The proposal in the 2017 Budget to limit the maximum acreage to be held by a standalone regional plantations company to 5,000 acres could be negative for the sector, according to Bartleet Religare Securities.
“The one policy backtracking proposal comes in the form of restricting maximum plantation ownership to an acreage of 5,000 - irrespective of current profitability,” they said in a research report on the Budget.
“Despite the offering of first right of refusal, we are concerned about the cap on the maximum acreage to be held by a standalone company at 5,000 acres. There is little specification on the process or the target profitability of the said plantations. Until we receive more clarity on this proposal we remain concerned as all listed plantations in our radar fall within this stipulated limit.”
Bartleet Religare Securities also said the budget gave a “double whammy” to the plantations sector with the proposal to allow imports of CTC teas for value-addition and re-export.
“The imported tea would not only harm our image for best quality Ceylon Tea but also make it impossible for the local producers to attract higher NSA prices,” they said.