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| Sunday, 20 February 2005 |
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Business |  |
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Private tea factory owners complain The Private Tea Factory Owners' Association (PTFOA) complain that the recent fiscal policies adopted by the government without even consulting the Ministry of Plantation Industries, has affected the industry. The one per cent economic service charge and the withdrawal of the VAT component paid by them to tea manufacturers have put tea factory owners into a deep crisis, its President Amara Dissanayake said. He said that factory owners are entitled to only 32 per cent of the total proceeds of the sale of tea by a government regulation and the remaining 68 per cent has to be distributed among cultivators who supply green leaf tea to the factories. Factory owners are required to pay one per cent economic service charge from the total proceeds of the sale of tea, Dissanayake said. He said that factory owners who borrow money from brokers/financial institutions will have to bear this cost upfront which will adversely affect their cash flow resulting in grave consequences. Dissanayake said that until 2004 tea manufacturers/PTFOAs could claim the VAT component paid by them for input items purchased for manufacturing tea, from the Inland Revenue Department. "Unfortunately by a gazette notification the government withdrew this facility thereby putting the PTFOAs from the frying pan into the fire," Dissanayake said. The Finance Ministry took this decision without consulting the Ministry of Plantation Industry and even the stakeholders, he said. Following the gazette notification an additional Rs. 3.50-4.00 on each kilogram of tea has to be paid to cultivators, he said. Dissanayake said that the Ministry of Plantation Industries is not happy with this decision since it is detrimental to the entire tea sector in the long run. The tea smallholder accounts for more than 65 per cent of the industry's output and this will create a major negative impact on them with the increase in expenditure. The PTFOA covers three hundred thousand smallholders in the country. PTFOA's immediate past President Edward Welikala said that the Ceylon Planters Association is supporting them for the betterment of the industry. He said that each tea estate will have to pay an additional Rs 30-40 million to the government after the withdrawal of the VAT component from them. Welikala said this would prevent factory owners from modernising their factories to face future challenges. He said that by 2006 all factories need to obtain the HACCP international
health certification to export tea, especially to EU countries. |
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