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Thursday December 9th, 2021

Sri Lanka ‘organic’ tea prices may have to rise 75-pct to offset hit from fertilizer ban

Tea pluckers in Sri Lanka – file photo

ECONOMYNEXT – Sri Lanka’s ‘organic’ tea prices may have to rise 75 percent to offset a hit from a fertilizer ban which will drive up production costs and reduce yields, which could take at least three years to achieve, an industry official said.

It will take up to three years for a field used to chemical fertilizer to be converted to ‘organic’ and cost of production goes up sharply due to higher labour and lower yields.

Organic tea farming is an extremely challenging niche sector where Sri Lanka’s plantations already have experience. Certification is difficult and different countries impose different standard, but total volumes are small.

“The market for organic tea or products in the world is less than 1 percent,” Rajadurai said.

“Sri Lanka has an organic tea company that has won global awards.”

The company has been in organic tea for 20-years but are battling extremely challenging odds with variety of regulations to enter different markets.

“They are struggling to keep the float because countries like Germany, Holland, UK, USA and France have different parameters and levels when you give what you call organic,” he said.

Sri Lanka has banned agro-chemicals saying it cost over 300 million dollars for annual imports as foreign exchange shortages hit the country due to money printing and it they contributed to non-communicable diseases.

A study conducted by United Planters Association of South India, has found in 2013 that organic tea production will generate at least 30 percent of lower yields.

“So automatically, the cost of production will increase to 30 to 40 percent as a result of lower yields,” Roshan Rajadurai, Chairman, Plantation Service Group said at the Planters Association Annual General Meeting.

The study has also found that a plantation needs an additional 100 to 150 men per hectare to tend to the fields.

“So if you have 10 hectares you need additional 1000 workers. Again availability of workers and its cost,” Rajadurai said.

“There is no need to re-invest the wheel India has also done the research.”

By the use of permitted weedicides for example workers have been cut down, productivity boosted allowing them to earn higher salaries.

Sri Lanka regional plantations companies which started with 200,000 workers are already down to 120,000 as younger people move to retail and other areas.

The falling yields and higher production costs will require a 75 percent price premium to make organic tea viable, Rajadurai said.

However while more workers are needed to tend to fields, they will not have much tea to pluck, reducing revenues and driving companies to losses.

In conventional agriculture which uses both inorganic and organic fertilizers, it takes at least 3-years to convert the a field to organic due to number of soil and sampling tests done to check for residues.

“Organic is a certification,” Rajadurai said. “Merely by stopping chemical fertilizers we can’t label ourselves as organic.”

“This is a very niche market with many restrictions and specifications are required to get certification. At a commercial scale it is not viable,” he added.

Analysts have called for reforms to the central bank law to prevent liquidity injections to bring back monetary stability that was in the country before a Latin America style central bank was set up in 1950.

Sri Lanka’s Government Medical Officers Association, an apparently influential policy driving body, has said according to Pliny the Elder, a Roman author ancient Sri Lankans lived for 140 years, when there were no agro-chemicals.

Economists call ad hoc policy changes using the coercive power of the state, which could reduce earnings ‘regime uncertainty’.

Sri Lanka’s rulers also raised the salaries of plantation workers effectively expropriating plantations in another regime uncertainty.

Sri Lanka has gradually lost the ability to do policy with green papers, white papers, expert and public consultations over several decades. Policy is now by manifesto which are slammed on the public claiming a mandate. (Colombo/Sept30/2021)

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