Tea industry on contamination, subsidy and Iran fears

The Colombo Tea Traders’ Association (CTTA) said last week that a tea delegation to Japan was with the help of scientific evidence able to convince buyers that Ceylon Tea was not contaminated as feared.
The CTTA, in the same lengthy statement dealing with many issues, raised concerns over the withdrawal of the fertilizer subsidy and unfavourable propaganda in Iran.
With the implementation of new Japanese Food Sanitation Laws in May, tea, amongst other food and beverage products imported into Japan, would be subject to Maximum Residue Levels (MRLs) in regard to a prescribed list of chemicals.
“In advance tests conducted by Japanese Tea Importers, inexplicably, one particular herbicide, 2, 4 – D, recorded residue levels in excess of the stipulation, in a few consignments of Ceylon Tea imported into Japan. This prompted one of the largest Japanese buyers to withdraw their support to the Colombo auction for a few weeks, resulting in a sharp decline in prices for a particular category of tea,” CTTA said.
This led to a CTTA technical delegation being rushed to Tokyo in late April where its members were able to convince buyers of the quality of Ceylon tea and cleared all doubts regarding the safety of tea in relation to chemical toxicological contamination
In preparation for this visit, field trials, in accordance with FAO/WHO parameters, were conducted in collaboration with the Tea Research Institute (TRI) and representative samples were forwarded to an accredited laboratory in Germany, approved by the Japanese Health authorities, for analysis. The results of these tests clearly established that the MRL of 2, 4 – D in Ceylon Tea was within safe toxicological levels and did not exceed the recommended Japanese MRL for this chemical.
The delegation comprising Avi De Silva, Vice Chairman, CTTA, Dr. Ziyad Mohamed, Director, TRI, and Tissa Amarakoon, Scientist, TRI, was joined in Japan by Hasitha De Alwis, Minister Counsellor of the Sri Lanka Embassy in Japan.
Unfortunately it was after this visit in which Dr. Mohammed played a key role in finally leading to Japan lifting the ban on the import of Ceylon Tea that the TRI director was arrested on charges of alleged misuse of funds, in an arrest that shocked the industry and was condemned by many. He was released on bail but a vacation of post for going abroad without Ministry approval is still in force.

Tea is still getting collected despite a number of problems facing local manufacturers.

Fertilizer subsidy

The CTTA criticised the decision of the government to provide a subsidy only to producers with less than five acres saying, “Considering that the entire agriculture sector is equally affected by this resolution, such discriminatory determinations only serve to highlight the inequitable treatment being meted out to the formal plantation sector.”
Expressing dismay over the withdrawal of the subsidy, it said the unprecedented escalation in international oil prices, which has impacted significantly on the cost of fertilizer, compounds this situation, in that producers are now faced with the prospect of an almost 250 percent increase in the price of fertilizer.


The CTTA said since September 2005, there has been a concerted campaign conducted in the Iranian market to denigrate Ceylon Tea. “Malicious and totally unfounded aspersions are being cast on the product, creating amongst consumers a perception of adulteration and unhygienic contamination.
Iran is a very important tea importer for Sri Lanka and this adverse propaganda raised serious concerns in the Industry,” the statement said.
The Association said it made strong representations to the Sri Lanka Tea Board and the Ministries of Foreign Affairs and Trade & Commerce to intercede through diplomatic channels at the highest levels.
“The CTTA has been assured that preliminary steps are already being taken with the Iranian Embassy in Colombo and that a high-powered state delegation will shortly be visiting Teheran, with a view to prevailing upon all relevant authorities to stifle this unethical campaign,” the statement said.

Tariff concessions from Russia

Following intensive negotiations over a protracted period, driven by the Commerce Department, Russia has offered tariff liberalisation for Sri Lanka, as an element of its accession negotiations with the World Trade Organisation.
The CTTA said Ceylon Tea is, by far, the most significant component in this package.
Although concessions have been granted, they fall far short of the proposals submitted by Sri Lanka, particularly in regard to specified minimum duty levies on value-added tea imports, which create a “floor price” regime and, in effect, take the form of non-tariff barriers, for the benefit of the Russian domestic packaging industry.
Over the past many years, the Russian Federation has been the single largest buyer of Ceylon Tea from origin.
The major portion of these exports, throughout this period, was in consumer packs. Initially, such value added exports accounted for as much as 90 per cent of the total.
However, this percentage has been gradually eroded since 1997, from when tariff measures were introduced with decidedly protectionist objectives, the statement said.
The CTTA said it was working strenuously with the Commerce Department to ensure that equitable conclusions could be reached to rectify the serious anomalies that have been imposed on the value added constituent of Ceylon Tea exports to Russia.


