Friday 1st of March 2024

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Solutions to the dollar problem from the Agricultural Modernization Project

2022-07-23 7716


A boost to coconut-coir and coco peat industry

(Heshan Sampath Tilakaratne, Anthony Agash Vaas, Geeth Tharuka Munasinghe, Erandi Anuradha and Shanika Shiromala)


The value chain component of the Agriculture Sector Modernization Project has been under implementation for 5 years under the Ministry of Plantations. This project, which was started in 2017, has so far called for new product ideas for the development of agricultural production value chains under three scenarios.

Among them, the selection of suitable projects is done through an interview and after that a project report is obtained with details related to the relevant idea. It is submitted to an independent evaluation committee and then a Board of Directors consisting of the Ministry of Finance, Central Bank, Export Development Board, Provincial Agriculture Secretaries, and Chamber of Commerce representatives to get approval for the payment of money for the project. After that, the relevant organization and the Agriculture Sector Modernization Project enter into an agreement and release the related money with conditions.

However, since only a very less number of applications for industries related to coconut, coir and coco peat were received for the first calling by the Agriculture Sector Modernization Project, the project management unit conducted a study on opportunities to increase export income through value chain development related to these sectors. For this, the support of government and non-government organizations dealing with coconut cultivation and production was also obtained.

About 115 million dollars have been brought to our country from the export of coco peat and related products and 110% input contribution to add value to those exports has been received within the country. When researching the background required for the development of these industries, it came to light that this industry is ample in the coconut triangle and since the spread of the industry is marginal in other areas, the requirements were considered after dividing it into 2 sectors. Here also the nature of industries in India which gives a stiff competition to Sri Lankan products was also taken into consideration.

There were several problems identified in the industry. High competition for raw materials in the coconut triangle that leads to reduced product quality, (accumulation of sand and waste and use of old machinery), reduced production efficiency, reduced use of opportunities for value-added products, problems in finding labour for industries, reduced interest of the primary producers to obtain quality assurance certificates, prevailing of environmental and health problems due to excessive dust in the factory premises and destruction of coconut husks outside the coconut triangle without being added to the industries are among the issues.

The opportunities for coir and coco peat related producers were created through this project after identifying the opportunities to develop the exports of these industries through a simple method for increasing investment opportunities in this sector.

Investment opportunities were created to create new industrial opportunities outside the Coconut Triangle and to increase the production quality and efficiency of industries within the Coconut Triangle. The producers who maintain their business with low profitability got a great opportunity to upgrade their production to their next level and this project has also helped to create new industrial opportunities.

A matching grant of 380 million rupees has been approved for thirty two investors and 231 million rupees has been released so far to encourage investment in these industries which has so far exceeded 800 million rupees. Among them, 14 companies have started production and are exporting, while three more industries have started production and are adding to the market as local raw materials.

Among them, 14 companies that have started exports could bring a revenue over 17,000 million rupees after 2021 which was 6,344 before the commencement of the project.  

The income of the 14 institutions that started export activities before the start of the new project was 6,344 million rupees and after the project, in the year 2021, they have contributed to bring an income exceeding 17,000 million rupees into the country. According to the data obtained from the Sri Lanka Export Development Board, 8 percent to the export income has been contributed by the coir peat related products facilitated by the Agriculture Modernization Project. This contribution will increase further in the future.

After the project's initial year, the increase in exports of coir peat and related products in 2018 was 119. 98 million dollars. In 2019, that value was dollar million 133.83. By 2020, this income has been increased to dollar million 145.14 and the income received by May 2022 was dollar million 80.02.

When considering the increase in exports in this production sector, it is clear that several times more dollar income has been brought into the country than the amount spent so far by the government. There are plenty of benefits, when considering the employment generation and improving the quality of life earned as a country.