Additional one rupee cess on made teas to fund replanting in estates

A draft Cabinet paper to allow the Tea Board to slap on an additional one rupee cess on made teas will be presented to policy makers shortly.

A draft Cabinet paper to allow the Tea Board to slap on an additional one rupee cess on made teas will be presented to policy makers shortly. The additional levy will help carry out urgently needed replanting and a part going to bridge the gap in the Boards operational budget.

Some Rs. 300 million will be added to the current collection of Rs. 750 million, from charging a Rs. 2.50 cess on made teas.

Tea Board Chairman Niraj de Mel told Lanka Business Online on Monday that at least 2 percent of the current tea bushes need to be replanted urgently to increase yield per hectare.

The yield from old bushes continues to decline, but plantations are reluctant to invest in replanting due to the long gestation periods, usually averaging 7 years.

Today Sri Lanka has over 200,000 hectares under tea, with yield per hectare around 2000 kilos, below the capabilities a handful of other plantations in Sri Lanka and overseas have shown at over 3000 kilos per hectare.

However, a lack of funds in most estates has reduced this number to less than 0.7 percent says de Mel.

Of the additional one rupee cess, Rs. 150 million will be diverted annually to the replanting exercise.

The industry is however still reluctant to the move, with cost of production continuing to rise on the back of a higher fuel and fertiliser bill and the wage hike expected to come into effect shortly.

A Rs. 2.50 cess is currently slapped on every kilo of made teas, with the monies going to fund the Tea Board, the Tea Research Institute (TRI), the Ceylon Tea Promotions Bureau and over half of it going back to the private sector for brand promotion.

In 2003, with tea production just short of 300 million kilos, the cess brought in less than Rs. 750 million.

De Mel says the current cess intake is not adequate to support the budgets of the Tea Board, the TRI and to carry out viable brand promotions internationally.

The initial budget for 2004 alone, De Mel says exceeded Rs. 900 million, with a revised budget still around Rs. 850 million.

The cess on made tea was last revised up by fifty Sri Lankan cents, back in 1998.