After continued losses under state ownership privatization took place and 21 Regional Plantation Company’s(RPCs) were set up in 1993. Within ten years the RPCs were made profitable but Return of Equity as at around 2 percent and lease rental due to the govt accumulated to 251 million. This was capped by the government which resulted in the RPCs receiving relief of almost 985 million. To review the performance for the period 2002-2008 of the Regional Plantation company’s(RPCs) the researcher is using a model that has been revised from the famous Balanced Score Card analysis which is called the SE Model( Strategic Evaluation Model). There are 4 new areas into this model. Financials, Operations (Production and productivity), Long Term Investments (Replanting and Fertilizer application) and Stakeholder Relationship (Lease rentals, Management Fees charged, Compensation due from govt and subleases by RPCs).

On the financials The Return on Equity (ROE) as per the annual report of 2007/8 was 27% while in 2004/5 the Industry recorded a low ROE of 9.30% which gives us an indication of the reality of the financial issues that the industry is challenged with. Even though prices have stabilized in 2009 post the commodity bubble burst the volumes produced have declined and the drought expected will be a new challenge that needs to be addressed. In this backdrop on the The ‘7th January meeting’ where The President Appointed Committee presented the key findings to Minister in the presence of the media it was recommended that the lease be extended to 66 years which is justifiable given that the RPCs will enjoy 2 cycles post - replanting of tea. However, based on the published annual reports a point to note is that in 2007/8 the RPCs revenue earnings was Rs.41billion with the Gross Profit recording a 18.6% and Net Profits of 10.3%. Hence, it is very evident that financially support is required for replanting to be implemented as per TRI recommendations

As per the ‘7th January meeting’ a point highlighted overall output of tea churned out by the RPCs in the last five years had declined. The research done by me reveals that from 142 million kilograms in 2005 in 2002, the volumes had declined to 124 million kilograms of tea which is a drop of almost 12.6%. If we look at the overall national out put it had decreased by only a 0.7% to be precise from 310 million kilograms to 308 million kilograms which highlights that there is serious issue in the corporate sector.

This drop in volumes by the RPCs is alarming and I strongly suggest a detailed analysis needs be done between RPC grown tea and bought leaf segment to understand the reality.

On the other hand, if the overall productivity levels had improved then, this reduction in output can be justified to rationalization but based on the research data the productivity level has also declined from 1467kg per Ha to 1420 in 2005 which calls for a logical analysis and appropriate action needs to be taken. I recommend the need for an independent and powerful regulator to this industry is the need of the hour so that these issues can be identified early, and addressed on a regular basis rather than let it become an issue. The approach that is required in my view is that the public sector support the private sector and NOT play umpire as end of the day RPCs have done its duty by the nation by turning around a loss making state venture after privatization.

Let me take the example of one RPC which explains the importance of an effective regulator to this industry. Based on the annual reports of 2007/8 this particular RPC has quite rightly pursued a strategy of diversification to arrest the low profitability of the industry. In this RPC ten years back, the tea segment had contributed 81% to the total turnover and now it generates only 37% on double the revenue turnover. In one way it’s a good strategy to implement, based on modern business practices to drive up profitability and make the RPC more marketing oriented. But whether this RPC has done justice to the Tea Industry needs to be analyzed carefully. After all the Tea industry is a national asset and one cannot allow privatization to move away from government policy just for the sake of profitability.

This is a debatable point but it is time that in all fairness to the country and the RPCs to have a clear direction. This will enable the necessary reforms to be made based on the national strategy such as easier gemming rights, quicker approvals for commercial forestry, fruits and vegetable propagation for the export market to be done more effectively with policy makers. If not its collateral damage as the country is has not benefited from privatization neither has the private sector which has invested their resources and time in taking on a public asset for development.

The thoughts expressed are the writers own based on his doctoral research and not the view of the positions he holds in the Government or the Private sector. The author invites comments on rohantha.athukorala 1@gmail.com