The tea industry’s cash crisis has worsened with the Tea Board not honouring the government's bailout package for unsold teas.
Earlier, the government had told the Tea Board to buy stocks to inject cash into the tea sector and stabilize it after nearly 60% of the tea at the Colombo Auctions remained unsold.
As a result, for the first time, the Tea Board intervened and bought nearly 1 million kilos at the Colombo Auctions at a cost of Rs 232 million. But the government is yet to release funds to the Tea Board to pay for the tea it bought, since the Stabilisation Fund, with its Rs 1.5 billion for the tea sector, has still not been activated.
Tea brokers who bought tea on behalf of the Tea Board say they have still not been paid though the credit period for payment ended this week – while Tea Board officials blame the Treasury for not giving them the money. Brokers point out that the payment delay is making the cash problem in the industry worse. They have been forced to pay producers, especially tea smallholders, last Wednesday after the auctions because the Treasury money did not come.
Asia Siyaka Commodities chief Anil Cooke said: “Since this payment (Rs 232 million) has not come into the system, the cash problems have become worse and it has also reduced our ability to extend financial support for the rest of the industry.”
When contacted, Tea Board chairman Lalith Hettiarachchi said it could not pay for its tea purchases because the Treasury had still not released the money. “We have asked the Bank of Ceylon for an overdraft to pay our commitment of Rs 232 million to the brokers,” he said.