Tea prices are stable says Plantation Industries Ministry

In response to a media release by the Tea Exporters Association (TEA) published recently, the Ministry of Plantation Industries has issued the following statement:

The ministry is of the view that certain aspects and facts have been left out so that a more complete and holistic view of the industry was not given and the TEA media release gives a totally negative view of the tea industry. The broad categories of TEA’s concern are: 1) Falling tea production, 2) Liberalizing tea imports, 3) Delay in launching the global campaign and 4) Tax issues concerning the exporters.

We would like to take these issues individually.

The falling tea production has been a case of concern for everybody. In 2014, the highest tea production was reached at 340 m MT and since then 320 m MT and 292 m MT was recorded in 2015 and 2016. The reasons for this are several. Incremental weather patterns, the weedicide issue and falling tea prices are the main reasons. While TEA gives the low figures for January and February this year it conveniently omits the fact that in March tea production came to normalcy as 26 m metric tons was produced as the drought conditions were reversed.

Stable manner

To state that tea production has drastically come down is not correct as tea production is continuing in a stable manner. When the current minister took office tea prices were at an absolute rock bottom with a price range of Rs 400-450 and there was much protest, agitations and threat of social unrest if subsidies were not increased.

However, today the prices have increased between Rs. 550-600 and a large sector of the tea industry is satisfied with the current situation. The government has, despite financial problems, maintained the fertilizer subsidy, allocating Rs. 1,500 million for years 2016 and 2017 separately giving weight and importance to the small tea producer. The minister has also ensured a more transparent and democratic process in the Tea Board where all stakeholder ideas and inputs can be expressed and if consensus is obtained to make it into policy.

The ministry and its officials together with the Minister and the Chairman, Tea Board are fully aware of the arguments for and against the importation of teas to Sri Lanka.

While appreciating the arguments stated in the TEA statement, producers are highly concerned that importation of teas even under strict conditions will impact the price of Sri Lankan teas and this will have a severe impact on the current financial models in place and a collapse of the prices will lead to a severe social chaos specially among the smallholders.

It is too much of a risk to take as one erroneous policy decision can severely hamper the industry for years to come. A majority of the stakeholders are against the idea of importing tea.

‘Pilot project’

The ministry has asked TEA to come with a viable and practical model to be implemented even on ‘pilot project’ basis but TEA has not done so.

As TEA is promoting the importation of teas isn’t it the duty and function of TEA to involve the other stakeholders in a more meaningful dialogue and obtain their consensus for their idea?

TEA has also raised the issue of the global tea campaign to be launched by the ‘export levy’ on tea exports that is in place. The ministry sincerely thanks all the exporters who contributed to the export levy that has now accumulated to approximately USD 50 million.The current Minister and the Chairman of the Tea Board went out of their way to ensure these funds remain in the tea board as they realize the value and the need of a well targeted global campaign for ‘Ceylon Tea’.

Unfortunately government regulations and procedures has meant some unwanted delays has arisen.

The ministry also wants to absolutely ensure that the content is well targeted and has some real returns for the brand ‘Ceylon Tea’.It will be a pity if USD 50 million is spent only for the sake of spending it. Therefore, the ministry is confident that this campaign will kick off in the next 3-4 months. TEA is fully aware of all these developments yet it repeatedly keeps coming in their media releases.Tax issues concerning the TEA has been fully looked into. The minister and the chairman tea board have met representatives of TEA on numerous occasions to sort out their issues.

The minister submitted a cabinet paper on the SVAT issue and it was decided by the Economic Sub committee chaired by the prime minister to suspend the proposed new structure.Under the current administration a large amount of funds and development work are envisaged to the tea sector. Among them are:

a) Strengthening of the Plantation management monitoring unit, already underway b) Development of the small holder sector under funding from FAO, a 65 million USD project already underway c) A project to modernize tea factories under funding from JBIC, negotiations progressing well, and d) A World Bank project to improve and modernize the Regional plantation companies, Negotiations almost complete.

Hence these funds will be the largest amount of funds received by the tea industry at particular moment of time.

The Ministry and the Tea Board has repeatedly asked for more unity among the stakeholders so that a single master plan taking account of the interest of all stakeholders together could be implemented. It will be more helpful to the industry than individual stakeholder organizations issuing media releases that portray a negative image about Sri Lanka’s tea industry. 

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