Sri Lanka tea growers asked to ‘go slow’ to manage global crisis (Lead)

October 29th, 2008 - 8:48 pm ICT by IANS  

Colombo, Oct 29 (IANS) Sri Lanka’s tea industry, the world’s third largest, has been asked to go slow till the global financial crisis becomes manageable.Sri Lanka Tea Board chairman Lalith Hettiarachchi said that although the industry had in the past 10 months exceeded last year’s income level of a little over $1 billion, it has started facing the impact of global market jolts.

“We have advised the estate owners, producers and green leaf suppliers to cut down on the production as much as possible so that the volume going to the market can be reduced. This would create a situation where the prices could go up,” Hettiarachchi told IANS.

The Russian Federation and the Middle East, the main buyers of Sri Lankan tea, have shown “reluctance in buying our tea, especially the low-grown tea”, he said.

“Certain tea grades have come down between Sri Lankan Rs.60-100 per kilogram while the good quality tea has faced only 10-12 percent price drop,” Hettiarachchi said.

“Nearly 60 percent of the tea was left unsold at an auction last week. It is a serious situation,” he said, adding that the market brokers were not willing to advance money to tea small holders, citing the global market instability and “the small holders are finding it difficult to carry out their daily operations” as a result.

According to reports, over 400,000 small holders of tea are affected by the downturn in the global economy.

The Tea Research Institute (TRI) has also recommended “selective plucking” of tea leaves and advancing the pruning of tea plants, and make use of this interim period for the development of the tea estates.

The TRI has also suggested to growers and producers to lower the fertiliser usage to ensure the low production of tea leaves.

Hettiarachchi conceded that it “is a difficult process to convince the tea producers, mainly the small holders, to go on a low profile as their income is based on the output”.

President Mahinda Rajapaksa, who Friday held a meeting with key players of the tea industry, has instructed the central bank governor to discuss with all bank officials the possibilities of helping tea smallholders “to overcome difficulties they are facing as a result of the drop in tea prices”.

The tea sector has traditionally been a vital component of Sri Lanka’s economy, contributing a significant amount to the gross domestic product. It is also the country’s largest employer providing employment both directly and indirectly to over one million people.

Sri Lanka, the third largest tea producing country globally, has a share of 9 percent in the international production. Its share in global exports is around 19 percent.

Approximately 187,309 hectares of land is under tea cultivation, mainly in the central highlands and southern inland areas of the island.

Sri Lanka produces tea throughout the year. The influence of climatic conditions of its plantation imparts to the product a variety of flavours and aromas, making it very popular in Australia, Europe, Japan, North America and the Middle East.

Meanwhile, Central Bank Governor Ajith Nivard Cabraal Tuesday decided to introduce series of steps to address the problems of the industry.

Accordingly, commercial banks have been asked to cut down interest rates on loans offered for purchasing tea by 6 percent while the existing grace period of one week for settlement of these loans is to be extended to four weeks.

A ‘Tea Price Stabilisation Fund’ is to be set up, with the government allocating Sri Lankan Rs.1.5 billion as the initial capital. The Tea Board has also decided to purchase more tea from the tea auction.

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