Tea Sector in Crisis?

The tea sector exerts a significant influence on the economy, and despite many setbacks such as the Land Reform process of the early 70’s which virtually drove local expertise out of the country and in turn affected the plantations and the troubled times of 87/89 where many tea factories were burnt down, the industry still continued to grow within a stressful environment.

Still, deficiencies in the fiscal administration have caused enormous cash flow problems in the tea sector in recent times. The exemption of VAT to producers and much delayed refunds to the export sector and the innovative Economic Service charge (fortunately the original rate of 1 percent introduced in 2004 has now been reduced to a moderate .25 percent) are a few examples.
The increasing security issues have necessitated strict measures to be imposed at the point of export. However the most disturbing has been the damage caused by recent strikes by the Plantation employees.

The strike caused an immense loss to workers, plantation companies and the national economy. An unattended Tea bush creates many issues and the period of near four weeks inactivity gave rise to a vicious circle of losses. Due to the limitation of auction quantities prices rose to unrealistic heights thus compelling exporters to pay a higher price for contracted orders, this no doubt put many exporters into financial difficulties.

Commenting on the outlook for 2007, Forbes and Walker Tea Brokers forecast a strong demand for “Good quality Tea” in the first quarter and year as a whole held good promise for attractive prices for good teas. The shortage of Teas is attributed to Kenyan crop limitations during this period and of course the damage to both quality and quantity of Sri Lankan Teas, this comes amidst steady oil prices from the Arab world a major Tea importer from Sri Lanka. However in the likely scenario of quality and quantity deficiencies Sri Lanka will once again let opportunities go begging.

As much as the owners and the employees, Trade Unions too are an important stake holder. There seems to be mistaken belief that the Trade Unions task is to encourage work stoppages thus causing losses both to he organization as well as to its employees. It is unfortunate some Trade unions view employee grievances as opportunities to expand their political power. Trade Union hierarchies as responsible citizens must sit back and analyze the losses caused by unwarranted work stoppages. Strike should be the last weapon when all the negotiations have failed, as seen in the Plantation strike real losers were the poor workers and the National economy even though plantation companies too took some beating. Tea is a global product competing in a fiercely competitive market and our losses may well be the stepping stones for the competitors.

Meanwhile the crisis at the Tea Board continues adding fuel to the fire of the tea sector, with the ex -Chairman still wielding influence over the Tea Board Administration. Plantations Ministry once manned by then powerful ministers such as Dr Colvin R de Silva, Hector Kobbekaduwa, Montague Jayawickrema Gamini Dissanayake and present Prime Minister Ratnasiri Wickramanayake is no longer in the cabinet category thus taking away the sting & the power attached.

Today Tea Board is in a paralyzed state due to the ongoing litigations posing many threats to the viability of the industry. The much prioritized HACCP implementation in the factories are held up as Tea board cannot release funds, the very purpose of the increase in Tea Board Cess in April 2006 to provide for the Tea factory modernization is at a standstill and the promotional programs are in total disarray. In a dynamic competitive global environment none of these activities could be postponed and the present inactivity will go down the history as yet another major set back to the Tea sector. It is needless to say that these are matters of grave national importance that needs the attention at the highest levels of the executive.