Well-managed Public Private Partnership, the need for ailing JEDB and SPC - Udayasri Kariyawasam

By Dhaneshi Yatawara

The state sector tea industry is trying to regrow back into a lush green era. The effort is to turn into a profit- earning entity and be significant contributors to the still in demand Ceylon Tea which is doing significantly well in the world market. Speaking to the 'Sunday Observer' Chairman of the Janatha Estate Development Board and Acting Chairman of the Sri Lanka State Plantation Corporation Udayasri Kariyawasam said that the two institutions were in a transformation period. "We have to strike a balance between making profits and looking after employees," he said. "Simultaneously we need to make several management changes as well as changes in agricultural practises," he said.

Following are excerpts of the interview.

Q : What is the present situation?

A : I would like to say that this is a transformation period. For the last two decades these two institutions have gone through a series of problems. Basically financial problems and serious liquidity problems exist. The Janatha Estate Development Board (JEDB)and the Sri Lanka State Plantation Corporation (SLSPC) are the biggest government entities in the tea industry.

Now if you take the tea industry in Sri Lanka the private sector is doing very well. In 2013, the total tea production in the country was 340 million kilograms. Tea export was worth around 1.5 million US dollars. These indicators show the good position the tea industry is has.

That is the situation of the industry. Moreover tea is a saleable product. If somebody says tea is a difficult product to sell, this is wrong. The problem is with the two institutions - the JEDB and the SLSPC. These two entities have been mismanaged in the past. These two institutions require management transformation. Throughout history - mostly during the last two decades - these two institutions have incurred massive losses.

Q : What is your analysis for these failures?

A : Due to several reasons. One thing is that our cost of production is higher than the selling price. Cost of production is very high. Every kilogram of tea leaves that is produced faces a loss.

This is where the liquidity problem arises. The challenge now is to bring down the cost of production. For that we need to introduce stringent management methods in these two institutions. To some extent certain spots are overstaffed. We have to pay all the staff.

When it comes to the agricultural aspect, all the estates under the JEDB and the SLSPC need to change. Timely harvesting, timely fertilising and weeding were has not been done on schedule and has been done in a haphazard manner. This is also due to a lack of funds. The major focus right now should be to develop the existing plantations. We can not think about planting anew. Now the focus is how to rehabilitate existing plantations. For that we need fertiliser, chemicals and working capital to maintain the status quo. The main problem is the income generated through the estates. The income coming in is barely sufficient to meet even the monthly payments.

Q: The industry had a massive demand when it started in Sri Lanka in the colonial era. Later on many other countries specially the African countries like Kenya came into the business leading to competition. How do these two institutions face this?

A : It is quite true. But you see amidst all the competition in the world market. The private sector is doing well. All the estates owned by the private sector were earlier owned by the JEDB and the SLSPC.

The difference between state-owned estates and private -owned estates is the manner in which it is managed. The private sector diligently observes proper management practices wheras the state sector pays little or no attention to management practises and this has led to the destruction of these once flourishing tea estates.We need management transformation. As you said the world trend has focused from South Asia to the African continent. Even China is in the world market. Yet, Ceylon tea still accounts for about 24% of the world market.

It is a substantial amount. Most of our brands are well- known in the world. Having a few factories is another problem to meet the demand because of the produce. At the JEDB we have 17 tea estates but only four factories. And in the SLSPC we have 12 estates and only two factories. Factories were constructed during the colonial era. Still they are as they were with absolutely no modernisation whatsoever. No new machinery has been added and very little renovation has been done. Some of the factories we have closed because there is no investment coming in. So in short what I feel is that these two institutions managed 520 estates in the past.

At present only 39 are under these institutions. The rest were privatised in the '90s. The privatised estates are making huge profits.What remained with the two institutions were the unproductive estates. That's another reason why we are incurring losses.

I took over JEDB in June 2013 and took over as acting chairman of the SLSPC in December 2013. In the SLSPC as of today, four estates are functioning well and are profit making ventures. In the JEDB also three estates are making profits. There is nothing special about these estates that are turning out profits. These estaes are well-managed ventures and this is the only reason for the profits.

Q: As we all know, these losses were going on for sometime without a proper solution. These two institutions have employees with long- standing service terms. In such a backdrop what are is the management transformation that you propose?

A: The biggest challenge in these two institutions is maintaining discipline. We need to restore discipline in these two institutions and at estate level. There is a long established culture among these workers and they work according to that.. There is a long established trade union influence as well. To develop these institutions this culture has to change to an extent, if we are to make this a profitable business. In this sector we work with many trade unions thus satisfying them is also an issue.

There are many requests and interferences. We are looking into all the possibilities of going for a better income generating system and on the other hand the trade unions demand a salary increase. With all these factors we have to strike a balance between making profits and looking after the employees. Every month by the 10 and 25 of the month we have to pay employees. Luckily several private companies are buying raw tea leaves from us and they pay us in advance. Most of the time we settle employee salaries based on this business.

My opinion is we cannot develop this sector without the correct support from the private sector. It should go towards a properly established Public Private Partnership.

At present when we have to maintain the status quo we go in search of cash injections from the Treasury. it is difficult for the Treasury to continuously fund an institution which needs to function as an income generating entity. Once in a way asking for funds is fine specially when in difficulty but in this state the two institutions have to continuously request for Treasury funds. The Government can not afford to lose money at this rate.

We need to work in close collaboration with the Sri Lankan scientific community who can bring short -term and long- term solutions specially to the agricultural aspect of our estates. It is high time that these two institutes make a change in Human Resource Management. We also need people with new knowledge and upto date qualifications to transform the JEDB and SLSPC into profitable entities.

Q : How do you plan to sort this out?

A : Firstly we have to find the money to settle the statutory liabilities. Which means the none payment of gratuity, EPF and ETF. That alone is about one billion rupees with the JEDB and about 600 million rupees with the SLSPC. Just imagine from where we have to find the money. To settle this is our first priority. Cabinet approved the request to cut down certain trees in the estates with timber value. We still need more money.

Simultaneously we need to make several management changes as well as changes in agricultural practises. This goes in to the mid- term planning.

In the existing plantations it is difficult to change agricultural practises. We need to go for replanting and re-cultivating which cannot be done immediately. For that we need to accumulate a revenue of nearly four years. That is why we believe that we need to move forward in partnership with the private sector.

Q: Do you mean privatising the estates again?

A: That is not Government policy. But ideally a well- managed Public Private Partnership.