Tea exporters are pushing for a three-month moratorium from commercial banks as the government maps out a contingency plan should war break out over Iraq.
All exporters currently given a 180-day packing credit to settle outstanding loans, which they want extended by a further three months, Exporters Association officials say.
” We have already put forward the proposal and there has been an initial positive response though this still has to be talked through with the Central Bank and other officials” , he added.
” We have already arranged a meeting with the commercial banks and the Central Bank next week to discuss the issue and hopefully we should see some results in the next few days” , Plantation Industry Minister Lakshman Kiriella told LBO.
Commercial banks came through this week with a 50 percent interest rebate on working capital loans taken by private tea factory owners.
The remaining interest component is to be footed by the Tea Board, Kiriella says.
Meanwhile, average auction prices for low grown teas dropped Rs. 12.50 over two weeks at the Colombo tea auctions.
Commodity brokers fear that current low prices for tea would have importers renegotiate their previous higher priced purchases.
Brokers expect the February 6 auction average to drop below Rs.150.00 down from Rs. 154.74 in the previous auction.
Asia Siyaka Commodity Brokers say the rapid fall in prices could push importers to ” re-negotiate contracts.”
As the US gears for war against Iraq, tea buying from the region is dropping steadily and followed down by auction prices.
Low demand meanwhile is building up a backlog of teas, filling up every last inch of warehousing capacity.
” The stock position in the tea trade is very high with warehousing capacity being exceeded both by the brokers as well as the exporters,” say Asia Siyaka officials.
Of the 3.2 million kilos of low grown teas on offer at last weeks auction, only 2.5 million kilos have been sold, indicating the lower levels of activity that prevailed at the sale.
” If stocks do not tu around, liquidity of both the exporters and the producers would be adversely affected.”