1. Introduction
1.1 Srilanka Tea Industry
The
tea production in year 2011 was 328
mn kg. It was estimated that the said quantity will be 330
mn kg in the year 2012. However, the total tea production
up to August 2012 was 214 mn kg and
it is projected that the total tea production at the end of the year will be 321 mn kg. The decline in the production was caused by the
unexpected unfavorable weather conditions.
The
average price of tea at the Colombo tea auction which was stood at Rs.363.87 per kg in the first eight months of the year 2011 has increased by 5.1% up to Rs.382.48 per kg during the corresponding period of the year 2012. Further, the FOB price in the first eight months of the
year 2011 amounted to Rs.503.48 per
kg and it was recorded as Rs.541.32 per kg in the first
eight months of the year 2012. It is a 7.5% increase.
At
present, tea cultivation has expanded in the extent of 203,885 hectares of which 120,664
hectares (59%) are owned by the tea small holding
sector. Further, 73,708 hectares (36%) are owned by 21 Regional Plantation
Companies and 9,513 hectares (5%) are owned by the state Plantations institutions
1.1.1
Tea Small Holding Sector
In
pursuance of the criteria available at present, an extent of 4
hectares or less is defined as a tea small holding. However, the average extent
of land unit owned by the tea small holder is 0.33
hectares.
A
greater contribution to the tea cultivation is made by the tea small holders
and they contribute 70% to the national tea production.
This was mainly attributed by the fertilizer subsidy granted to the tea small
holders under the National Fertilizer Subsidy Programme and granting of a
subsidy of Rs.300, 000 to the replanting
and Rs.150, 000 to the new planting
by the government by year 2012 has also caused for the
encouragement of tea small holders. Further, direction of the tea small holders
to the research and training programmes, extension services and good agricultural
practices has also caused for the improvement in the productivity of this
sector.
The
extent of lands under replanting in the tea small holding sector in year 2011 was 772 hectares and actions have been
taken to replant in 900 hectares during the year 2012.
1.1.2
Corporate Sector
23 private companies were established in year 1992 and the ownership of the large scale estates owned by the
government has been leased out to the said Companies for a period of 53 years. 73,708 hectares have been
cultivated with tea, under 21 Plantation Companies among
the said Companies and further 9,513 hectares are
cultivated by the state plantation institutions. Although the contribution of
this sector to the total tea production is about 30%, the
contribution of the quantity of made tea produced by them from the green leaf
of the tea small holders is 41% of the total production.
1.1.3
Productivity of the Tea Sector
The
average productivity of the tea small holding sector in year 2011
was 1,974 kg per hectare and the said quantity in the
sector of Regional Plantation Companies was 1,483 kg per
hectare. Accordingly, the total average productivity in the year is 1,615 kg per hectare.
1.1.4
Tea Production
The
total tea production in the first 8 months from January to
August 2012 is 214 mn kg. Taking into
consideration the main tea producing methodologies, the Orthodox black tea
production recorded 91.6% (196.46 mn kg) of the total tea
production during the same period. The C.T.C. and Green Tea productions
recorded 6.8% (14.66 mn kg) and 0.9% (1.97 mn
kg) respectively and the Instant Tea and Reclaimed Tea production was 0.5% (0.98 mn kg) and 0.2% (0.35 mn kg)
respectively.
1.2 Definition of ‘Fertilizer’
Any of a large number of organic and synthetic materials,
(including manure and nitrogen, phosphorus, and potassium compounds) spread on
or worked into soil to increase its capacity to support plant growth.
1.3 Definition of 'Subsidy'
A benefit given by the government to groups or
individuals usually in the form of a cash payment or tax reduction. The subsidy
is usually given to remove some type of burden and is often considered to be in
the interest of the public.
Politics play an important part in subsidization.
In general, the left is more in favor of having subsidized industries, while
the right feels that industry should stand on its own without public funds.
2. Objective of Subsidy
ü Increase of foreign exchange earnings.
ü Retaining the cost of production at a low level.
ü Enhancement of the profitability of the tea small holders
and the Plantation Companies.
ü Uplifting the living standard of the Plantation
Community.
ü Supply of high quality products to the consumers.
ü Sustainable development through the environmental
conservation
3. Subsidies Given to Srilanka Tea Industry
ü Subsidy on fertilizer: There was subsidy provided by the
government, on imported fertilizer for
the entire agriculture sector, with a view to improving productivity. Since the
government cannot
afford to provide this subsidy for the entire tea sector, it decided to provide
this subsidy only
to the small-holders in the tea sector. At present, it works out to about Rs 25,000/= and Rs
15,000/= (approximately) per metric ton of imported urea
and the common tea fertilizer mixtures
used, respectively.
ü Subsidy for re-planting: Recognizing the contribution from the
smallholder sector and also with
a view to developing that particular sector further, the small holders were
provided subsidy
to re-plant their lands. There have been funding from Asian Development Bank,
to meet part of the
subsidy paid to the small holders, under the Second Tea Small Holder Development Project (1999 – 2005). This funding was made available to the government, as a long term loan with a low interest component. The balance
component of the subsidy was taken
from the tea cess funds collected. There was also funding for training of
personnel in the sector,
under the same project/scheme.
