‘Tea Tweak 2020’: Addressing challenges and opportunities of Sri Lanka’s tea industry

TEA officials at the press conference, from left: Treasurer Dai Pathmanathan, Vice Chairman Sanjaya Herath, Immediate Past Chairman Rohan Fernando, Chairman Jayantha Karunaratne, Vice Chairman Sanjaya Herath, and Secretary General Ranjith Abeykoon

The Tea Exporters Association held their Annual General Meeting under the theme ‘Tea Tweak 2020’ at Cinnamon Grand, Colombo recently. Many dignitaries representing the tea industry and related sectors attended the occasion which was held under the patronage of Central Bank Governor Dr. Indrajit Coomaraswamy.

The Tea Exporters Association was established with the objective of promoting and protecting the common interests of members who are engaged in exporting tea. Ceylon Tea, one of the top exports of Sri Lanka, is widely popular across the globe and competes on par with its global counterparts. 

The total production of tea in 2016 accounted for 292.57 million kg where 288.77 million kg was exported. However, in comparison to 2015 the numbers have shown 11% decline, as the total tea production accounted for 2015 was 328 million kg while tea exports the same year remained at 306.96 million kg.

Tea production for the period January-August 2017 has totaled 206.9 million kg vis-à-vis 199.0 million kg of January-August 2016, showing a gain of 7.9 million kg. The volume of tea exported during January to August 2017 period has declined to 190.1 million kg, a drop of 7.2 million kg against the volume of 197.3 million kg registered in the same period in 2016. The decline was caused by a number of factors including high prices, economic situation in Russia, military conflicts in Middle East, and sanctions on Iran and so forth.

The correlation between tea production volume and the tea export volume is further evident when comparing the statistics. A drop in production directly reflects a drop in exports. Inclement weather is one of the chief causes of tea production decline. Unpredictable weather patterns cause floods and droughts that in turn yield a low harvest.  

Another key determinant of the tea industry’s development is the issue of liberalisation of tea imports for re-exports. Delay in implementing the liberalisation has deterred the progress of the once thriving industry. Tea has become a stagnant crop over the past few years and this is evident through the revenue statistics from 2013 onwards showing no significant progress. 

For example in terms of revenue, tea exports realised Rs. 184.70 billion in 2016, depicting a growth of Rs. 2.79 billion over the amount of Rs. 182 billion achieved in 2015. Consequently the total free on board (FOB) value has shown growth during 2016, registering at Rs. 639.88 per kg in comparison to the Rs. 539.08 per kg recorded in 2015, marking a growth of 46.8%.

Russia and Middle Eastern countries including Iran, Iraq and Dubai have continued to be the prime destinations for Ceylon Tea in 2017. Russia alone imports 34 million kg of tea from Sri Lanka while other major buyers include Iran (33 million kg), Iraq (32 million kg), Turkey (27 million kg), UAE (18 million kg), Libya (12 million kg), Syria (12 million kg), and Azerbaijan (10 million kg). However, the export market has faced a number of obstacles due to sanctions, political and economic instability and continuous strife faced by these countries. Furthermore, the prominent drop in oil prices has further aggravated the issue. 

Sri Lanka is the fourth largest tea producer in the world. China, which tops the list, produces 2.2 billion kg of tea while India and Kenya produce 1.2 billion kg and 400 million kg respectively. Sri Lanka produces 330 million kg. Conversely, Sri Lanka is the third largest tea exporter in the world, where its exports account for 300 million kg. Kenya is on the lead exporting 380 million kg, while China follows closely with 320 million kg. 

Addressing the gathering, Dr. Coomaraswamy commended the role played by the tea sector towards uplifting the national economy since 1867. 

“Even today, tea compares very strongly with all other export items in Sri Lanka. And as a source of employment, it’s been a critical sector over the years. All of us are very proud of our social indicators and social development this country has enjoyed. But what is not always recognised enough is the role that the tea sector has played in the establishment of free education and free health in this country. It was the taxation levy on the tea sector that helped us to fund free education and free health. The tea sector has played a critical role in financing our social development.”

Commenting on the occasion, Tea Exporters Association Chairman Jayantha Karunaratne noted: “The Minister of Plantation Industries and Chairman of the Sri Lanka Tea Board have been receptive towards some of our suggestions – agreeing to make use of the collected marketing levy of over Rs. 5 billion for promotional and marketing effectively without further delay, in addition to abolishing further collection of the promotional and marketing levy. We have been lobbying to remove all cesses from 1tea exports to make us more competitive in the international market.”

Expressing his views on the woes of the industry, Karunarathne noted that Tea Exporters Association has been lobbying for liberalisation of tea imports for more than two decades, without any success.

“We are all striving to make Sri Lanka a global Tea Centre, which will naturally add a boost to the industry. We have just celebrated 150 years of Ceylon Tea. The extraordinary efforts by a team headed by Anslem Perera have done an excellent job by taking the Sri Lankan tea industry to a higher level in the international market.  This will no doubt, be appreciated by all stakeholders and the image built will also be long remembered.”

Tea is one of the largest contributors to the national economy. It is also a high value commodity which has made a strong footprint across the globe. Addressing the woes faced by the tea industry is of utmost importance, and this can only be done through effective intervention of the policymakers and the collaborative efforts of all stakeholders.