Tea smallholders raise sustainability concerns

Sri Lanka’s tea small holders, who account for 76% of the national tea output, say small holder concerns need to be addressed for tea industry sustainability.

“Right now the tea small holders, who are the mainstay of Sri Lanka’s tea industry, are facing some serious problems that will directly contribute towards reducing the national tea output in the future.

Unless mechanisms are developed to resolve these problems, Sri Lanka’s tea industry is at risk,” said Neville Ratnayake, the Chairman of the Sri Lanka Federation of Tea Small Holder Development Societies.

Tea small holders say the increasing cost of production, mainly driven by higher labour costs, is making the sector unsustainable. This is also preventing re-investment in land development and replanting, which is expected to hurt industry productivity and quality of Ceylon Tea, in the future. Small holders say that in the case of high grown and mid grown tea, the cost of production is actually higher than small holder incomes.

“According to Tea Research Institute calculations, the production cost of one kilo of green leaf, in the small holder sector, is Rs. 43.19. However, the current price for high and mid grown green leaf, is Rs. 40 per kilo, on average, which means small holders in the mid and high grown areas are actually making losses,” said Ratnayake.

Low grown tea on the other hand, is generating a marginal profit for small holders with prices in the range of Rs. 50 per kilo. However, this Rs. 7 per kilo profit is seen as inadequate, given the cost of living in Sri Lanka. Therefore, to avoid losses, small holders are compromising agricultural standards. This is expected to reduce tea yields in the future.

“Our production costs have increased after the latest plantation sector wage increase in 2010. So to remain profitable farmers are cutting down on good agricultural practices like investing in land development. This means we can expect our yields to drop in the future,” said Ratnayake.

The quality of Sri Lankan tea is also affected because of pressure on profit margins. “Sometimes farmers delay plucking tea leaves, to be able to pluck more in one round of plucking. But this means some leaves are too mature and the tea that is produced is not of the best quality,” said Ratnayake. A significant share of Sri Lanka’s upcountry and mid country tea comes from small holdings.  According to 2010 data released by the Sri Lanka Tea Board, upcountry and mid country tea accounts for about 41% of Sri Lanka’s total tea production and tea small holders contribute about 25% of this production. This means the quality of tea produced by tea small holders could impact the overall quality of Ceylon Tea. Low quality tea could also result in Sri Lanka losing international market share. Small holders say Sri Lanka needs to urgently develop existing export markets and find new export markets, while increasing tea outputs domestically, for small holdings to remain profitable.

“Over the long term, we need to look at gradually doubling our yields from the current 300 kgs per acre, per month. This is possible with proper agricultural practices. However, we need to also increase our exports. This means we must increase market share in existing markets or, develop new markets for Ceylon Tea,” said Ratnayake. The Government has already recognised the need for quality and productivity increases in the tea sector and has mandated that 3% of total tea extent should be replanted annually. The Government has also extended a Rs. 300,000 subsidy, for replanting. However, the estimated cost of replanting is around Rs 1 million per hectare of tea. Given the economies of small holders, the legal provisions and financial assistance are not seen as adequate to motivate the majority of tea small holders to replant.    

“On top of the high cost of replanting, replanting will also leave small holders without an income for about three to five years, until the new tea bushes can be harvested.  This is the main reason small holders are reluctant to replant,” explained Ratnayake.

A majority of Sri Lanka’s tea small holdings (approximately 80%) are below one acre. Many tea small holdings are half acre or quarter acre plots and are a primary source of income for families. Sri Lanka has about 400,000 tea small holders who support close to two million people.   “These small holders do not want to replant because replanting would reduce their incomes. So we need to develop an alternative source of income for these families. One alternative could be to introduce other mono crops, such as pepper, that can be cultivated until the replanted tea can be harvested,” said Ratnayake.

Given the extent of the small holder’s contribution to Sri Lanka’s tea industry, the Federation of Tea Small Holder Societies points out that mechanisms need to be developed urgently to safeguard the sector.