Sri Lanka 2015 budget gives more subsidies for tea

Oct 24, 2014 (economynext)  – Sri Lanka’s 2015 government budget promised more support for tea cultivation by small farmers and exports in value-added form but warned big plantations their lands would be taken if they did not replant as expected.

The budget increased the replanting subsidy for tea small holders by 41% to Rs200,000 per acre from Rs142,000 and the new planting subsidy by 60% to Rs160,000 from Rs100,000 an acre.

Small holders produce the bulk of the island’s tea crop.

Fertiliser will continue to be given at the subsidized price of Rs1,250 per 50/kg bag for all plantation crops, President Mahinda Rajapaksa, who is also finance minister, told parliament when presenting the budget Friday.

The Rs5,000 per acre grant assistance to support land preparation towards water retention, soil conservation and use of organic fertilizer for smallholder tea cultivation to increase production would also be continued.

"Financial assistance will be extended to fully modernize smallholder tea factories with modern machinery and processing equipment," Rajapaksa said.

Regional plantations companies (RPCs) were also given support but warned their land leases could be cancelled if they didn’t improve productivity and do regular replanting of aging tea bushes.

"Only a few plantation companies have shown notable increases in their productivity," Rajapaksa said.

Plantation companies which had not responded to government proposals to take action to improve productivity will be put on six-months notice so the government as ‘Golden Shareholder’ can make decisions regarding the development of plantations under each company, including the cancellation of their lease holding, he said.

He offered soft loans to RPCs through a government credit scheme at six percent interest with an eight-year maturity to all "well-performing companies that will commit to an agreed area for planting and replanting, for social development of plantation workers and to increase the volume of value added tea exports."





But RPCs that have not paid their land lease rentals will not be eligible.

Rajapaksa proposed to spend a billion rupees to set up a separate government-owned plantation company to develop all remaining state-owned tea estates under the Janatha Estates Development Board and Sri Lanka Plantations Corporation.

The government-owned Kurunegala and Chillaw coconut plantation companies "have performed well and paid dividends to the Treasury," Rajapaksa said.
He also proposed to "suitably" reduce import taxes on packaging material required for exports without affecting local industries that manufacture such material.


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