ü Subsidy on factory machinery: A subsidy of 35%
on the cost of machinery, enjoyed by the industry for quite a long period, was removed in mid 1990’s.
ü Others: For the corporate sector, funding is available in
the form of loans with low interest rates,
through the Plantation Development Project (PDP) with financial assistance from
Asian Development Bank
and Plantation Reform Project II, funded by Japan Bank for International Cooperation (JBIC). Out of the 20
RPCs managing tea estates, 16 have signed the agreement with the Government to participate in the Project. With a
certain percentage contribution from the
government, funding totaling up to approximately US $ 140.4
Million, is available under these
two projects, to address the following objectives:
i.
to enhance the
profitability of the plantation sector through, transformation of RPCs from
primary producers to agribusiness entities
ii.
to improve the living and working conditions of estate workers.
Such
funds could be utilized for the purposes of re-planting/infilling, factory
development, social
development as well as skill development programs for personnel attached, to
the sector.
4. Subsidy Scheme for tea sector
All
services are provided through Tea Inspector/Ext. officers at field Level and regional
offices at the regional level.
Objectives;
·
Policy foundation for the sustainable development of the tea small holders.
·
Set the development Programs
·
Monitoring of Programs
In case of applying
subsidies, tea farmers should consider following regulations and conditions.
Planting Scheme
|
Replanting with soil rehabilitation
|
|||
Regulations &
Conditions on the Scheme
|
If your
land exceeds 10 perches
|
|||
If the
ownership of the land can be proved
|
||||
Possibility
of receiving funds by your authorized representative
|
||||
Funding Method for
replanting
|
For the
land is situated in any tea growing districts Rs. 300,000/- per hectare can be received. Approval will be granted up
to one hectare for a Small Holder per annum.
|
|||
Installment
|
Installment
value (Rs.) per one hectare
|
How to
entitle for release of payment
|
||
First (Land Preparation)
|
||||
Part I
|
High/Mid
|
Low Grown
|
After
completing land preparation & grass planting, TI inspects the land &
recommends to release the installment payments
|
|
80,000.00
|
80,000.00
|
|||
Second (Soil Rehabilitation)
|
||||
Part I
|
High/Mid
|
Low Grown
|
After 6 months of grass planting , TI inspects the land &
recommends to release the installment payments
|
|
30,000.00
|
30,000.00
|
|||
Part II
|
High/Mid
|
Low Grown
|
After 18 months of grass planting , TI inspects the land &
recommends to release the installment payments
|
|
120,000.00
|
120,000.00
|
|||
Third (Planting)
|
||||
Part I
|
High/Mid
|
Low Grown
|
After
planting, TI inspects the land & recommends to release the installment
payments
|
|
40,000.00
|
40,000.00
|
|||
Part II
|
High/Mid
|
Low Grown
|
After one
year of planting , TI inspects the land & recommends to release the
installment payments
|
|
30,000.00
|
30,000.00
|
|||
Planting Scheme
|
Crop Rehabilitation
|
|
Regulations & Conditions on the Scheme
|
If the extent of your land is more than 20 perches.
If the ownership of the land can be proved.
Possibility of receiving funds by your authorized representative.
|
|
Method of payment
|
Stage I - Rs. 15 per plant
|
Approval will be granted up to one acre for small holder per annum
|
Stage II - Rs. 10 per plant
|
Up to 1000 plants per acre.
|
|
Stage
|
How to entitle for release of payment
|
|
First Stage
|
||
Rs. 15 per plant
|
After filling vacancies (Planting), TI inspects the land & recommends
to release the payments
|
|
Second Stage
|
||
Rs. 10 per plant
|
After one year of planting , TI inspects the land & recommends to
release the payments
|
|
Example
|
||
If you apply 500 plants to fill the vacancies of
your cultivation, then you are entitled for
|
||
Stage I
|
500 X 15 = Rs. 7500.00
|
|
Stage II
|
500 X 10 = Rs. 5000.00
|
|
Planting Scheme
|
Replanting without soil rehabilitation
|
||
Regulations &
Conditions on the Scheme
|
If your
land exceeds 10 perches
If the
ownership of the land can be proved
Possibility
of receiving funds by your authorized representative
|
||
Method of payment
|
For the
land is situated in any tea growing districts Rs. 225,000/- per hectare can be received. Approval will be granted up
to ¼ acres for a Small Holder per annum and ownership of the land extent
shall be one acre.
|
||
Installment
|
Installment value (Rs.) per hectare
|
How to entitle for release of payment
|
|
First (Land Preparation)
|
|||
Part I
|
High/Mid
|
Low Grown
|
Within
first year after land preparation, plants shall be cultivated.
|
80,000.00
|
80,000.00
|
||
Second (Planting)
|
|||
Part II
|
High/Mid
|
Low Grown
|
Within
first year after land preparation, plants shall be cultivated.
