Rubber on a roll!

By Cheranka Mendis

A tense exchange took place between Colombo Rubber Traders Association (CRTA) Chairman M.S. Rahim and Plantations Minister at the AGM when the former insisted that the CESS was of no value to the industry.

In response Plantations Minister Mahinda Samarasinghe remarked that the Government had ploughed millions into improving efficiency and the industry should not complain about it. He called on Rahim to do a cost benefit analysis to decide where the monies were being utilised.

 

Battle of the cess

“Of course you would have been much happier if the cess has not been increased, but when you run a Government you must also think of revenue generation. The principal is that when you tax the industry, ideally if the money can be pulled back to the industry in a productive manner, then the increase of the cess cannot be totally challenged,” Samarasinghe said. He added that “hopefully” if the economy improved, cess could be done away with in the future.

“We have been investing in the industry in the form of various subsidies and the Ministry has taken various measures to ensure that the necessary support is given to help the production and productivity improvement in the rubber sector,” he added.

Rahim in his address as the Chairman of the association asserted that while imports of domestic cess led by the Rubber Development Department were being suitably utilised for the need of the industry, the direct imposed cess by the Treasury was not being brought back to the industry.

“The plantation industry urges that the present subsidy should be increased to meet the rising cost in planting, factory development and upgrading as well as enhancing initiatives such as rain guards. Additionally it would be much appreciated if you could reconvene the Cess Committee, which has been disbanded,” Rahim said.

He also conveyed a message from the exporters to either give prior notice of such intents of increase or work out a system so that they can get protection for contracts made prior to any cess imposed.

Samarasinghe in his speech following the Chairman’s listed out the activities carried out by the State with direction from the Ministry with regard to investments made in all forms to stabilise the industry.

Good year to come

The Minister who claimed that the Ministry would work closely with the industry stakeholders in ensuring that correct policy decisions are taken to complement the progress expected and capitalise on the positive framework for rubber needs both internationally and locally, stated that plans were underway to further develop the sector.  

“We see great progress in the rubber industry. Year 2010 was a record year in terms of production and when we look at the prices today, it has increased quite significantly and the expectations are that it will increase further as a result of the significant demand increase for natural rubber internationally. We see countries such as China and India growing rapidly and with these two giant economies in accelerated growth, demand for natural rubber would definitely increase. We must make a note of the situation internationally and put in place the correct policy decisions to ensure that we take advantage of the situation internationally as well as locally,” Samarasinghe said.

He assured that with backing from a good budget as announced by President Mahinda Rajapaksa last year, where suggestions made by the Ministry after lengthy discussions with stakeholders were taken into account along with important proposals made to further facilitate the industry, the sector stands to meet challenges head-on backed by the significant investment made on the same line.

Rain guard facilitation

For the first time Sri Lanka has received Government funding for a subsidiary for rain guards. Claiming that this was an initiative the Minister championed himself, he stated that he had received records showing a marked increase in productivity if rain guards were used on a continuous basis.

“After visiting the Rubber Research Institute in my electorate Agalawaththa and post discussions with scientists, I was given sufficient information to believe that usage of rain guards would increase productivity in a significant manner. The institute has done its adoptive trials and used rain guards in Rubber Research Institute Darton field estate and Kuruwita and showed results of productivity increase as high as 30%” he said.

A clear advantage of propagating the usage of rain guards not just among the regional plantation companies but across all smallholders was identified.

The allocation for the provision of rain guards involves a 50% subsidiary. The cost of rain guards is said to be between Rs. 50-60, out of which a 50% subsidiary is given. “I’m happy that nearly Rs. 100 million of the money allocated has been given to regional plantation companies. The balance has been provided to smallholders and I believe that next year, when we ask for the continuation of the subsidiary, we would be able to reach many more small holders and continue to provide it for regional plantations as well.”

Expectations and land lease

“What we are expecting is a rapid increase in productivity and production, which would enable us to take advantage of the great demand internationally for rubber products and meet the needs of the domestic value-added industries which consume nearly 70% of the rubber production.”

Some of them from the local market must import their raw material as a result of Sri Lanka not being able to meet the demands of the domestic value-added industry to the extent that we should be able to, he said.

In a different direction, the country would also be able to increase the incomes of smallholders and expect the returns to be reinvested in the estates they look after.

Samarasinghe remarked that there were 35 years more to go on the lease agreement for rubber cultivation land. “This kind of forward thinking would ensure that at the end of the 53 years of the lease agreement we have entered into as of now, that if we do not continue the agreement further, the estates be handed back to the people of the country in a state it should be handed back to them.”

From tradition to new thinking

Further opportunities are available to expand cultivation of rubber in areas not ventured into. There are traditional areas such as Kalutara, Kegalle, etc., but there are also what are called ‘non traditional areas’ that the country has now ventured into with hopes of increasing cultivation of rubber.

Commenting on his role as the Minister, Samarasinghe stated that with his takeover, the existing plans that were already in operation had been further expanded and promoted.

“Before I took over the portfolio of the Plantation Ministry, the Ministry has entered into a contract with the International Fund for Agricultural Development (IFAD) to target 5,000 smallholders in the Monaragala District with approximately 5,000 hectares in mind. I increased it to 10,000 smallholders in 5,000 hectares in the first instance and took steps to locate other land available in that district to ensure we give them more land so their incomes could be increased and correspondingly, production.”

He also stated that due acknowledgement should be given to the Government for repaying the IFAD loan, for venturing into a non traditional area and taking advantage of new thinking. He said he was also in the process of considering further discussions with IFAD and other such institutions to see whether the country could enter into similar concessionary loan facilities to expand into other areas.

“In addition we have now ventured into the Eastern Province – Padiyathalwa as well as Maha Oya, where we were able to get the regular budget to allocate a sizable amount of money for 900 hectares to be cultivated within this year. We are now in the process of embarking on that. The Rubber Development Department said that by next month we would be able to embark on the project on a practical level,” Samarasinghe said.

Doling out more good news, the Minster stated that 10,000 hectares mainly in the Maha Oya area had been further identified and were to be included in a project that has already been started. “We are hopeful that the Treasury would allocate a larger amount of money in next year’s budget to go beyond the 900 hectares that we are embarking on this year.”

“We are not stuck in traditional areas anymore and have gone into new ventures,” Samarasinghe said. He has also given instructions to the Rubber Research Institute to start adaptive trials in the north. He stated that 15 target beneficiaries had already been identified and given assistance by the Rubber Development Department and that by end 2011, the trials would be completed. “It’s been about six months since we embarked on this.”

Replanting subsidiaries

The Ministry has also identified replanting as an area with an acute need for higher productivity, better quality as well as greater production. “I was able to convince the Treasury to increase the subsidy we were giving in last year’s budget for replanting. The subsidiary was Rs. 125,000 and in last year’s budget it increased by Rs. 50,000. Now it stands as Rs. 175,000.”

In August the Ministry will start handing over the necessary information and applications for subsidiaries to be given.

“I have also been successful in convincing the Treasury to continue providing the fertiliser subsidiary. This year Rs. 7.5 billion of Government funds will be utilised to continue the subsidiary, which will be available for both smallholders and regional plantation companies.”

As a result of the new decision by the President, anyone can now go to any shop in the area of plantation and purchase the special mixture available for Rs. 1,300 or for Rs. 1,200, fertiliser of choice. “We have done away with the bureaucratic requirements of filling forms and issuing receipts and no longer will the inspectors have to verify the usage of fertiliser. This is how the Government has invested funds from cess,” Samarasinghe said.