Tea Shop

In search of new growth for its stunted tea export industry, India is cultivating plans to set up an auction centre in Dubai.

Indian Tea Association Chairman C.K. Dhanuka was quoted saying that a separate auction centre in Dubai would be a shot in the arm for the ailing tea industry, whose exports fell from 201,010 tonnes in 2002 to a revised 173,100 tonnes in 2003.

Exporters here say the move to set up an auction centre in Dubai might give India a competitive advantage in the region, but would not seriously dilute Sri Lankas shares in the Middle East market.

“Buyers know what they want, and there is a market for the unique qualities of Sri Lankan teas which will keep then with us,” said one Colombo commodity broker.

Sri Lanka was offered the opportunity to set up an auction centre in Dubai, but turned it down on a policy decision to help develop the local auction.

Local authorities were also flirting with the idea of setting up an international auction in Colombo. Little effort was put behind the concept, pushing it to extinction.

Industry analysts feel Sri Lanka has still the potential to host an auction for the region, with Vietnam and most others Asian tea producers still without an auction.

Outside Sri Lanka, only India and Kenya have international tea Auctions. Other large exporters including Vietnam sell direct to buyers, putting pressure on marketers to produce a steady flow of buyers for their teas.

An auction centre in Indonesia failed to take off, partly due to the auctions being conducted in the local language endash the only auction not to be conducted in English and the inherent problems with its logistics.

However, among the impediments for Sri Lanka to start an international tea auction is its policy on tea importation to the island.

Two strong lobbies in Sri Lanka endash for and against the Tea importation continue to debate the topic without resolve.

Last year Sri Lanka imported less than 800,000 kilos of tea purely for blending and speciality tea exports.

The lobby against the imports argues that, a liberal policy on tea imports would encourage low cost teas entering the local system, eroding the market for local teas.

“In addition, the lobby feels that the identity of ldblquote Ceylon” tea would be diluted.

On the other side of the fence, the lobby for tea imports says that importing tea for value addition and re-export will only help grow Sri Lankas share of the export revenues.

The issue remains unresolved, and until it stays that way Sri Lanka will be nowhere near capable of setting up a regional or international auction.

-LBO Newsdesk: lboemail@vanguardlanka.com