Economic Impact of Establishment of Quality Management Systems in Tea Industry: A Case Study in Matara District

Abstract

Tea is the main export plantation crop and the main foreign exchange earner among agricultural products of Sri Lanka. In 1998 Food and Agricultural Organization (FAO) named tea as a food commodity. Consumers in the global market are very conscious on the quality of tea as a healthy beverage. Thus, "Food Safety Standards” have adopted for tea to prove its suitability for human consumption. Among food safety management systems, ISO 22000 is the most widely used and most accepted system and the 5S is a supporting system, which helps to establish ISO 22000. To establish this system it spends large amount of cost. Therefore, it is worthwhile to find out that the economic benefits of establishing these quality management systems. Matara district was selected purposively and five factories within the district were selected randomly. They are Dhampahala, Mulatiyana, Nilgiri, Sudugaha hena and Bogoda. To find out the "economic impact" of the project, the project analysis tools such as Net Present Value (NPV), Internal Rate of Return (IRR), Benefit cost ratio (BC ratio] and Payback period were employed. Results revealed that establishment of Quality Management Systems (QMS) in to a tea factory are beneficial economically. The NPV was 2,482,774.00 LKR. The IRR was 74% and the BC ratio was 1.69. The payback period was 3 years. Therefore, the introduction of QMS is a worthwhile investment for tea factories in economic aspect.