Local tea industry gears to reap benefits from Russia

By Cheranka Mendis

The local tea industry must be prepared to make maximum benefit of Sri Lanka’s biggest market for tea, Russia, entering the World Trade Organisation, Plantation Minister Mahinda Samarasinghe said.

Speaking at the award presentation of ‘Ceylon Speciality Estate Tea of the Year’ 2011 Russia held at the Galle Face Hotel, Samarasinghe stated that the WTO membership for Russia would mean looking at bringing down the duty for value added teas exported from Sri Lanka from a high of 20% to 12.5%.

This, however, would happen over a period of time, he noted. “I don’t know how long it would take to get to that position but I have been told by the Department of Commerce and Industry and others following Russia’s entry into WTO that it may take two to three years for the position to be achieved.”

A reduction in duty will provide Sri Lankans a much better level playing field than what is currently enjoyed.

“We have to get ready to capitalise on the reduction of duty,” he said. Stating that Russia is an increasingly sophisticated and highly industrialised country, the Minister noted that Russia buys 30% of Ceylon Tea and welcomes 17% of local exports to the country.

Along with the reduction of duty that is expected from the WTO membership, there would also be changes in other duty regimes as well. Sri Lanka can also hope to face out non tariff barriers that are in place today, which has put local exporters at a disadvantage.

“The main items we need to keep in mind for negotiations (with the entry into WTO) is to see whether we can face out the gross weight being used as a criteria for duty and go to the normal established rule of nett weight in the calculations of duty,” Samarasinghe acknowledged. This would further increase the possibilities of greater penetration in the future.  “With this and the encouragement we give our producers and manufacturers with such events being held, we would no doubt be able to position ourselves to increase the quantum of value added tea being sent out to Russia starting 2012.” The country could then focus on positioning itself in a more favourable position in three to four years time when the duty structure is set in place. On value added teas and the importance of increasing the quantum exported, Sri Lanka is ready to position itself as a value added tea market from next year. “Today the quantum of value added teas being sent to Russia is about 20% of the entire lot whereas 68-70% goes in bulk form. We would like to increase this and we are organised to do this from 2012.” Samarasinghe observed that a Rs. 3.50 levy has been put in place with agreement from tea exporters of Sri Lanka. The levy has been formally put into place by way of cabinet approving the levy and the President announcing it in Budget 2012 which was regularised before Parliament a week ago. The sum is to be collected over the next five years. “We are talking of a US$ 50 million minimum fund which will be used exclusively for the promotion of value added teas worldwide. Given that Russia is our biggest single market, we would be looking at using a lot of this money to further enhance our market share in the Russian market.” The Minister noted that a lot of new things would happen from next year. “We have the GI registration, which is now being completed within Sri Lanka.  We are hopeful to complete the GI registration internationally starting next year. Ground work has been done by the Tea Board and with the GI registration both internally and externally put into place, speciality teas would be able to be further enhanced.”

“Lot of things are falling into place as a result of the correct policy decisions Sri Lanka has taken to ensure that the tea industry sustains itself and that quality Ceylon Tea is made sustainable,” he said.

“This is the modus operandi we will take forward in 2012.” The ‘Ceylon Speciality Estate Tea of the Year’ competition was organised for the fifth time to popularise and encourage the concept of marketing straight line marks to showcase the diversity of Ceylon Teas from Sri Lanka in foreign markets. The event was previously held in New York and Puerto Rico and in Japan last year.

The purpose is to distinguish one estate from another and to educate the trade/consumers on quality and special characteristics of tea produced by different estates, Sri Lanka Tea Board Director Promotion Hasitha De Alwis said. He noted that 495 applications were received from tea estates in agro climatic regions in Uva, Dimbula, Nuwara Eliya, Uda Pusselawa, Kandy, Sabaragamuwa, Ruhuna and for the first time for green tea and CTC teas. A total of 66 were found eligible from a 12 member panel of tea tasters and were taken to Russia.

The winners were awarded gold, silver and bronze awards at yesterday’s event. One winner each was picked from the green tea category and CTC tea category. In Russia the finalists were able to showcase their teas to a panel of judges consisting of eight Russian tea tasters and two local tea tasters.

The final round was held at the Expo Centre in Moscow coinciding with the World Food Exhibition in Moscow. The 23 winning teas were then auctioned out the next day, bringing in revenue of US$ 15,710.