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Monday February 6th, 2023

Sri Lanka tea farms fear 40-pct crop loss in 2022, rubber wipe-out over fertilizer ban

ECONOMYNEXT – Sri Lanka’s tea output could fall 40 percent in 2022 and rubber could be wiped out by leaf disease, threatening livelihoods and export revenues, if a fertilizer agro-chemical ban suddenly imposed this year is continued, industry officials said.

“In 2022, all experts estimate that we will record reduction in tea exports over 40 percent,” Bathiya Bulumulle, President of Sri Lanka’s Planters’ Association representing managers of commercial tea plantations and factories, who was re-elected for a second time said at its annual general meeting.

Severe Crop Losses

“With an immediate halt to use of fertilizer of agro-chemicals, the consensus is that there will be severe crop losses, and as a result, a reduction in export revenues by as early as the end of this year.”

Sri Lanka has banned imports of fertilizer saying 300-400 million dollars were spent on it a year and that agro-chemicals caused non-communicable diseases.

Sri Lanka’s central bank has been printing money, triggering forex shortages.

Sri Lanka’s Government Medical Officers Association, an influential policy driving body has said according to Pliny the Elder, a Roman author, ancient residents of the island lived for 140 years, before there were any agro-chemicals.

However, critics have said Pliny the Elder is likely to have been wrong and policy should be made on refutable science.

Over several decades Sri Lanka abandoned evidence-based policy making involving, green papers, white papers, expert consultation and finally public consultation which leads to a law to suddenly resorting to bans through executive action and gazette rule.

Up to now plantations companies are using fertilizer already imported to the country for tea. Crop losses have not been severe up to July, amid good rainfall though down from 2019.

“All this time we were managing with whatever the fertilizer issued by the government,” Bulumulle said.

“But it is too premature to tell what it is going to be. There may be a 30 to 40 percent reduction of crop maybe early next year when there is no adequate quantity of fertilizer given to tea.”

Sri Lanka exported 1.2 billion US dollars of tea in 2020 and 1.3 billion in 2019.

The government at the moment has introduced liquid nitrogen. However its efficacy compared to urea based fertilizer is not yet known, planters said.

Usually, Sri Lanka’s Tea Research Institute or Rubber Research Institute recommends fertilizer and application volumes after study.

Rubber Break

Rubber is also hit by diseases and is under threat without adequate fertilizer.

“By the end of 2021, the industry expects an estimated 20 percent Year-on-Year reduction in output from rubber plantations due to this disease,” Bulumulle, said.

A leaf disease (Pestalotiopsis ) is spreading in the plantations. Already about 20,000 hectares are affected.

Rubber plantation experts have said it has reached an epidemic level.

“This disease results in continuous fall of tree leaves so the Rubber Research Institute has instructed us to give additional dosages of fertilizer,” Bulumulle explained.

Farms need fungicides, Carbendazim and Hexaconazole and also fertilizer to help the trees recover leaves.

“One of the key issues in addressing Pestalotiopsis is the lack of necessary fertilizer and the required agrochemicals,” Bulumulle said.

“Since rubber trees lose their foliage due to the disease, to compensate and provide extra nourishment for foliage re-growth, the Rubber Research Institute’s main recommendations is to apply additional inorganic fertilizer,”

The shortage of fertilizer is also going to hinder progress on replanting of rubber, given that the uptake of fertilizer is most crucial when rubber is in the nursery phase, Bulumulle said.

The planters are sounding the alarm, says this could be as bad as the “coffee blight of late 1800s” without fertilizer.

Sri Lanka was a prominent coffee producer in the late 1800s when a disease known as ‘coffee rust’ blight wiped out Sri Lanka’s coffee plantations in the late 1800s.

By next year, planters predict that if crop falls companies will not be able to provide work for the staff.

About 120,000 work in the regional plantation companies. Similar plight will fall on smallholders the PA warned.

“For replanting too, the entire industry – including tea smallholders – who account for over 70 percent of total tea production, need fertilizer for their nurseries,” Bullumulla explained.

“Without it, we cannot grow viable cultivars.”

Planters also said that once a market is lost, especially for tea, it cannot be regained. (Colombo/Sept30/2021)

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Sri Lanka to address SME tax problems at first opportunity: State Minister

ECONOMYNEXT – Problems faced by Sri Lanka’s small and medium enterprises from recent tax changes will be addressed at the first opportunity, State Minister for Finance Ranjith Siyambalapitiya said.

