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An Update on Ceylon Tea

The Private Estates
Today the private sector is regarded as the backbone of Sri Lanka’s tea industry, and the small holder sector dominates these areas. In the past year, the private sector has been wholly responsible for about 45% of total tea production, of which more than 60% is under the management of smallholders.

This sector that was neglected for a considerable length of time has now come into the limelight. In order to pursue an integrated approach, the Small Holder Sector Development project has been designed and put into operation to enhance the productivity of the small holders. The Asian Development Bank, with an extensive capital outlay is ready to assist the small holder to maintain a sustainable level of growth.

At this stage the role played by the private factory owners cannot be disregarded. They have encouraged the expansion of this sector by offering processing facilities that, under their own accord, would never have reached satisfactory levels.

The private factory owners have today formed themselves into an alliance and have registered themselves as a Private Limited Liability Company under the name of Private Tea Factory Owners Association. It functions essentially as a service organization providing all facilities to its members to operate their factories in a more practical manner and, in the process, assisting the country to maintain its steady growth.

Whilst providing the small holder with all the processing facilities, the private factory owners are now eager to refine the quality aspect of the final product in a more charismatic manner. They are currently in the process of enlarging their factory capacities in order to accommodate the excess leaf being harvested. Heavy investment has been undertaken with the installation of advanced color sorters to improve the leaf appearance by the extraction of stalk.

The private factory owners are now also keen to take advantage of hi-tech equipment with the sole purpose of creating a new image for Sri Lanka teas. They have already attained a great deal of success in this regard and the record prices realized for offerings from private factories stand out as an attestation of the untiring efforts of private tea factories to improve the general standards of manufacture.

The cordial relationship that exists between the private factory owners and the small holders has developed tremendously over the past few years, with the result that the factory owners now feel that they have an obligation towards the improvement of the small holders’ domestic environment. They are determined to improve the social infrastructure of the small holders that provide them with the raw material. Through these acts of humanitarianism and benevolence, the bond of mutual regard for each other is protected.

The Structure of the Private Sector
The tea land survey conducted by the Sri Lanka Tea Board into the tea small holder sector provides valuable information regarding the steady expansion of the private sector in recent times. From these findings, it becomes obvious that the future of the industry will, to a great extent, depend on the performance of the small tea cultivators that form the core of the private sector.

Sri Lanka’s total mature tea coverage is 188,172 hectares, of which 56% is under company management, and the balance under the management of the private sector dominated by the small holder.

In the small holder sector, 76,570 hectares are cultivated by 3206,652 tea growers, and the largest concentration of small holdings is in the Southern Province. In most cases, tea is grown as a subsistence crop and occupies only a portion of the individual holdings. This system in a way helps to bring about an ecological balance and helps to protect the environment. The future of the small holder could be further ascertained by the manner in which they have managed their properties. According to a survey conducted in 1994, about 68% of all small holdings were considered to have been in a very satisfactory condition, with over 75% making regular fertilizer applications based on recommended methods. This is most vital in tea cultivation, as it not only increases the production of leaf but also improves its quality, ultimately resulting in the production of a better quality tea. From the long-term point of view, the small holder is well geared to face the future with confidence since about 70% of the small holder substructure is planted with high yielding varieties.

In the state sector, which is now under the management of private companies, there are 404 holdings covering an area of 104,602 hectares. The highest concentration of plantations under the control of the private companies is in the Central Province.

Economics and Social Impact of Privatization of Plantations
Privatization of the estate sector was one of the boldest steps taken by the government in recent times as the plantations are of crucial importance to the Sri Lanka economy. Export earnings from tea alone account for over US$750 million, which is 14% of the total earnings of the country. In addition, it generates employment directly and indirectly for over a million people.

The issues that led to this change are both economic and social, unlike earlier situations when socio-political reasons took precedence over commercial considerations. It was meant not only to improve the general efficiency of the industry by enhancing product quality and by stepping up capital investment, but also to improve the general quality of the life of the workforce and their families.

The 20 management companies manage 34% of the county’s land under tea and rubber, accounting for 49% and 40% respectively of the island’s production of primary export products. The success of the privatization program will no doubt have an overall influence on the entire plantation industry.

The prime concern of the new management companies that took over in 1992 was to bring back the field from the stagnant levels of the mid-1980s. This involved the adoption of a package of improved agricultural practices and has resulted in a definite upsurge in tea production since privatization. The accomplishment of a field technology practiced so far, though not spectacular, is nevertheless encouraging and records a 1.6% increase over the previous six years. It must however be stressed that results of the systematic replanting and in-filling that has taken place can only be expected to become evident over the longer term.

An improvement in factory technology was the next consequential task undertaken by the management companies. Extension of factory capacity was a necessity, but the most daunting task ahead was to re-establish the image of Sri Lanka teas in world markets. The introduction of modern machinery with new processing management systems will ensure product consistency, and before long these measures will help to enhance the quality of Sri Lanka teas.

A further healthy impact of the ownership change is the increasing dependence by the tea sector on market forces and the tearing down of the regulatory framework previously introduced by the government.

It is an accepted fact that there is an ongoing passion on the part of the management companies to improve the infrastructure and improve the living conditions of the labor force. Several more projects aimed at serving the working classes are in progress and it will be interesting to view this subject and the different themes in ten years’ time.

Tea & Coffee - June/July, 2002


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