INVESTMENT PROPOSAL
PINEAPPLE CULTIVATION
Ministry of Agriculture, Animal Production and Development,
Industries, Fisheries and Tourism
Eastern Province
Contact Information
Ministry of Agriculture, Animal Production & Development, Rural Industries Development, Fisheries
& Tourism, Eastern Province
Website: http://www.ep.gov.lk/minagriindex.asp
Email: minagriculture@ep.gov.lk
Mr. K. Pathmanathan, Secretary
(+94)-026-3269976
Dr. R. Gnanasekar, Director Planning
(+94)-026-2223076
Acknowledgements
The Ministry of Agriculture, Animal Production & Development, Rural Industries Development,
Fisheries & Tourism of the Eastern Province has developed this series of investment proposals in
consultation with several industry stakeholders. It wishes to thank all relevant stakeholders and
government institutions for sharing their valuable resources and providing information that made the
financial estimates possible. The Ministry wishes to thank USAID and the USAID-supported VEGA
FEG Program for the invaluable support rendered towards the economic development of the Eastern
Province, especially for encouraging large scale investments and building capacity of human
resources by providing technical assistance since the end of the conflict.
This publication is made possible by the support of the American people through the United States Agency for International
Development (USAID). The contents are the sole responsibility of the Ministry of Agriculture, Animal Production & Development,
Rural Industries Development, Fisheries & Tourism of the Eastern Province and do not necessarily reflect the views of USAID or the
United States Government.
This publication was produced for review by the United States Agency for International Development. It was prepared byMinistry
of Agriculture, Animal Production & Development, Rural Industries Development, Fisheries& Tourism of the Eastern Province.
i
-----------------------Hon. Minister’s Message
The agricultural sector is the backbone of Eastern Province economy and
the means of livelihood for most of our rural population. Sustained
agricultural growth is critical for uplifting the living standards of our people
as well as generating rapid economic growth. However, in spite of the
importance of the agricultural sector, farming in our province has for many
years been predominantly a small scale, rain fed and poorly mechanized
activity of low production and productivity. In order to address these
challenges, my ministry launched several agricultural development
programmes and I am pleased to note that implementation of such
development initiatives has been largely successful. As a result, the agriculture sector surpassed the
growth target and presently contributes towards 23% of the provincial GDP.
It is noteworthy to mention that under the policy framework of the government the “Mahinda
Chinthana” the Eastern Provincial Council has accorded highest priority during the last five years to
realize the full potential of the agriculture sector in Eastern Province. In the recent past Eastern
Province agriculture has undergone remarkable modernization thanks to several initiatives by the
government and donor institutions and this has made spectacular productivity gains possible through
rapid improvement in yields. As the Minister of Agriculture, Animal Production and Development,
Rural Industries Development Tourism and Fisheries, Eastern Province I encourage private and
foreign investment in the development of these sectors. New investment will pave the way for
infusion of capital and technology and improve productivity and value addition leading to increased
production and prosperity in Eastern Province. My ministry is presently involved in implementing
proactive development initiatives with commitment to inclusive development and creation of an
investor friendly environment.
These agriculture sector investment proposals are an outcome of series of workshops and
discussions we had with relevant stake holders i.e. Government institutions, private sector agencies
and non-governmental agencies. These proposals clearly spell out the available potential and
resources involving production, avenues for value addition and marketing of agricultural produce
and focus all efforts towards achieving excellence in agriculture through private and foreign
investments in Eastern Province.
I also would like to take this opportunity to put on record my appreciation to the United States
Agency for International Development (USAID) and its VEGA FEG Program for the assistance
provided to the Eastern Province through its various economic growth and technical assistance
interventions.
I wish to reaffirm the commitment of my ministry in creating an enabling environment for the private
and foreign investments and I urge all stakeholders to play their respective roles in ensuring that the
Eastern Province of Sri Lanka transforms itself as a most preferred destination for investments.
Z. A. Naseer Ahamed (Eng), M.P.C
Minister of Agriculture, Animal Production & Development,
Rural Industries Development, Fisheries & Tourism
Eastern Province
ii
COMMERCIAL SCALE PINEAPPLE CULTIVATION IN THE
EASTERN PROVINCE
Contents
Page No
The Eastern Province and its Agribusiness Base …………………………………………
01
Investment Opportunity for Commercial Scale Pineapple Cultivation……………….
