“No truth in Minister’s claims”
Chairman, Planters’ Association, Damitha Perera
speaking of the controversy surrounding the RPCs
denied claims made by Minister D.E.W. Gunasekera
that the companies had defaulted commercial banks
and not adhered to the lease agreement signed
between the RPCs and the government.
Perera told The Sunday Leader that there was no
truth in the statement made by the Minister that the
RPCs had defaulted billions of rupees to the
commercial banks. “If we are in default, then no
commercial bank will be allowed to carry out
business with us,” he said.
Perera noted that the committee had forgotten the
reason for privatising these plantation companies.
“The state could no longer carry the burden. The
state was coughing out Rs. 400 million per month in
1992. The government then decided to privatise the
management. After the management was privatised,
from 1995 onwards stocks were sold through the stock
exchange and lease agreements were signed between
the government and the RPCs. The government then
became the lessor and the RPCs became the lessee,”
Perera also said that the ‘mudslinging’ by the
government appeared to be a pretext to acquire
plantation land to be distributed. “The Minister has
said that the RPC lands could be taken over and
distributed among the landless.”
Speaking of the allegation of RPCs charging high
management fees, Perera said the management
agreement was done with the management fee agreed
upon by the RPCs and the management agents. He said
that 90% of the RPCs have revised the management
fees and agreed with the state and brought down the
earlier agreed terms sharply. So far 16 RPCs have
revised the fees.
He added that several other RPCs have written to the
state proposing a reduction in the managing agents
fees, but have not yet had any acknowledgement from
As for the Rs. 291 million in lease rentals due to
the government from the RPCs, Perera said the then
Treasury Secretary P.B. Jayasundera had agreed to
offset any outstanding lease payments from the
compensation due to the RPCs on the lands acquired
by the state after privatisation.
However, at a subsequent meeting, Jayasundera had
gone back on this. “The RPCs are yet to get
compensation for land acquisition dues,” he said.
When asked about the replanting in the RPC owned
plantation land, Perera said the necessity to
replant was indigenous to each estate and that in
areas with labour shortages and good yields the
replanting policy was subject to changes.
Referring to the statement made by Gunasekera that
the RPCs had employed about 83,000 people, Perera
said he did not know how the Minister had received
such erroneous information. “The RPCs have employed
over 200,000 employees. If as the Minister says, the
RPC lands are taken over, then what would become of
this workforce?” Perera queried.
There were two committees appointed to look into the
RPCs — Gunasekera’s committee and a 10-member
committee headed by Neville Piyadigama including
“The 10 member committee spoke to us and accepted
our representations and provided us with a copy of
its report. Gunasekera’s committee did not speak to
us and we have not been given a copy of the report,”
‘RPCs owe millions to the government’ - Minister
Head of the Cabinet Sub Committee appointed to look
into the RPCs, Minister D.E.W. Gunasekera says that
the mechanism put in place to monitor and collect
the necessary dues has not functioned properly.
Gunasekera told The Sunday Leader that some of the
RPCs owed Rs. 291 million to the government.
He added that the RPCs had gained profits and had
even obtained bank loans, which they had also
According to Gunasekera, the RPCs have violated one
of the main clauses in the lease agreement between
the LRC and plantation companies. The clause being
on the necessity to re-plant.
“The plantation companies have only replanted 5,000
odd hectares of tea, rubber and coconut in 10 years,
which is 0.3% of the total land extent when they
should have had a replanting rate of 3%,” he said.
Speaking of the management fees drawn by some of the
RPCs, Gunasekera said,the companies have drawn
between 10-20% as management fees. He said that one
RPC had drawn Rs. 700 million as management fees
while not making any payments to the government for
However, he said that once the sub committee
commenced inquiries into the financial
irregularities in the RPCs, the said company had
reduced its management fees from 50% to 25%.
Gunasekera also said the Chief Government Valuer has
estimated the value of an acre of land given to the
RPCs at Rs. 1.5 million each. However, the estimate
of the plantation companies is far less for an acre,
According to Gunasekera, the plantation companies
had not done the intended improvement of the
plantations and re-planting. He added that some of
the lands belonging to the RPCs have been used for
gemming and cutting down trees.
He said that the sub committee has proposed the
setting up of a presidential task force with
competent people to look into the RPCs in the
interest of the national economy.
Gunasekera further noted that with regard to tea
production, small holders produced 76% and it would
be better for the state to consider distributing
land among them.
“If the RPCs have been productive and have made the
necessary payments, there is no problem, but some
companies have not,” Gunasekera said.
Brief history of the regional plantation companies
Following is the history behind the formation of
RPCs as appearing in the report presented by the
presidential committee headed by Neville Piyadigama:
During the early 1970s, large extents of plantation
lands were acquired by the government and vested
under the Janatha Estates Development Board (JEDB)
and the Sri Lanka State Plantations Corporation (SLSPC)
under the Land Reform Act No. 1 of 1972 and, the
State Agricultural Corporations Act No. 11 of 1975.
As a result these two agricultural corporations
controlled approximately 51% of tea, 35% of rubber
and 2% of the nation’s coconut lands.
Prior to 1992, the JEDB and SLSPC consisted of 509
estates covering 272,902 Ha. and employed 389,549
workers. The two corporations performed poorly
throughout most of their existence and relied
heavily on government assistance to offset the
mounting operational losses which had increased to
about Rs. 1.5 billion per annum by 1992.
In the face of the mounting financial losses
suffered by the JEDB and SLSPC, the government
appointed a task force to recommend measures to
resolve the problems relating to these two
corporations. The task force recommended the handing
over of management of the plantations to the private
During 1992/1993, 461 estates managed by JEDB and
SLSPC were converted into 23 RPCs under the
Companies Act No. 17 of 1982, in terms of the
provisions of the Conversion of Corporations and
Government Owned Business Undertakings into Public
Companies Act No. 23 of 1987. However, the
Government retained 100% ownership in these
Each RPC was initially assigned the leasehold rights
of between 12-29 estates for a period of 99 years
for a nominal lease rental. These leasehold rights
formed the primary assets of the RPCs.
The management of the RPCs was handed over to
private managing agents who were selected through a
competitive process. As per the terms of the
management contracts, the managing agents were
appointed for a 5 1/2 year term, which was renewable
upon the fulfillment of certain performance
criteria. In exchange for their services, the
managing agents were entitled to receive a
proportion of the respective company’s profits.