Financial Times

Foreign Minister to hold talks with ambassadors to push tea exports

By Dilshani Samaraweera

The Minister of Foreign Affairs is due to meet ambassadors from major tea buying countries on Monday, to push exports of Ceylon Tea in the midst of the global economic crisis.

“The Minister of Foreign Affairs has organised a meeting on November 10 with ambassadors and representatives from Russia and Middle Eastern countries represented in Sri Lanka, to discuss the current global crisis and to explain to them the concessions that we are offering for tea purchases. The ambassadors will be asked to convey this message to tea buyers in their own countries,” said the Chairman of the Tea Board, Lalith Hettiarachchi.

The discussions, and incentives, are expected to rekindle export orders for Ceylon tea. Over the last few weeks large stocks of tea remained unsold at the Colombo Tea Auctions. The reason was traced to a cash crunch experienced by major tea buying countries because of the global financial crisis.

To get round the problem, Sri Lanka is offering an extended credit period of 28 days for payment of tea purchases and a 6% interest rebate on bank loans for tea purchases of over 10,000 kg at over Rs 250 per kg. “Previously brokers had to be paid in one week. But now we will allow a 20% payment in one week and the balance 80% payment 21 days later,” said Mr Hettiarachchi.

“We will also give buyers a 6% interest rebate if they buy over 10,000 kg and pay over Rs 250 per kg. The price, of over Rs 250 per kg, was set to make sure that the green leaf suppliers get about Rs 40 per kg to cover their costs,” said Mr Hettiarachchi.

The interest rebate facility will be available through the Tea Board for buyers of Ceylon Tea when the Stabilisation Fund becomes operational. Local tea exporters pointed to the over-valued rupee as another reason for poor sales, in addition to the global financial crisis.

But instead of allowing a large depreciation of the rupee, last week the government had the Tea Board buy nearly 1 million kg of tea at the Colombo Tea Auctions to jump-start demand and stop the price slide. This week, the state body did not buy tea but said it would intervene in the market again, if needed.
“This week we did not buy tea because there was no need for our intervention. Demand and prices had improved compared to the situation before. But we will buy again if the need arises,” said Mr Hettiarachchi.

To safeguard the tea sector, the 2009 budget proposed setting up a fully state owned company with shares owned by the Tea Board, Tea Smallholder Authority and the Export Development Board, to intervene in the Colombo Tea Auctions.

The budget also proposed reducing the price of fertilizer for tea smallholders to Rs. 1,000, imposing a cess of Rs. 4.00 on every kg of tea imported, exempting tea packets and tea bags from import cess and reducing income tax to 15%, on revenue from export of tea packets which weigh less than 1 kg.

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