Revenue, Investments, Exports
Sri Lanka Tea Board (SLTB) Chairman Jayampathy Molligoda said on Friday that three things spurred the current level of high prices that Sri Lanka tea enjoys in the world market today.
Speaking at the 126th Annual General Meeting (AGM) of the Colombo Tea Traders’ Association (CTTA) held at a Colombo hotel, he said that they were
(a) The automation of the over 100 year old Colombo Tea auctions,
(b) Drought which has impacted tea production in both India and Sri Lanka,
(c) Tea attributed as being a health beverage, globally.
Molligoda said that the automation of tea auctions, replacing the traditional out crier system, took place because of COVID-19 in March of this year. The SLTB Chairman further said that because of automation, that also assured the trickle down effects of good tea prices, benefiting the small grower to the tea plucker as well.
These gains have to be looked at in the context that Sri Lanka tea operates in an environment of low productivity and high costs compared to its competitors, he said.
The SLTB Chairman further said that refuse tea, known by the industry as ‘BM Fannings,’ in fact was a gold mine. He however, said that an infinitesimal minority in the trade, comprising not more than two to three per cent, were trying to undermine this part of the industry. Molligoda said that a similar percentage of a minority of tea factory owners were involved in adulterating Sri Lanka tea. He however assured the trade that the Government of Sri Lanka (GoSL) has zero tolerance of such acts of misdemeanour committed by so few in the trade.
He also said that steps are being taken to amend the country’s ‘2003 intellectual property law’ so that ‘Ceylon Tea’ will have a global identification by being recognised worldwide as a ‘Geographical Indicator’ (GI), backed by the Geneva based World Trade Organisation (WTO).
Molligoda added that the SLTB is in a Rs 550 million campaign with the dual purpose of promoting Sri Lanka tea globally and to provide quality, drought resistant plant material to the tea plantations.
He said that the industry includes two million, who live on this trade, 421,000 small growers and a total of 705 factory owners which also encapsulate Regional Plantation Companies (RPCs) as well, and 310 exporters.
The industry plans to grow the tea sector to be a US$ three billion industry by 2030, while simultaneously increasing the volume of local tea production to 350 million kilos annually, by then. The industry, in this quest, has got global support from buyers of Sri Lanka tea in the West, led by London based purchasers of Sri Lanka tea.Tea is Sri Lanka’s fourth largest foreign exchange earner.
There are three factors from Mollligoda’s speech that this editorial would focus on. They are automation, tea as a health beverage and marketing refuse tea.
SLTB Chairman in his speech said that because of automation Sri Lanka has got good auction prices translating to better export value and prices for the small time grower and higher earnings to the tea plucker.
Automation allows for greater transparency, from plucking, to auction prices, benefitting all stakeholders, from the plucker to the exporter in the supply chain.
In the wider picture, former Telecom Minister Harin Fernando told this newspaper when he was in power, that, due to the non-automation of Customs, GoSL was losing revenue to the tune of US$two million daily.
With GoSL facing a revenue shortfall, complemented by wider budget deficits, Sri Lanka cannot afford this status quo to continue. It’s hoped that Budget 2021 would address this shortcoming by mandating the digitisation of Customs.
The other factor was Molligoda referring to refuse tea as a gold mine. This is in contrast to what the Chief Guest at the CTTA AGM, Plantation Minister Dr. Ramesh Pathirana said. He said that it was alarming to find the rise in refuse tea, in factories manufacturing tea.
The Tea Control Act (TCA) defines ‘refuse tea’ as ‘fluff, mature product (not obtained in sweepings, red leaf, stalk or any other being made tea) the process of manufacture of tea.’ Currently it’s illegal to export refuse tea. However, refuse tea extracts which are used to make value added ‘instant’ tea is legal. Meanwhile, there is lobbying to make the export of refuse tea legal.
However, CTTA Chairman Jayantha Karunaratne said that they are against refuse tea exports. “But what we are lobbying is to have the enabling environment to attract instant tea manufacturers to set-up shop in Sri Lanka for export purposes. Currently, Sri Lanka’s instant tea market is dominated by only three exporters, Unilever, Hayleys and another small time tea manufacturer in Galle,” he said.
Meanwhile, the third point made in Molligoda’s speech was the health attributes of tea which has led to the uplift of its exports. While the health aspect of tea needs to be promoted, it would also do well for GoSL to digitise Customs which would lead to enhance revenues overall, while simultaneously having in place the enabling environment to attract instant tea manufacturers, globally, to invest in Sri Lanka.