Business Times

Debate continues: Tea exporters strongly defend their tea hub proposal

Focus on Tea
By Bandula Sirimanna

Strongly defending a proposal to liberalize tea imports making Sri Lanka a global tea hub, leading tea exporters say that their initiative is aimed at increasing the island’s total tea exports to around 400 - 500 million kg a year from 320 million kg. They were of the view that the country cannot harness a tea yield sufficient to produce even 380 million kg due to lack of land and other requirements.

Niraj de Mel, Chairman of the Tea Exporters Association (TEA), which represents exporters who account for around 83% of Sri Lanka’s tea export volume and export earnings, told a media conference at the Royal Ceylon Golf Club in Colombo on Tuesday that it was essential to import quality tea for value addition which is necessary for the achievement of the export target of US$ 5 billion by 2020.

Tea export earnings stood at US$ 1.5 billion in 2011, and the country cannot expect high revenue this year, he said adding that exporters should be given opportunities to blend different types of tea to different tastes around the world.

The TEA has submitted a proposal on a request made by Minister of Plantation Industries Mahinda Samarasinghe to liberalize tea imports for re-exports in accordance with the Mahinda Chinthanaya Idiri Dekma, the government’s policy document.

Dilmah, the country’s first successful single tea origin brand, has been joined by growers and other exporters like Mabroc to oppose a proposal which they said was made more than 10 years ago and surfaced once again.

Mr de Mel said news reports which highlighted Treasury Secretary Dr. P.B. Jayasundera’s statement (at a recent Dilmah conference) that the import of teas will not be permitted and that the TEA's proposal to liberalise tea imports would destroy the image of ' Ceylon tea', were misleading.

The TEA proposal is designed to give consumers a wider choice to pick from, which ability is currently restricted due to the limitations placed on imports. It will help Sri Lankan indigenous brands to increase their current 12% share of value added exports to much higher level. The restrictions on imports have only succeeded in retarding this growth and relegating Sri Lanka back to a bulk supplier or a raw material supplier to international packers, he said.

Mr. de Mel noted that the association was demanding the authorities to allow tea imports from other origins and to increase volumes and market share while at the same time single origin teas can continue to sell. It targets to increase tea exports and earn US$ 5 billion per year.

Mr. de Mel said that blended and retail packed tea fetches twice or three times the auction price. Restrictions on tea imports for blending had also led to several big exporters shifting packing operations overseas in countries like Dubai and Russia. Only CTC-type (crush, tea and curl) teas used in tea bags, green teas and certain specialty teas are now allowed to be imported for blending and re-export.

It is being properly monitored by the tea board customs and other relevant agencies, he said. Orthodox teas were imported only by paying high import duty, he said. The TEA's proposal also stresses the need for monitoring imports to ensure only quality teas was allowed in, he said.

Imperial Tea Chairman Jayantha Karunaratne told the Business Times that the setting up of a tea hub in Sri Lanka gives access to a greater variety of the world’s tea which will allow them to enter new markets and to successfully compete with other multinational brands. He revealed that the global economic crisis heightened a new trend towards packing other origin teas in Russia, and Ceylon tea brands packed in Sri Lanka, due to import restrictions, are losing out to brands packed in Russia.

TEA member and Chairman of HVA Lanka Rohan Fernando said failure to develop the Sri Lanka tea hub will result in the decline of prices at the auction and this will be the death knell of the tea growing industry with very significant social consequences.

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