02
The Investment Proposal……………………………………………………………………
04
Markets for Pineapple………………………………………………………………………
05
Potential Locations for the Project…………………………………………………………
06
Investment Incentives………………………………………………………………………
07
Procedure for Long Term Lease of State Lands…………………………………………
09
Useful Contacts………………………………………………………………………………
11
The Eastern Province and its Agri-business Base
The Eastern Province is one of the nine
administrative
provinces
in
Sri
Lanka
comprising 15% of the total land area of the
country, 25% of the coastal belt and 8% of the
country’s population. The land area is 9,361 sq
km and inland water resources to the extent of
635sq km totaling 9,996 sq km. The Province
contributes 6% to the national GDP.
Agriculture1578ha
Industries
265 ha
Services
28 ha
The Eastern Province relies mainly on
agriculture for food security, income generation
and employment of the population. The
Agriculture
5064 ha
contribution of agriculture to the provincial GDP
Industries
220 ha
is about 22.1% and about 65% of the population
depends on agriculture for their livelihood.
Approximately 34% of the population is
engaged in farming on full time basis. The
Agriculture
2652 ha
province has vast resources of agricultural land
Industries
219 ha
with plentiful water for irrigation. Approximately
40% (380,000ha) of the land area is used for
crop agriculture. Paddy occupies about 200,000
ha; homestead cultivation of vegetable and fruits
occupy about 105,000 ha; and around 75,000 ha
is sparsely used land. The availability of large
tracts of land and adequate water resources
make it an ideal location for commercial farming
in Sri Lanka. Advancing commercial scale
farming
and
involving
local
farming
communities as outgrowers is a priority for the Government of Sri Lanka. The Ministry of Agriculture
offers support such as soil testing facilities, on-site disease diagnosis and technical advice to facilitate
new investments in commercial farming based on its involvement in local communities and creation
of employment opportunities.
The soil profile in each district is shown in Table 1.
Table 1: Soil Profile in the Eastern Province
Type of soil
Ampara(ha)
Batticaloa(ha)
Trincomalee(ha)
Sandy Regasoals
230
16,755
26,300
6,378
92,050
Alluvial
Alkaline Soil
13,250
Reddish Brown Earth
17,780
Red Yellow Lattasol
3,001
Rock Knob Plain
4,062
SolidizedSolonats
12,474
78,900
1,123
7,890
Erosional Remnants
26,300
Soil with Gravel
5,260
Non Calcic Brown
13,150
Others
12,000
55,432
1
Investment Opportunity for Commercial Scale
Pineapple Cultivation
Pineapple is one of the commercially grown fruit crops in Sri Lanka and is predominantly produced
in the Kurunegala and Gampaha Districts. In the Eastern Province it is mainly grown in the Ampara
district. The two varieties grown in Sri Lanka
are Mauritius (Smooth Cayenne) and Kew
(Queen). Industry experts claim that Sri
Fruit Cultivation in the Eastern Province
Lankan pineapples have a distinct taste due
to agro-climatic conditions and are in high
Diversification into higher value crops such as
demand in both local and export markets.
fruits and vegetables (F&V) is an emerging
trend in agriculture sector development in
There is great potential to cater to the
Eastern Province. Although only 3.2% of the
tourism industry as well as to export markets
cultivated land in Eastern Province is under
for mangoes, bananas, pineapple and
F&V cultivation there is a greater scope for
papaya. According to the Sri Lanka Export
diversification into higher value crops since
Development Board, the fruit and vegetable
most of the cultivated lands are usually
sector is a high priority industry for the
irrigated lands.
development of the rural sector. In
particular, the agriculture products export
market at Rs 279 billion in 2011 is a nascent,
but fast growing business with good long
term prospects. Exports of fruits and
vegetables amounted to 15,670 Mt in 2011.
Growing fruits on a large scale and in
combination with investments in processing
facilities will enhance fruit production
thereby generating income and employment
throughout the year for the farming
community.
The climate and soil in the Eastern Province
are suitable to grow tropical fruits such as
banana, papaya, pineapple, mango, lime, and
passion fruit. Presently, most of the fruits are
cultivated in home gardens mainly for home
consumption and the surplus is supplied to
commercial markets.
Some fruits are
commercially produced in Trincomalee and
Ampara districts for domestic and export
markets.
An estimated extent of 4,295 ha of agricultural
lands is under fruit cultivation. The policy of
the government of Sri Lanka is to increase the
production of F&V to attain self sufficiency
level by year 2020. This is to be achieved by
expanding the irrigation facilities as well as
cultivated extent in all districts in Eastern
Province. Private sector investments will be
encouraged by creating a conducive
environment for investment in F&V cultivation
and value addition.