|
115,000.00
|
115,000.00
|
||
Third (Maintenance)
|
|||
Part III
|
High/Mid
|
Low Grown
|
After one
year of planting , TI inspects the land & recommends to release the
installment payments
|
30,000.00
|
30,000.00
|
||
Planting Scheme
|
New planting with soil rehabilitation
|
||
Regulations & Conditions on the Scheme
|
If your land exceeds 10 perches
If the ownership of the land can be proved
Possibility of receiving funds by your authorized
representative
|
||
Method of payment
|
For the land is situated in any tea growing districts
Rs. 150,000/- per hectare can be
received. Approval will be granted up to one acre for a Small Holder per
annum.
|
||
Installment
|
Installment value (Rs.)per hectare
|
How to entitle for release of payment
|
|
First(Land Preparation)
|
|||
Part I
|
High/Mid
|
Low Grown
|
After completing land preparation & grass planting,
TI inspects the land & recommends to release the installment payments
|
50,000.00
|
50,000.00
|
||
Second(Soil Rehabilitation)
|
|||
Part I
|
High/Mid
|
Low Grown
|
After 6 months of grass planting ,
TI inspects the land & recommends to release the installment payments
|
15,000.00
|
15,000.00
|
||
Part II
|
High/Mid
|
Low Grown
|
After 18 months of grass planting
, TI inspects the land & recommends to release the installment payments
|
50,000.00
|
50,000.00
|
||
Third (Planting)
|
|||
Part I
|
High/Mid
|
Low Grown
|
After planting, TI inspects the land & recommends
to release the installment payments.
|
35,000.00
|
35,000.00
|
||
Planting Scheme
|
New planting without soil rehabilitation
|
|||
Regulations & Conditions on the Scheme
|
If your land exceeds 10 perches
If the ownership of the land can be proved
Possibility of receiving funds by your authorized
representative
|
|||
Method of payment
|
For the land is situated in any tea growing districts
Rs. 120,000/- per hectare can be
received. Approval will be granted up to one acre for a Small Holder per
annum.
|
|||
First (Land Preparation)
|
||||
Part I
|
High/Mid
|
Low Grown
|
After completing land preparation & grass planting,
TI inspects the land & recommends to release the installment payments
|
|
50,000.00
|
50,000.00
|
|||
Second (Planting)
|
||||
Part I
|
High/Mid
|
Low Grown
|
Within first year after land preparation, plants shall
be cultivated.
|
|
70,000.00
|
70,000.00
|
|||
5. Subsidy Impacts
·
Tea smallholders
are contributing nearly 76% to the total tea production.
Therefore, increasing the new planting and replanting subsidy substantially
will encourage smallholders and thereby enhance the productivity of the tea
industry.
·
At present, a large
area of land under RPCs remains unutilised. The proposed loan scheme will
encourage them to use their lands more productively.
·
Sri Lanka aims at increasing export income from tea to
US$ 2.5 Billion by 2015.
Hence, carrying out an aggressive marketing
campaign to promote Sri Lanka tea in the international market will help to
penetrate into new markets and also to increase country’s share in the existing
markets.
·
At present a 28% income tax rate is
applicable for manufacturing companies engaged in value
added tea industry. Extending concessionary tax rates for joint ventures of
value added Sri Lankan tea will encourage value addition and also promote
productive alliances among industry stakeholders
some other impacts
v Enhancement of the productivity in the cultivated lands.
v Increase of the annual rate of tea replanting.
v Expansion of the cultivation in non-traditional areas.
v Implementation of research and development programmes.
v Value addition and promotion of brand names.
v Expansion of under cultivation.
v Increase of foreign exchange earnings.
v Retaining the cost of production at a low level.
v Enhancement of the profitability of the tea small holders
and the Plantation Companies.
v Uplifting the living standard of the Plantation
Community.
v Supply of high quality products to the consumers.
v Sustainable development through the environmental
conservation
v The amount of foreign exchange earning from tea.
v Productivity (Increase in the yield from a land unit).
v Replanting rate of tea lands.
v Extent under new planting.
v Quantity and value of value added products.
v Low production
cost as against the selling price.
6. Conclusion
Providing subsidy ensure the future of the tea
industry and make the Ceylon Tea the premier brand in the global beverage
market through strengthening the tea small holding sector and the corporate
sector for sustainable development.
7.
Suggestion
Ø Providing subsidy
under suitable guidance.
Ø
After providing subsidy appointed
special officers
for supervision.
Ø
Stop providing subsidy for high
profitable company.
Ø
When allowing subsidy for machinery, giving long period technical guidance
Ø
Arrange the special training
programme for estate worker’s base on fertilizer application & pesticide
application.
ØCreate good communication method between estate worker’s and government Because goverment can easily identify
impact of providing subsidies.
Ø
Encourage using
natural fertilizer’s.
8. References
ü Central Bank of Sri Lanka., 2012. Annual
Reports 2011, 2012.
ü National Plan of Action for Social Development of the
Plantation Community 2006 – 2015
ü SustainabiliTea.
Report on Srilankan Tea Industry.January 2008.Institiue
of Social Developement.
ü Ministry of Plantation Industries - Progress Report 2012
ü Tea Small Holdings Development Authority (TSHDA)
ü Sri Lanka Tea Board
http://www.pureceylontea.com/
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