Sri Lanka tea industry slams plan to hike export cess

May 18, 2007 (LBO) – The Colombo Tea Traders’ Association (CTTA) said Friday the industry was strongly opposed to government plans to increase the tea export cess. Funds could also be used for promoting Sri Lankan owned brands, stimulating value-added exports, facilitating food hygiene initiatives and supplementing research programmes. It also accused the government of violating the basic principles of the export cess scheme and of acting in bad faith in going back on previous pledges of financial aid.

The CTTA said in a statement that the industry reliably learns the Treasury is contemplating increasing the tea cess by two rupees a kilo.

“The tea industry is overwhelmingly opposed to this manoeuvre, as the imposition of any additional cess would have a distinctly negative impact on the industry,” the CTTA said.

The tea cess levy was increased by 1.50 rupees a kilo to four rupees from 2.50 rupees barely a year ago “in the face of strong resistance from the tea industry, spearheaded by the CTTA,” it said.

The association pointed out that the latest proposed increase by two rupees was ostensibly to provide some relief to the industry, “which should already have been afforded to it through the utilization of the funds currently being collected for that purpose.”

The tea industry has constantly complained that cess funds extracted from the industry were being misused by the government and not spent on the industry from which it is collected.

In recent statements, the CTTA highlighted instances of the inappropriate application of the limited funds ploughed back into the industry, that it said was “for the most part, being squandered on politically orientated initiatives, which brought no return or benefit to the industry.”

It has long been agitating that, as an industry body, it should be consulted on all aspects of the cess scheme, especially the proper allocation and disbursement of the considerable funds collected each year.

The CTTA statement also said existing problems in funds disbursement had been made worse by a recent decision taken in Parliament to consolidate at the Treasury all cess funds collected on exports of tea, as well as rubber.

This move provides for the disbursement of funds in accordance with priorities to be determined by the state fiscal authority, instead of being used exclusively for the benefit of the industry, the CTTA noted.

“This could mean that the industry may not necessarily be the beneficiary, in any form, of funds that have been speciously extracted from its stakeholders, which, originally, were directly assigned to and controlled by the line Ministry,” the CTTA said.

“This is a blatant violation of the fundamental principle of the Export Cess Scheme.”

The CTTA also noted that the plantation sector had been officially told that work already undertaken by producers, on the pledge that expenses incurred would be subsidized by cess funds, will now not receive any financial reimbursement.

“This is tantamount to a breach of trust, which will gravely damage the credibility of state agencies in the perception of the industry.”

Some of the priority areas identified by the industry for the investment of cess funds are enhancing productivity through re-planting, better application of fertiliser and the adoption of innovative agricultural practices.