Successfully growing and exporting more
tropical fruits will require extensive private
and public investment in expanding
production and improving the supply chain
links into rural areas. To attract the needed
private investment, present government
policies are designed in a manner that will
make it easier and more attractive for
investors to lease and develop large tracts of
land into commercial scale orchards and
farms. Furthermore, the government is
offering several incentives to facilitate
private sector investments in the form of duty
free imports of agriculture machinery and
low tax rate for export income. Public private
partnership models are already in place to
lease or auction / lease suitable parcels of
land to the targeted sectors such as fruit and
vegetable
cultivation.
These
lease/
partnership agreements generally include an
obligation on the part of the investor to work
with smaller farmers in the surrounding
areas, to create outgrower networks.
District
Trincomalee
Production(Mt)
2,416
21,309
518
7,077
Ampara
1,361
17,627
TOTAL
4,295
46,013
Batticaloa
2
Extent(ha)
The export of horticulture products from Sri Lanka has grown almost 100% from 2006 to 2011 fuelled
by new markets and new demand and increasing availability of land for cultivation since the end of
the conflict. Demand for new fruits
and vegetables have risen in step
with the dramatic growth of hotels,
construction and tourism in the
Persian Gulf and the Maldives. This
phenomenal growth in export of
fruits and vegetable could be
attributed tothe involvement of major
private sector companies, such as
Dole Asia, CIC
Agribusiness,
Hayley's PLC, John Keells Holdings,
Aitken Spence and other companies.
These
companies
have
been
prepared technically, financially and
commercially to undertake the risks
inherent
in commercial
scale
horticulture for export ventures.
They have shown that investors with
resources and experience are
needed to take advantage of the
export potential for fruit and
vegetable production in Sri Lanka
and to deal with and overcome
constraints that would discourage
and overwhelm smaller farmers.
However they have also shown the
capacity and model for larger
investors to work with farmers,
organizing them as outgrowers to
raise the quality and quantity of their
produce to a level that made it
possible to export.
3
The Investment Proposal
The total project outlay for a 50ha block of commercially cultivated pineapple over 5 years is LKR 173
million (capital and recurrent cost). The investment may be scaled up as necessary. The land will be
leased from the government at a cost of LKR 50, 000 per hectare per annum. The cost breakdown is
shown in Table 2 below and excludes investment in cool rooms which is an additional investment
necessary for exports.1 It is envisaged that cultivation of pineapple on 50 ha will yield an average
annual production of 1.25 million fruits.
Table 2 Production Cost and Revenue for Five Years
Cost Element
Cost per ha in LKR
1. Seedlings
250,000.00
2. Fertilizer
189,488.00
3. Compost
62,500.00
4. Agro- Chemicals
72,200.00
5. Machinery & Irrigation
776,160.00
6. Labour
187,000.00
7. Agrowell
400,000.00
8. Land Rent
250,000.00
9. Fencing (1200ft x Rs. 400/ ft)
480,000.00
10. Miscellaneous
250,000.00
11. Harvesting
40,000.00
12. Harvesting/Storage/ Packing tools/ equipment
500,000.00
Total Cost for five years / ha
3,457,348.00
Investment in Farm Building
200,000.00
Total Cost / 50 ha for five years
173,067,400.00
Revenue for five years/ha
6,400,000.00
Total Revenue/ 50 ha for five years
320,000,000.00
At current local wholesale market rates of LKR50/fruit the investment will generate a payback in less
than two years with an internal rate of return of 43%. Table 3 below shows the investment ratios.
Replanting will be supported by suckers generated out of the production process and in addition
every year around 35,000 suckers per ha will be available for sale or for expanding production
through outgrowers. Production from the pineapple orchard can be augmented by a farmer out
grower system in which farmers organized in clusters will be supplied with pineapple planting
materials, fertilizer and technology and their produce purchased by the investor in adherence to a
purchase agreement. Investment in a processing facility such as a canning plant for the production of
jams and cordials will augment the investment decision.
These cost estimates are meant to be indicative only and investors will need to do their own financial feasibility analysis based on
their proposed project design.
1
4
Table 3: Investment Ratios
Pay Back Period (yrs)
2.7
NPV (LKR)
74,667,735
IRR
43%
ROI
85%
Present Value of Cost (LKR)
142,068,015
Present Value of Benefit (LKR)
216,735,750
Benefit Cost Ratio
1.53
Markets for Pineapple
Local sales of fruits can be facilitated through the customary marketing channels. Currently high
quality pineapples are retailed through supermarket chains although volumes are small compared
with other retail market channels. Production of pineapples for export has been undertaken by
investors with access to market channels. New export marketing arrangements can be organized
with the assistance from Board of Investment and Export Development Board. The general supply
chain of fruits and vegetables to the local market is depicted in Figure 1 below.
