Getting Cold

The refuse tea export, though illegal, has become the latest threat facing the tea industry, adding to other global pressure.

The export demand for fiber and stalk from the tea plant called refuse tea has spawned a whole industry undermining the image and the quality of the brand – Pure Ceylon Tea.

The centuries old tea industry contributes a significant portion of GDP.

Stooped in tradition the tea industry has also been slow to change or adapt to new market realities.

Refuse tea that planters use to fertilize fields has a market in some African countries.

But some Africans prefer to brew tea from it than use it to fertilize fields.

The police over the last few months have been actively cracking down on exports of refuse tea.

The police recently raided a warehouse in Sedawatte in the out skirts of Colombo where a stash of refuse tea meant for export was uncovered.

The Tea Board says refuse tea a-byproduct of tea making-is not fit for consumption.

But tons of refuse tea ends up in warehouses in the back alleys of Colombo to be eventually shipped to markets overseas.

The Tea Board, which regulates the industry, says refuse tea exports are illegal and could damage the good name Sri Lankan Tea has internationally.

“Ceylon Tea has reputation in the international market. Exporting refuse tea will damage that image. Why are we trying to do that damage,” asks George Pelpola, Chairman, Tea Board.

The Police team that raided the Sedawatte warehouse last week says the refuse tea export trade is much bigger than they initially thought it was.

The Police were pushed in to action after the Tea Board told them refuse tea exports could hurt the auction prices for the countrys top commodity export.

“The police did not realize the implications of this illegal operation,” said Sarath Lugoda, SSP, Colombo Crime Division.

Industry regulators say premium prices for local teas at the auctions have a lot to do with value buyers attach to the “Ceylon Tea” brand.

“Once you come into an international agreement that you wont sell tea under ISO 37-20 standard, it is not possible to export low grade tea even there is a market,” Pelpola pointed out.

Up to 60 percent of tea exported goes out in bulk form but not before the Tea Board checks their quality.

Any stalk and fiber exported as refuse tea has to bypass the auction system and Tea Board regulations imposed on all tea sold.

The regulator in charge of the clampdown on refuse tea exports say there is no way to know where the tea is going and in what form.

“What if a competitor buys it and brands and sell it as Pure Ceylon Tea damaging the brand and the market?” asks H. D. Hemaratne, Tea Commissioner.

“20 years ago the Colombo Commercial Teas Ltd., a government company exported BM Fannings but that failed,” he noted.

Being excluded from the auction process has not curbed refuse tea exports.

The industry says these exports are flourishing because demand is driving the market.

If exports from Sri Lanka dont meet that demand someone else will.

An agreement signed by the Tea Board with other tea growing countries prevents them and others from exporting low quality tea altogether.

The agreement is based on an ISO standard for black tea that specifies what parts of a tea bush can be used for making black tea.

“India Sri Lanka and Malaysia signed an agreement that we will not export any tea below the ISO standard/ Refuse Tea does not fall within this category,” Mr. Palpola said.

“Our members do not favour the export of refuse tea (B.M Fannings) simply because we are signatory to the agreement,” said Mahen Dayananda, Chairman, Tea Traders Association.

But some planters prefer to sell their refuse tea than have to destroy it or use it as fertilizer as it makes better economic sense.

Some experts say refuse tea is not necessarily unfit for human consumption and widespread consumption of it in Africa and some places in the middle-east have had no bad effects.

Critics say approved exports to countries willing to consume this tea would give producers additional income and bring the illegal tea trade under regulation.

This could also help prevent the product from reaching countries where the import is banned.

Any tea exported out of the country however can be branded as – Pure Ceylon Tea and sector players are concerned about consequences.

“There certainly is a market for the refuse tea. But there is the issue of adding value. We are in the process of adding value and upgrading the image and quality of what we ship,” said Mahen Dayananda.

Analysts say the demand for the product and the illegal nature of the industry in meeting that demand has driven operations underground with involvement of politicians and criminals.

The Tea Commissioner who is spearheading the crackdown on illegal tea exports says he is under threat from people who made a windfall through exports.

“lot of threats. We are expanding and we want a clean industry,” H D Hemaratne, Tea Commissioner

Police involved in the crackdown on refuse tea have already taken control of nearly two million kilos valued at over Rs. 41 mn, but they say this is just the tip of the iceberg.rn

Critics say legalizing refuse tea imports with strict control can not only improve incomes for plantations but also remove the criminal elements that are part of it.

Industry already has the processes needed to track tea right through the auction process and in to export containers.

Critics also say top tea buyers wont be interested in low quality tea, which cannot be sold in discerning markets.

Industry associations have for years been debating the issue of importing teas for value addition with no real progress.

Umbrella associations like the Tea Association have not been able to make any headway.

Critics say the industrys unwillingness to change or adapt to new realities could spell its ruin.

Top policy makers say that commodity exports are unlikely to be successful for much longer.

The tea industry should become an agribusiness with higher value addition.

“What we are concerned here is the value addition -the agribusiness. You must aim at the top end and the middle segment of the global market in which there is enough room for value addition,” Prime Minister Ranil Wickremesinghe told the planters speaking at the 150th anniversary celebrations of the Planters Association last week.

“There must be complete in tea change before leaving the country. We are still focusing on selling the primary product. What more have you done for tea?” the Premier asked.

Some industry players say the Premiers comments reflect the situation of the commodity exporters in the country who have resisted change.

Experts say the reluctance to change has seen the importance of commodities diminish since independence.

A more dynamic industry would have been able to position tea as a lifestyle product a position it had under the British.

Coffee bars are more popular hangouts today even here in the tea capital of the world.

The issue faced by the tea industry is not only if it should allow controlled export of low quality teas, but also its a manifestation of what has been brewing.

The tea industrys unwillingness to change.

Legalising low quality tea exports will bring a bigger portion of the industry under regulation, will eliminate criminal activity and improve plantation sector earnings.

But industry fears about brand value erosion will have to be addressed.

Critics say doing nothing, which is the standard industry response, is not going to do it any good.

Any one of the thousands who prefer to frequent the hundreds of coffee bars in Colombo are likely to agree that tea has lost its appeal as a lifestyle drink.

-LBR Newsdesk: LBOEmail@vanguardlanka.com