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.

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expat
expat
6 years ago

There is less demand from Middle East due to 1. the ongoing wars and 2. the ongoing El Nino effect.
only few countries in MENA have escaped the pain of war. no need to elaborate on the refugee crisis that has spilled over to Europe. so obviously tea will be way down the list of requirements of many.
the El Nino has made MENA very warm for almost one year. we are in october and still the temperatures are hovering around 40C in many parts. again tea is necessary to make one warm so a delayed winter and a short cold period will reduce tea demand.
as for russia, it is having a crisis with the western blockade over many issues.
the fault lies with the powers that be who for many years just ate up the income and did not do anything to promote our tea in new markets. if sri lanka tea is famos in Auzzy or NZ , it is becoz of personal investments of people like MJF. can we name any brand from sl other than DILMAH known for tea? people in middle east think LIPTON is sri lankan tea (when it is like 30% lankan tea blended with kenyan and other teas). people in middle east have no idea of the difference between blended and single origin tea. do our jokers in diyawanna hotel know how many sri lankan tea brands are present in MENA? other than Dilmah in very selected places i have never seen any of our teas in Oman UAE Bahrain or Qatar!!! if thre is sri lankan tea, it is baggage carried and sold. what have they done to get our teas in large chains like carre four, spinneys , lulu, etc? nothing
for many years we have been comfortable selling bulk tea to MENA buyers like Ahmed Tea who packet it and sell using our name , when actually it is a blended tea. even Tetly sell our tea blended, but keep on saying ceylon tea. our rubbish rulers are happy to tax but never to do something to make our teas more recognizable.

tea
tea
6 years ago

Why bleeding plants in Sri Lanka is not allowed? If we allow it all values generate out side will remain in Sri Lanka

Tilak
Tilak
6 years ago

Let us have a look at a area rubber small holder support scheme support for top quality latex supplied to manufactures of top quality exports by the small holders.We are looking this within the context of the prevailing situation in country.(i.e SL imported over 20 million k.g of rubber in to the country in 2014 in comparison with 2013 & the 2015 figure is further rising.).Some small holders supply top rubber exporters grade 1 latex for the manufacture rubber products for exports. Even though Government with best of intentions has introduced a quantity/quality based very logical support systems to encourage the local production & has allocated enough funds let us consider the ground & situation how it reaches the small holder who supplied latex to top rubber exporters)
a)These small holders are paid direct by the Rubber Development Department by a checque sent to the smallholder.(Support portion whilst the other portion is paid by the relevant companies.)
b)There are some small holders who are waiting for payment pertaining to the support portion paid by the RDD for the moths of (June,July,sept whilst continuing Oct deliveries.) up to to date the reason given by RDD is lack of staff which may be true.
c)Rubber small holders pay their employees on a 50/50 basis.(ie Owner take 50% of the revenue whilst rubber tapper gets 50%).
d) This means even though some export proceeds have been collected by the country out of the production(may be june july) the small holder & his tapper who created latex with air,soil,& water of this country mixed with local labor is waiting for their full remuneration for the above months(i.e for the support portion whilst other portion is paid timely by the relevant companies).It also means more & more rubber imports since industry cannot face a rubber shortage whilst may establishing another all time import record.(Weather & natural factors too is contributing to this adverse trend but these are mostly uncontrollables)
e)In this context It is seems best that the factor that is creating sub optimization (staff)/system is sorted since their may be enough recruits with qualifications who may be under employed within the public service itself & release internal brakes & stress for the BP,small holder,tapper, & the over worked present staff.(i.e pressure on BP due to record imports to cover latex shortage shortage)