Figure 1: Rural Marketing Model of Vegetables and Fruits in Sri Lanka
Farmers
Collectors/Commission Agents
Wholesale Markets
Dedicated
Economic
Fairs (Pola) at Villages
Contract Suppliers
Hotels/Restaurants/
Hospitals
Institutional
Consumers
Roadside Boutiques
Retail Fairs
Consumers
5
Public Retail
Markets
Potential Locations for the Project
The following locations in the Eastern
Province have the necessary agroclimatic
conditions
suitable
for
cultivation of pineapple.
Trincomalee District:
Kuchchaveli
Kantale
PadaviSiripura
Morawewa
Batticaloa District:
Mandoor
Koralaipattu West
Ampara District:
Maha Oya
Padiyatalawa
Lahugala
Adequate parcels of land can be
obtained in these areas for setting up
the project.
6
Investment Incentives
Government incentives are available in the agriculture sector for farming associated with advanced
technology, distribution, collection & marketing, storage, cold rooms, ice plants, animal husbandry
and out grower schemes, plant & nursery, pre/post-harvest management, cultivation of plants of any
description. Table 4 below shows the current investment incentives available for new companies.
Table 4: Investment Incentives for Investors under BOI Regulations
Investment Category
Small investment
Medium scale investment
Large scale Investment
Minimum Investment
Tax Holiday
LKR 25 Million
LKR 50 – 100 Million
LKR 100 – 200 Million
LKR Over 200 Million
LKR 300 – 500 Million
LKR 500 – 700 Million
04 Years
04 Years
05 Years
06 Years
06 Years
07 Years
LKR 700 – 1,000 Million
LKR 1,000 – 1,500 Million
LKR 1,500 – 2,500 Million
Above LKR 2,000 Million
08 Years
09 Years
10 Years
12 Years
Sri Lanka scores well on the World Bank Ease of Doing Business Index ranking 81 out of 189 countries
surveyed and is far ahead of comparative countries in the region.
Sri Lanka
81
Maldives
95
Pakistan
107
Nepal
108
Regional Average South Asia
121
Bangladesh
129
India
132
0
20
40
60
80
100
120
140
Source: World Bank, Doing Business Report 2013
Figure 2 below charts the procedure for application for Board of Investment approval.
7
Figure 2: Investment Approval Process
BOI Approvals
Application Submission for BOI
Approval
Assigning of a
Project Officer to
Guide the Investor
Letter of Acknowledgement of
Business Activity
Opening of
Bank A/C S/A
(Optional)
Incorporation of Company
(Department of Registrar of Company)
• Site Approval
(Engineering
Approvals DeptBOI)
• Environmental
Clearance
(Environment Dept.
BOI/ CEA)
Collect the Draft
Agreement
(Legal Dept- BOI)
Preliminary Clearance (If applicable only)
• For the project Activity
• Rules of Origin Certificate
• Import/ Export License
Initial Environment Examination (IEE)/
Environmental Impact Assessment (EIA)
(If applicable)
Formal Letter of Approval
Sourcing of raw materials
(If applicable)
Preliminary Planning Clearance for the
Building (If applicable only)
Signing of BOI Agreement
(Section 17 Projects)
Opening of
Bank A/C
(FCBU/SIA)
Development Permit
(If applicable only)
Import (duty free items)/ Export
- BOI Approval
(IFC Unit/ Engineering)
- Registration
(Investor Services Dept - BOI
Commence Implementation
(Within the specified
period)
Work Permit & Residence
Visa (Ministry of Defense &
Dept. of Immigration &
Emigration
• Recommendation for Work Permit &
Residence Visa
(Investor Facilitation Unit - BOI
Certificate of Conformity (COC)
Environment Protection License
(EPL)
Commence Commercial Operation
Source : Board of Investment
Registration for VAT/ TIN
(Inland Revenue Dept)
Import Export Registration
(Sri Lanka Customs)
8
Utilities
Electricity:
- Ceylon Electricity
Board
Water:
- National Water
Supply &Drainage
Board
Telecommunication:
- SLT/ Private
Certificate of
Conformity
(COC)
(If applicable only)
SIA : Securities Investment Account
FCBU : Foreign Currency Banking Unit
* for details please refer infrastructure
brochure
* residence visa can be obtained at any stage of
the process
Procedure for Long Term Lease of State Lands
Lease permits are granted under State Land Ordinance No.8 of 1947. Lands are leased to people and
institutions for a 30 year of period for residential, agricultural or commercial purposes. The leasing
period can be extended to 50 years for special projects. Upon the success of the initial lease a
request may be made for the extension of the period of lease. These permits can be transferred and
mortgaged with prior approval of the Land Commissioner.
