Tea moratorium: Plantation and Finance Ministries disclaim responsibility

By Madhusha Thavapalakumar

The moratorium on capital and interest payments of loans promised for local tea manufacturers by the Government two months ago is still tangled up in a web of bureaucracy, exacerbating the financial woes of the industry.

Inquiries made by The Sunday Morning Business revealed that the moratorium has still not been implemented due to the lack of a proper mechanism to enable banks to issue the relief to the applicants.

This is in spite of a cabinet paper having been submitted by Minister of Plantation Industries Navin Dissanayake in July to seek approval for the implementation of the moratorium. However, the Cabinet is yet to formally approve this proposal.

When inquired as to the current status of the cabinet paper, sources at the Ministry of Plantation Industries told us that cabinet approval has been obtained, but that the moratorium cannot be practically implemented without the said mechanism.

According to the Ministry, the responsibility of preparing a suitable mechanism in consultation with the banks lies with the Ministry of Finance, which has already been advised to prepare the same.

However, when we contacted the Ministry of Finance, it vehemently denied being the authority responsible for the mechanism, claiming that it is the Ministry of Plantation Industries that has to come up with a mechanism in consultation with the banks.

The Finance Ministry further added that it would only be providing suggestions and opinions to the Ministry of Plantation Industries upon the formulation of this mechanism.

Addressing the media on 18 July at the Sri Lanka Tea Board (SLTB), Minister Dissanayake noted that a cabinet paper was being prepared at that time and that it would be submitted for approval in the following week. When we spoke to Dissanayake’s Ministry the following week, we were told that as promised, the cabinet paper had been submitted.

The Ministry of Plantation Industries has decided to grant the moratorium following a meeting with Prime Minister Ranil Wickremesinghe, CBSL Governor Dr. Indrajith Coomaraswamy, Sri Lanka Tea Factory Owners Association (SLTFOA) representatives, and several other ministers in late June.

However, CBSL, banks, and even the Sri Lanka Banks’ Association told us that they had not heard anything from the Ministry of Plantation Industries or the Ministry of Finance about a mechanism to provide a moratorium for the tea industry.

When we spoke to a leading bank in Sri Lanka, they noted that they haven’t heard anything from the Government, and according to legal procedures, the banks should be given a proper mechanism to implement the moratorium.

For further clarification, The Sunday Morning Business also spoke to CBSL, where we were told that they too did not get any update after the meeting in June.

However, speaking to The Sunday Morning Business, Sri Lanka Tea Board (SLTB) Chairman Lucille Wijewardena stated that the banks have already come on board unofficially during a meeting held in June on this regard.

“Banks do like the moratorium, because they will not lose anything this way. So they have agreed.”

The request for the moratorium was made by a number of tea factories which were heavily burdened with financial difficulties and therefore at the edge of collapsing. Sri Lanka has over 700 tea factories out of which around 130 are on the verge of collapse with almost 10 factories having already closed down operations. According to SLTFOA, factories are struggling to settle outstanding loans worth Rs. 5 billion and are in urgent need of the moratorium.

Speaking to The Sunday Morning Business, SLTFOA Chairman U.K.H.R. Ranasinghe emphasised that the moratorium is an urgent requirement put forward by the companies.

“We spoke to the Ministry of Plantation Industries last week and told them that this is a very urgent matter as the number of financially burdened tea factories keep increasing. They are going bankrupt,” he added.

According to Ranasinghe, the financial burden of the companies has been created by a drop in tea prices and less crops, especially the shortage of green leaves.

Sri Lanka’s tea sector was suffering even prior to the Easter Sunday incident due to inadequate replanting and the incident exacerbated problems. Sri Lanka’s tea replantation rate has come down drastically over the years, making it less than 2% at the moment.

Speaking to The Sunday Morning Business a month after the Easter tragedy, Wijewardena noted that the tea sector managed to perform as usual after the incidents, even though there were minor impacts on the transportation of green tea leaves during curfew hours. He also noted that a slight reduction in orders placed by foreign countries can be expected during the next few months.

According to data from CBSL, tea exports suffered a significant hit in April. Tea export earnings fell from $ 109.6 million in April 2018 to $ 99 million in April 2019. However, export earnings from tea increased to $ 125 million for the first time in May 2019 since April 2018 due to higher export volumes despite lower average export prices when compared with $ 121 million May 2018. In June 2019, tea exports dropped to $ 113 million from $ 129.6 million a year ago.

With a Ceylon tea promotion campaign set to launch in Russia this month, the total tea exports are expected to be higher than last year’s export total of $ 1.4 billion.

Soon after the Easter Sunday incidents, the Ministry of Finance provided a moratorium to the terror-hit tourism industry. However, a request by the construction sector for a similar moratorium was shot down by the Ministry, saying that the construction industry was suffering even before the Easter incidents.