The banking sector is willing to prop up the tea industry by lending up to Rs. 1.25 billion to buy teas unsold at weekly auctions.
The bail out plan was put together by the newly formed Tea Association of Sri Lanka (TASL), who has to float a new independent firm to utilise the loan.
The new firm can buy up to 1.5 million kilos of unsold teas and can hold them up to six months before re-selling it to the market, TASL officials said following a morning meeting with industry stakeholders, the banking sector and the treasury.
The banks are willing to stretch their individual exposure up to Rs. 150 million, TASL sources said.
The industry hailed the move to set up a firm to buy teas unsold at the auctions, but was weary of the time it took for action.
Brokers said that less than 5% of teas were left unsold at this weeks auction only as buyers and sellers could not agree on a price, opposed to over 50 per cent of the teas left back in warehouses in the previous week.
However, the firm will carry the mandate into the future, ready to buy unsold tea lots from the weekly auctions.
A ten person committee, inclusive of the eight tea brokers will decide on price and quality of teas the new firm will buy in case of a sharp drop in prices at the auctions.