop their factories several decades back when interest rates were below 10 percent. However, Ranasinghe pointed out that interest rates have now gone up to 14-16 percent, increasing the serviceable amounts to banks by nearly 50 percent.
Further, the majority of tea factories are running under capacity due to the shortage of green leaves.
According to SLTFOA, most of the factories are running at 50-70 percent capacity while some are running below 50 percent.
Ranasinghe blamed insufficient replanting for the shortage of green leaves, noting that replanting has been ignored for many years. Despite favourable tea prices at the Colombo Tea Auction during the first few months of the year, the prices for low grown teas have come down by around Rs.60 to Rs.540 per kg.
On a positive note, Ranasinghe revealed that the government agreed to reduce the Economic Service Charge (ESC) on the total turnover of tea factories.
Tea factories pay 0.5 percent ESC on their total turnover as of now. However, the turnover is shared at 68 percent and 32 percent between tea small holders and tea factory owners respectively.As per the agreement reached with the government, the ESC will be only charged on 32 percent of factory owners’ turnover.
Ranasinghe noted that the reduction of ESC would reduce the excessive financial burden on tea factories that are already running at thin margins.