Figure 3: Procedure for Lease of State Lands
Survey
Superintendent
Applicant
15
Lease
Indenture
Land
Registry
Request 9
1
Charging of rental &
handing over physical
possession
8
Divisional Secretary
14
2
Recommendation
7
Valuation
Calling
6
Approvals
13
Lease
Indenture
Valuation
Department
PLC
3
Recommendation
Diagram
Land Commissioner
General
4
Recommendation
5
Approval
Secretary to the Ministry
of Lands/ Minister of
Lands
12
Survey
Requisition
Lease
Indenture
11
Leases for
Signature
Presidential Secretariat
Source: Land Commissioner General’s Department
9
10
Preparation of
Lease
Conditions for granting state lands on long term lease for the special promotion projects
1. Special Promotion Projects are:
i.
Approved cabinet project
ii.
A project approved by the board of investment
iii.
A project approved by the ministry of industries
iv.
A project with a special patronage of any state affiliated institution
2. General documents which the applicant should submit
i.
Request
ii.
Project Report.
iii.
Project Approved by Board of Investment/ Ministry of Industry/ the other institution
iv.
Registration of company.
v.
If a joint venture, the details of the directory (the details under the form 48 of the
company registration Act).
vi.
Affidavits as per format issued by the Divisional Secretary, which affirms that the
properties belong to them, are within the limit of 50 Acres.
3. General conditions applied to the lessees
i.
Term of lease is thirty years (30).
ii.
This will be extended up to 50 years under the special approval of the cabinet.
iii.
Rental must be annually paid.
iv.
The amount of lease will be quinquennially revised by 50%.
v.
The Land cannot be used for any purpose for which the land was obtained.
vi.
The land must be maintained in a proper state of development.
vii.
No sub-leasing, mortgage and vesting can be done without due permission.
viii.
Special conditions which could be stipulated by the other institution.
ix.
Actions could be taken in order to cancel the lease indenture on the occasion of
violating the conditions.
10
Useful Contacts
Department of Agriculture
Ministry of Agriculture, Animal Production &
Development, Rural Industries Development,
Fisheries & Tourism -Eastern Province
Old Galaha Road
Peradeniya
Sri Lanka
Tel : +94 81 2386484
Fax: +94 81 2388333
Website: www.agridept.gov.lk
Kanniya Road, Varothayanagar
Trincomalee, Sri Lanka
Tel : +94 26 2222441
Fax: +94 11 2222025
E -mail: minagriculture@ep.gov.lk
Website: www.ep.gov.lk
Central Environmental Authority
104, Denzil Kobbekaduwa Mawatha
Battaramulla
Sri Lanka
Tel : +94 11 2872359
Fax: +94 11 2872608
E -mail: dg@cea.lk
Website: www.cea.lk
Department of Agriculture - Eastern Province
Kanniya Road, Varothayanagar
Trincomalee, Sri Lanka
Tel : +94 26 2220366
Fax: +94 26 2222665
Board of Investment
Level 24 &26 West Tower
World Trade Centre
Echelo Square
Colombo 01
Sri Lanka
Tel : +94 11 2434403
Fax: +94 11 2447994
E -mail: infoboi@boi.lk
Website: www.investsrilanka.com
Department of Forest Conservation
82, “Sampathpaya”
Rajamalwatta Road,
Battaramulla
Sri Lanka
Tel : +94 11 2866631- 2
Fax: +94 11 2866633
Department of Registrar of Companies
400, D R Wijewardena Mawatha
Colombo 10
Sri Lanka
Tel : +94 11 2689208, 2689209
Fax: +94 11 2689211
E -mail: registrar@drc.gov.lk
Website: www.drc.gov.lk
Ministry of Agriculture
80/5¸Govijana Mandiraya,
Rajamalwatta Road,
Battaramulla
Sri Lanka
Tel : +94 11 2869553, 2872093,
+94 11 2872097, 2888902
Fax: +94 11 2868910
E -mail: ituagrimin@gmail.com
Website: www.agrimin.gov.lk
11