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28 December, 2015 08:58 AM Source: Financial Times - Sri Lanka
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Following threats to nationalise plantations the private sector has challenged the Government to take over debt-ridden and loss making plantation companies but has warned the State could end up biting off more than it can chew.

Regional Plantation Companies (RPCs) have responded following remarks made by Higher Education and Highways Minister Lakshman Kiriella to hand over their estates if wages of workers were not increased, noting that there was a plethora foreign investors who wish to invest in the industry. Kiriella also alleged companies conceal their profits to avoid a wage increase adding that the increasing land mass has led to an unmanageable situation for the plantation owners.

Retorting to these claims Planters Association Chairman Roshan Rajadurai pointed out the Government is already managing 36 estates in which the statutory liability collectively adds up to Rs. 3.6 billion per annum in 2014 without accounting for gratuity liability. Most of these factories have even been deprived of electricity due to late payments, according to the Chairman.

 “Maybe they are planning to manage the estates in a different manner but first they should demonstrate a good example to us by managing the Government owned estates, if they do so we also can set them as our benchmarks. Today productivity is a huge problem for us.If there are foreign investors who are willing to turn that around for these plantations we would be delighted to witness that magic.” he said.Untitled-2

Rajadurai further went on to say: “The minister may have told to just handover the estates but he should understand that these are all public listed companies. The shareholders will eventually make a call and there will be a due process to hand it over to the Government. These are now private legal entities and they have borrowed from local banks, and other agencies. Adding to that gratuity liabilities in a good size company will be over Rs. 2 billion. So the Government must be prepared to take over all this liabilities.”

Government sector plantations managed by the Sri Lanka State Plantations Corporation (SLSPC) and JEDB (Janatha Estate Development Board) were leased out to 23 Regional Plantations Companies (RPC)during the period 1992-1994. At the same time government entered into management agreements with some private sector companies to manage a few regional plantation companies. Kurunegala Plantations Limited and Chilaw Plantations Limited are among a few of them.

Moreover Rajadurai stated that at the time the estates were privatised the State sector was incurring a loss of Rs.1.3 billion and a debt of Rs. 7 billion which they converted to equity, whereas the Treasury was burdened Rs. 5 billion annually for operational expenses.


- See more at: http://www.ft.lk/article/513155/Plantation-companies-call-Govt--s-bluff#sthash.poGHNL8F.dpuf

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