Cabinet approval has been secured to grant one-year moratorium on loans taken by the country’s crisis-hit tea factory owners and to allocate Rs.500 million to facilitate working capital loans at concessionary rates.
“The relevant Cabinet paper presented by Prime Minister Ranil Wickramasinghe was approved by the Cabinet of Ministers recently. The Cabinet clearly ordered the Central Bank to take measures to grant one-year moratorium on loans obtained by the privately-held tea factories,” Plantation Industries Minister Navin Dissanayake said.
The Cabinet also ordered the Central Bank to take measures to halt legal action including seizing of assets by the banking sector,” he added.
Sri Lanka’s tea factories are under continued pressure to cease operations with 62 factories out of 707 already being forced to shut down since 2018 by the declining tea prices and stagnant green leaf production, which is further exacerbated by financial mismanagement.
Dissanayake said the government has allocated Rs.500 million to Sri Lanka Tea Board (SLTB) to extend working capital loan facilities at a concessionary rate to tea factories through the banking sector.
“SLTB Chairman Lucille Wijewardena will discuss with the Central Bank and will set up a special working capital loans facility for tea factories,” he said.
The working capital scheme is likely to come into force within a month, according to SLTB.
Sri Lanka Tea Factory Owners Association (SLTFOA) said their members are struggling to service Rs.5 billion worth of outstanding loans.
SLTFOA stated that the lower auction prices and static green leaf production levels as key reasons for the current crisis in the industry.
Also, the tea factory owners had borrowed billions of rupees when the lending interest rates were at single-digits which have now climbed up to double digits.
Further, the broker advances to tea factory owners have also been risen rapidly in recent times.
SLTFOA Former Chairman Harith Ranasinghe recently highlighted that advances extended by tea brokers have led to “uncontrolled borrowing practices” and malpractices by certain tea factory owners have led to the financial deterioration of the sector.
“Some factory owners have got used to these uncontrolled borrowing practices. It is like an addiction 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. The broker must concentrate on selling the teas than giving advances to the manufacturers,” he said.
Although, tea factory owners claim that loans have been obtained to invest in infrastructure and to enhance standards, the authorities allege that considerable portions of these loans were utilised to acquire personal assets to support their lifestyles. (NF)