Forex crisis impacts Plantation sector too

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The current foreign exchange crisis is giving Sri Lanka’s plantation sector a hard time as importation limitations due to both dollar shortage and restriction has affected maintenance and upgrading of mills in addition to sourcing essential inputs.

Import restrictions on other goods have also affected the maintenance and upgrading of our mills as well as sourcing essential inputs for our dairy and plantation business, said Watawala Plantations Chairman Sunil Wijesinha.

With the escalation of the US dollar against the Sri Lanka rupee and the acute shortage of foreign currency, it is likely that the import ban will remain in place in the short and medium term, he said.

Further, Policy uncertainty over the past few years have been of grave concern for the palm oil sector, he said.

While a previous government encouraged the cultivation of palm oil, the subsequent government discouraged cultivation by introducing restrictions on new plantations based on perceived health concerns. Later, a State directive was issued to even uproot a percentage of existing palm oil cultivation, he said.

As a result, Watawala Plantations PLC had to destroy and write off nurseries that we had invested last year, he said.

These policy reversals and restrictions have limited the ability to uproot uneconomical palms and initiate a replanting programme, which would impact the profitability of the Plantation in the future, he said. In addition, the inorganic fertiliser import ban was another setback for the plantation sector which depended on chemical fertiliser for high crop yields, he said.

Swift decisions had to be taken to adapt to the new regulations, he said.

While the absence of chemical fertiliser will not have an immediate impact on the Plantation sector, it most likely would in the long term, he said.

However, the government reversed its decision later, on chemical fertiliser imports, he said.

While the plantation industry welcomes this decision, the current high cost will increase the cost of production for the palm oil sector significantly, he said.

By Mario Andree