|Oversupply of tea has caused a crisis
De Alwis was addressing a media conference in Colombo recently to discuss the crisis faced by the Tea Export sector and to formulate a strategy to overcome the crisis faced.
"Tea supplies have increased by 2% to 3% annually and the global demand had grown only by 1% to 2%. Since more than 50% of all Ceylon Tea are exported to the Gulf, Middle East and North Africa, any uncertainty in that region would have a serious negative impact on prices. The markets are adopting a wait and see policy, whether state controlled or otherwise," said De Alwis.
He said that, "the discrimination on import duty for pre-packed teas against bulk teas in Russia and Ukraine, are adversely affecting the value-added tea shipments from Sri Lanka. The situation in Russia has been aggravated further by the increase of the minimum declared value for customs purposes, in respect of tea bags where it was recently announced by the Russian authorities, increasing the minimum rate from 0.40 Euros to 0.80 Euros per kilo."
Jayantha Karunaratne, Managing Director, Imperial Teas (Pvt) Ltd. and NCE council member said that "the crisis in the Middle East has affected the expert market as there were no orders from Dubai and directs have also been received not to ship the orders already placed".
He said that as a result of this, stocks were increasing and the warehouses were filling up. "In the previous week Letters of Credit have been established to ship Teas to Libya giving some hope to the industry", said Karunaratne. Referring to the Russian situation, Karunaratne said that "the prices were increasing for pre-packed teas, as both the importers and the packers were pressurizing the Russian government to reduce or even stop the import of pre-packed teas, which was virtually killing the pre-packed tea import market."
Rohan Fernando, Managing Director, HVA Lanka (Pvt) Ltd and immediate past NCE council member, said tea sector was of the view that there was no vision for the tea export industry and even the government of Sri Lanka was not concerned as to how this industry should be a part of the global scenario. He said that the value added tea margin had crashed and there was no facility or infrastructure available to produce branded tea and as a result, the exporters were suffering. "In the next 5 years, it will not be possible to export packetted teas, as this has been catergorized under food. Hence, it will have to go through a lot of inspection and approvals, "said Fernando.
Fernando was of the view that the current problem was mainly because the established system was not strong and hence the slightest change would affect the stakeholders. "The system is focused on the producer and not on the exporter. Short term and long term policies should be formulated to avoid recurring problems," suggested Fernando.
Fernando also said that, "although the tea sector was governed by two ministries, the trade section of the Sri Lanka Embassy should be allowed a more active role in making recommendations to resolve the matter."
In response to this charge, Hasitha de Alwis said that the Embassy had met the Russian authorities and an assurance had been given by the Ambassador that there would be no duty increase in the price in 2002. He was of the view that a duty of 65% should be imposed on bulk tea exports and a value addition of 35% on branded tea should be considered on exports to Russia and Ukraine.
Dealing on the decline in the orders from Dubai, De Alwis that they were due to:
a) the uncertain war situation in Iraq, b) the trans-shipment of 300 million kilos to Iran and Turkey being curtailed due to the border being closed as a result of the eminent war, c) a 100-million crop being recorded in Iran have resulted in the authorities of that country imposing an official ban on imported teas. De Alwis was of the view that a top level government delegation visit Russia and Ukraine as early as possible and prevail upon the respective government authorities to the value addition for their products.
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