Financial Times

Tea factory owners say they face 'ruin'
By Quintus Perera
Private tea factory owners have warned that they faced "ruin" owing to restrictions on them that were contrary to open market policies and accused the government of deceiving the industry and misleading the public on support given to the trade.

At an emergency annual general meeting of the Private Tea Factory Owners Association (PTFOA), members pointed out that the restrictions in the 'reasonable price formula' under which they pay green leaf suppliers were unfair and peculiar to tea, since they were not imposed on other commodities like coconut and rubber.
The restrictions, enforced by the Tea Commissioner, went against the operation of market forces in an open economy, they said.

The PTFOA also asked the government to investigate allegations that a cartel of powerful tea buyers had acted in collusion to depress prices at the auction. They also said the government had deceived them and misled the public since the loan scheme proposed to ease the difficulties of factory owners was not practical and would help only a very few of their members.

Plantations Minister Lakshman Kiriella has said the government did not have money to give big subsidies to the tea trade and instead would help factory owners tide over the current crisis by paying half of the interest on working capital loans taken by them.

PTFOA chairman Dr Sarath Samaraweera told a news conference after the AGM that imposition of price limits for factory owners to buy tea from growers must be stopped and they be given the prerogative to pay growers on the basis of sales.
The PTFOA tried to draw Kiriella's attention to the very serious situation in the tea industry but he did not show any interest and opened his eyes only when the media highlighted the crisis, Samaraweera said.

Many of their members were not in a position to provide the security required by banks for loans as they had sold their personal properties to get over the crisis caused by the sharp fall in tea prices, he said, adding that they wanted loans without security. Around 250 factory owners, out of 400, were members of the association and most of them produce low grown teas that constituted 60 percent of the country's total production.

Samaraweera warned they might be forced to close their factories since low tea prices made them unprofitable, if prices did not recover and the government was not prepared to salvage the industry. The PTFAO has asked the government to get banks to stop recovering their loan installments and interest payments and to give them time to pay electricity bills.

Sharp growth in Colombo port cargo volumes
Container volumes at Colombo Port are showing signs of robust recovery, with double-digit growth in recent months, owing to better “ product-price” competition, the Sri Lanka Ports Authority said.

Colombo handled 107,700 transshipment containers during the month of January 2003, up 23 percent as against the volumes handled in January 2002. Total container throughput handled during the month of January 2003 was 156,737, an increase of 20 percent over the volumes handled in January 2002, the SLPA said.

Colombo handled 258 vessels last month, an increase of 12 percent compared with the number of vessels handled in January last year, when the port was still suffering from the impact of hefty war-risk insurance premiums imposed after the terrorist attack on the Katunayake airport. The insurance surcharges forced many ships to avoid calling at Colombo.

The 1991 Gulf war impact
Fears being expressed today of the potential impact of a war in the Persian Gulf are markedly similar to the concerns that prevailed just before the first Gulf war in January 1991.

Then, a war in the Gulf was expected to most seriously affect oil prices, foreign remittances and Ceylon tea exports. With the Middle East accounting for 60 percent of Ceylon tea exports even then, the disruption of a war was forecast to have some adverse effects on the tea market for some time, with a major storage problem cropping up if tea stocks were held up for several weeks.

The auction prices were expected to fall, with nearly 25 percent of the quantity offered at the auctions being withdrawn due to lack of bids. Demand in the run-up to the 1991 Operation Desert Storm was low because buyers were reluctant to purchase due to the uncertainty about shipments.

Foreign remittances were expected to be affected in a big way for some time. On average, Sri Lanka sends about 50,000 people abroad for employment annually with 95 percent of them to Middle Eastern countries.

About 100,000 workers in Kuwait remitted some $100 million. This was predicted to come to a halt and the 40,000 Sri Lankan workers in Iraq then were also forecast to be badly affected. More than 200 licensed recruiting agencies in the country reported their work had come to a complete standstill.

Exports were expected to feel the bite of an outbreak of hostilities in the Middle East with several shipping companies imposing emergency war risk insurance surcharges on all ships going through the Suez Canal or Red Sea ports. International oil prices rose to $32 a barrel and the increase was predicted to have a serious impact on Sri Lanka's economy.

Before the price hike Sri Lanka spent about $225 million or about 72 percent of its import bill on oil annually. About 125,000 tonnes of Iranian light crude and 80,000 tonnes of Omani light crude oil were shipped to the island in anticipation of an expected oil shortage or price hikes. (RC)

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