Business chambers had raised questions about hikes in Value Added Tax, Corporate Income Tax and the Social Security Contribution Levy (SSCL) that’s been imposed.

It should be explored on how to amend the Inland Revenue Act, Siyamabalapitiya said, adding that the future months should be considered as a period where the country is being stabilized.

Both the VAT and SSCL are effectively paid by customers, but the SSCL is a cascading tax that makes running businesses difficult.

In Sri Lanka SMEs make up a large part of the economy, accounting for 80 per cent of all businesses according to according to the island’s National Human Resources and Employment Policy.

(Colombo/ Feb 05/2023)

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Sri Lanka revenues Rs158.7bn in Jan 2023 up 51-pct

ECONOMYNEXT – Sri Lanka’s government revenues were 158.7 billion rupees in January 2023 but expenditure and debt service remained high, Cabinet spokesman Minister Bandula Gunawardana said.

In January 2022 total revenues were Rs104.5 billion according to central bank data.

Sri Lanka’s tax revenues have risen sharply amid an inflationary blow off which had boosted nominal GDP while President Ranil Wickremesinghe has also raised taxes.

Departing from a previous strategy advocated by the IMF expanding the state and not cutting expenses, called revenue based fiscal consolidation, he is attempting to do classical fiscal consolidation with spending restraint.

President Ranil Wickremesinghe has presented a note to cabinet requesting state expenditure to be controlled, Gunawardana told reporters.

State Salaries cost 87.4 billion rupees.

Pensions and income supplements (Samurdhi program) were29.5 billion rupees.

Other expenses were 10.8 billion rupees.

Capital spending was   21 billion rupees.

Debt service was 377.6 billion rupees for January which has to be done with borrowings from Treasury bills, bonds and a central bank provisional advance of 100 billion rupees, Gunawardana said.

Interest costs were not separately given. (Colombo/Feb05/2023)

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Sri Lanka’s Ceylon Tea prices down for second week

ECONOMYNEXT – Sri Lanka’s Ceylon Tea prices fell for the second week at an auction on January 31, with teas from all elevations seeing a decline, data showed.

“In retrospect, the decline in prices would be a price correction owing to the overall product quality and less interest from some key importers due to the arrival of cargo at destinations ahead of schedule,” Forbes and Walker tea brokers said.

The weekly sale average fell from 1475.79 rupees to 1465.40 rupees from a week ago, according to data from Ceylon Tea Brokers.

The tea prices are down for two weeks in a row.

High Growns

The High Grown sale average was down by 20.90 rupees to 1380.23 rupees, Ceylon Tea Brokers said.

High grown BOP and BOPF was down about 100 rupees.

“Ex-Estate offerings which totalled 0.75 M/Kg saw a slight decline in quality over the previous week” Forbes and Walker said.

OP/OPA’s in general were steady to marginally down.

Low Growns

In Low Grown Teas, FBOP 1 was down by 100 rupees and FBOP was down by 50 rupees while PEK was up by 150 rupees.

The Low Growns sale average was down by 8.55 rupees to 1547.93 rupees.

A few select Best BOP1s along with Below Best varieties maintained.

OP1                     Select Best OP1’s were steady, whilst improved/clean Below Best varieties maintained.   Others and poorer sorts were easier.

PEKOE                 Well- made PEK/PEK1s in general were steady, whilst others and poorer sorts were down.

Leafy and Semi Leafy catalogues met with fair demand,” Forbes and Walker brokers said.

“However, the Small Leaf and Premium catalogues continued to decline.

“Shippers to Iran were very selective, whilst shippers to Türkiye and Russia were fairly active.”

This week  2.2 million Kilograms of Low Growns were sold.

Medium Growns

Medium Grown BOP and BOPF fell by around 100 rupees

The Medium Growns sale average was down by 33.40 rupees to 1199.4 rupees.

“Medium CTC teas in the higher price bracket witnessed a similar trend, whilst teas at the lower end were somewhat maintained subject to quality,” Forbes and Walker brokers said.

“Improved activity from the local trade and perhaps South Africa helped to stabilize prices to some extent.”

OP/OPA grades were steady while PEKOE/PEKOE1 were firm, while some gained 50-100 rupees at times.

Well-made FBOP/FBOPF1’s were down by 50-100 rupees per kg and more at times.

(Colombo/Feb 5/2023)

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