Private tea manufacturers' plea for state assistance

By Nimesha Herath

The Private Tea Factory Owners' Association while applauding the return of fertilizer subsidies for tea smallholders said similar assistance should be provided for tea manufacturers to help them get over a current crisis.

The association said with problems mounting in terms of modernization of factories, rising costs, lower tea prices, labour shortages, etc, government support is crucial for the industry to be sustained.

"As our manufacturing costs continue to accelerate, we are constantly on the edge facing losses along the way. With no assistance from the government, if this situation follows many factories will be closed down in the future," Edward Welikala, one of the members of the Association, told reporters last week.

He said negative publicity given in Iran, which is a prime destination for low grown teas in Sri Lanka, has reduced the demand for teas substantially affecting the overall tea prices in the market. According to the association, the average tea auction prices for low grown teas recorded for January to April 2006 came down to Rs 199.31 from Rs 193.37 within the four months showing a 2.3 percent reduction in prices. In other words low grown prices have fallen by Rs 4.68 per kg. Dr. Sarath Samaraweera, another member of the association said that low grown tea growers and factory owners are struggling with labour shortages and high wages. "For the last one and a half years, there has been a 25-30 percent increase in labour wages. We have to provide transport, accommodation, food, etc for these workers. This is a big burden as our revenue is low," he said.

Members of the Association at the press conference.

He also said although tea-buying countries pressurise local companies to become 'socially responsible employers' and obtain HACCP certification they don't have the necessary capital to do so. A current Asian Development Bank loan given to upgrade factories is only available for regional plantation companies. The association said that as this facility is not directly available to tea manufacturers, they hoped the government will provide assistance in modernizing their factories.


UAL strong growth in first quarter but profits ease

Union Assurance has posted an impressive 29% growth in turnover for the first quarter of the current year but consolidated after tax profits fell to Rs. 34 million against Rs. 37 million in the same period last year.

In a statement it didn’t give reasons for the fall but said rising turnover levels was due to healthy increases in both general and life insurance gross written premium.

General insurance premiums rose by 38% from Rs. 546 million in March 2005 to Rs. 754 million in March 2006. Life insurance premiums also increased by 14% from Rs. 329 million in March 2005 to Rs. 375 million in March 2006.

“Premiums from retail and corporate segments of the market recorded satisfactory growth,” noted Chairman Ajit Gunewardene, adding that “The results reflect UAL’s strategy to expand distribution capabilities in both general and life insurance businesses.”

UAL said it offers one of the highest no claim bonus schemes with substantial savings of up to 70% of the premium.


Dialog Telekom shows hefty profits

Dialog Telekom recorded an after-tax profit of Rs 2.31 billion in the latest quarter, representing a 34 percent earnings growth compared to Rs 1.72 billion recorded for the corresponding quarter in 2005.

These numbers were fuelled by parallel growth in the key revenue drivers of subscriber base, network reach, increase in usage per customer and expansion in international business.

Domestic revenues, which consist mainly of pre-paid and post-paid revenue, accounted for approximately 71 percent of the company's revenue in the first quarter of 2006.

Meanwhile the company’s revenue increased by 51 percent to Rs 5.83 billion compared to the first quarter of 2005.

When compared with results pertaining to the first quarter of 2005, pre-paid contribution has increased from 33 percent to 37 percent with a growth in subscriber base from 1.18 million to over 1.84 million, while the direct costs for the period amounted to Rs 2.07 billion compared to Rs 1.32 billion in the previous year, which is a 56 percent increase.

Significant components of direct cost are Telecom equipment depreciation, Network cost, International Origination cost, Outbound roaming cost, Lease circuit rental costs and International Telecommunication Levy.

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