The Tea Exporters Association (TEA) at a recent meeting with Central Bank (CBSL) Governor Dr. Nandalal Weerasinghe  clarified its position on the recent reports on repatriation and conversion  of export proceeds by its’ members. In a statement, TEA said the tea export business is highly working-capital intensive: teas purchased at the auction are settled within seven days while sales proceeds are often received within 30 to 90 days from the shipment date or in certain cases full or part payment is received in advance. 

Most tea export companies, due to intense competition from other tea producing countries and extended payment terms demanded by supermarkets, provide a reasonable period of suppliers’ credit within the repatriation period mandated by the Central Bank of Sri Lanka.

Given that tea cost amounts to almost 75 % of the value of the exported items, an exporter’s survival depends on the timely receipt of sales proceeds especially during the current high interest rate regime. 

In such a scenario, the tea exporters do not have the luxury of either delaying the receipt of payments or the opportunity to differ the conversions of export proceeds into rupees.

The TEA also pointed out to the CBSL officials that tea export companies convert a much higher proportion of their export proceeds into local currency in comparison with the figures indicated by CBSL. Most Tea Exporters, to remain competitive, borrow their working capital requirements (Packing Credit) from local commercial banks in foreign currency. 

Once the exporter receives his export proceeds, the borrowed working capital component is deducted by the bank and only the remaining portion is left for conversion into the local currency. The exporters believe this financing component caused the discrepancy between the CBSL figures, which were ascertained from the commercial banks, and those from the tea exporters based on their actual foreign currency conversions. 

To explain further, exporters are authorised to make the following payments in foreign currency: Import of packaging materials and other inputs; Settlement of loans obtained in foreign currency; Payment for brand promotion activities, legal fees, certification charges and commissions for overseas agents/distributors; Payment to suppliers deemed as indirect exporters who have a large import component and Payment of shipping and freight charges.

The remaining balances are converted into local currency by the seventh of following month by the respective commercial banks as per CBSL regulations.

As a responsible stakeholder, TEA said it recognises the necessity for the strict monitoring of the repatriation of export proceeds under the prevailing economic situation. The TEA is committed to extend their fullest cooperation to the Central Bank in this endeavour. The Ceylon tea export industry provides a livelihood for almost two million people both directly and indirectly. As responsible citizens, the exporters understand their essential role in keeping this industry vibrant and alive as the earnings of many depend on their activities.

TEA requests that all commercial banks maintain accurate records of all inflows related to tea exports covering advance payments as well as deferred payments and report these complete figures to the Central Bank. 

Further, strict measures to be taken on any tea export company who fails to submit the required information on receipt of export proceeds and fails to carry out conversion. As an association we would like to reiterate to the Government and to the public that the tea exporters are in compliance with the country’s regulations in respect of repatriation and conversion of export proceeds. 

TEA is also concerned about the recent media reports, quoting various unverified reports on repatriation of export proceeds by Sri Lankan exporters. Since the media reports do not specify any particular sector, it requests the Central Bank to investigate and intervene to educate the public with the actual facts and ensure wrongful publicity is restrained immediately.  

Such misinformation can cause unnecessary disturbance and irreparable damage to the reputation of genuine exporters, who are at the forefront of bringing the required foreign exchange into the country with a lot of hardship and competition in the current global economic situation.

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