ECONOMYNEXT – Cost of production of Sri Lanka tea has gone up 30 to 35 percent amid a currency crisis and plantations are still cut off from fertilizer despite a ban on agrochemicals being lifted, an industry official has said ahead of wage negotiations.
Cost of fertilizer has shot up partly due to a global commodity bubble fired by Federal Reserve money printing, which is now being reversed with rate hikes, and Sri Lanka has also been hit by foreign exchange shortages.
Sri Lanka’s ex-President banned fertilizer and agro chemical on the advice of the Government Medical Officers Association, and other activists including a monk.
“While the Sri Lankan Government has finally reversed its extremely ill-advised decision, the current conditions mean that fertilizer supplies will continue to be scarce, and therefore extremely expensive,” Bathiya Bulumulla, the outgoing chairman of Sri Lanka’s Planter’s Association said at is recent annual meeting.
“Many estates have been cut off from fertilizer supplies for up-to 18 months. The detrimental impacts will likely be felt for years to come.
“However, to this day, none of the so called experts and activists associated with these policy misadventures have acknowledged or accepted responsibility for the severe consequences of their actions.
“Meanwhile, the cost of all other material inputs, from packaging to fuelwood, and electricity have all sharply increased, while labour wages remain completely untethered from productivity.
“As a result, our Cost of Production has on average increased between 30-35 percent.
Tea prices have also shot up in rupee terms after the rupee fell from 182 to 360 to the US dollar after two years of money printing and cuts for ‘stimulus’.
However production is down amid fertilizer shortages.
Plantations now have to pay higher wages to workers with inflation running at 70 percent.
Sri Lanka’s rubber production had collapsed 40 to 45 percent, Bulumulla said with the chemical ban hitting the sector in two ways.
“As we had warned a year prior, low availability of fertilizer resulted in reduced yield, which was further exacerbated by one of severe outbreaks of ‘Pesta Leaf Fall Disease’, which further decimated production,” he said.
“As a result, we saw total rubber production collapse over 40 to 45% the past year.”
“And we do believe that the problems we face today can be solved. But we must first set ensure that politics is led by economics and science, and not the other way around.
“Only then can we truly start to work together for the betterment of the industry, and all who depend on it for their livelihood.”
Rubber revenues were up 40 percent to 42 million US dollars with higher global prices, he said. (Colombo/Sep31/2022)