Sri Lanka’s govt plans to intervene in tea prices with purchases of Rs300mn

Oct 01, 2015 (LBO) – Sri Lanka’s plantation ministry said that it plans to buy tea worth 300 million rupees from the auction to artificially raise the price of tea with savings from the money that government subsided for tea small holders.

“We have passed this proposal to ministry of economic affairs and policy which is under the prime minister,” Navin Dissanayake, minister of plantation industry said.

“The guaranteed price of 80 rupees per kilogram of green leaf produced by tea smallholders provided by government will end this September,” he said.

“Experts have second thoughts about this and we do not like to waste people’s money.”

So the minister says by saving that money for two months we are going to buy tea from the auction and I’m sure we will get it for a concessionary price.

“So through the proposed system we are planning to raise the tea prices artificially which we have done earlier also in situations like this.”

Sri Lankan tea industry is currently going through a difficult period with tea exports declining for the twelfth consecutive month due to lower demand from Middle East, Iran and Russian markets.

The government allocated 5 billion rupees to purchase tea leaves at 80 rupees per kilogramme through its interim budget in January, and the ministry says about 5.4 billion rupees had been given as the guaranteed price.

The tea subsidy is being implemented by giving factory owners funds to pay the growers up front but talking to LBO tea smallholders sources said despite the guaranteed price still most small holder growers are selling their tea leaves for around 65- 68 rupees.

Pointing out data, the minister said a price of a one kilogram of tea has declined to 380 rupees while the production cost is about 440 rupees per kilogram.

“Many people are depending on this industry,” Dissanayake said.

“This will lead to a social stigma if the trend continues. That is why we intervened,”

He said the ministry is planning to create a tea fund to fight back in an industry downfall that the Island going though now.

Sri Lanka’s Tea exports, continued to decline in July 2015 for the twelfth consecutive month, due to lower demand from main tea buyers such as Russia and the Middle East, reflecting declines in both export volume and export prices.

Tea exports recorded a drop of 14.0 percent in July this year.

Official data shows Sri Lanka exported 126.5 million US dollar worth tea in July 2015 compared to the 147.2 million US dollar tea exports in the same month last year.

For the first seven months from January to July 2015, tea exports declined 14.3 percent to 809.4 million US dollars compared to 944.2 million US dollars in the same period of 2014.