Sri Lanka commodity export tax seen hitting grower income

Nov 30, 2010 (LBO) – An increase in tax on Sri Lanka’s bulk tea exports is likely to reduce prices paid by buyers although it had no immediate impact owing to prevailing strong demand, brokers said.

The cess on all other value added tea products will remain at 7.50 rupees a kilo.

“The 3.50 rupees introduced on November 01 and the six rupees that was announced on Monday was expected to impact the market by an appropriate amount,” John Keells said.

However, some of the low grown and high grown varieties did not fall by the expected margin and prices were in fact firm or higher at last week’s Colombo auctions.

“This would indicate an improved demand for such teas at present and the market correction will take place when demand weakens,” the brokers said.

Buyers for Russia, the biggest market for Ceylon tea, were still buying strongly although it was expected to ease at this time of year owing to the impending Christmas holiday season.

Brokers Asia Siyaka Commodities said the tea trade was lobbing authorities to differ the implementation day of the new export tax or exempt contracts and purchases prior to the date of announcement.

Last week, the government in its 20