Tea industry negotiates for a profitable blend

Tea industry pins hopes on increased revenue with packeted teas to Iran or quota to increase exports

By Cheranka Mendis

Sri Lankan tea exporters are now crossing their fingers hoping that the Iranians will consider their request on lifting the ban on packeted tea to the country or at the very least give Sri Lankan exporters a quota for a particular volume of such teas, which is currently under negotiation.

The request which was put forward by the industry stakeholders approximately two months ago could, if agreed on, develop the industry by large numbers.

 

The retail market for packeted tea which goes via indirect, unofficial methods to the Iranian market from countries such from the Middle East and Turkey has prevented considerable export revenue to Sri Lanka.

If lifted, the prices would go down as intervention of middlemen would be prevented, good quality product will enter the market and the local producers would be at the receiving end of the market.

Director Promotions at the Sri Lanka Tea Board Hasitha De Alwis told Daily FT that the request was still under discussion and that no finalising had been done so far.

Meanwhile, the Government news portal stated that Iran had agreed to study the inclusion of preferential tariff quota on annual basis for Sri Lankan tea with the signing of a Memorandum of Understanding (MoU) as agreed upon by both parties.

Iran is said to have agreed that part of the quota could be used for packaging of Sri Lankan tea in Free Trade Zones in Iran by Sri Lankan companies or as joint ventures formed between Iranian and Sri Lankan companies.

De Alwis however stated that the topic under question had still not received a formal finalisation so far. “The proposal was put forward by the Ministry of Foreign Affairs and Ministry of Trade. The Ministries are also mulling over sending a delegation to Iran to further the talks in the first quarter of 2011,” De Alwis said.

“Pre packed tea has reached the Iranian market through indirect ways. The devious route could be cut off if the trade between the two countries is direct. Consumers spending on local tea products will increase as the prices would come down,” he said, adding, “A lot of profit margins for middle men will also be eliminated.”

Value added and branded local tea will face better volume sales as well.

Chairman of the Tea Exports Association Jayantha Keragala in agreement with De Alwis stated that the tea which is exported in bulk to Iran would bring in almost double the revenue if packaging was allowed. “Value added tea of the country will get an opportunity while the Sri Lankan economy on the whole would benefit from higher revenue,” Keragala said.

Chairman of the Colombo Tea Traders Association Anil Cooke also voiced positivism if the request was passed, although he too had not heard of any finalisation yet.

Iran, termed as Sri Lanka’s sixth largest trading partner, recording a total value of two-way trade of nearly US$ 992 million in 2009, has its demand on high-end low country teas, he said.

“Such teas are at the heart of low grown teas which is also a critical output of tea mode in the low country. If the request is taken into account it could strengthen the demand for local teas from that level,” Cooke said.

It was also noted that 45 per cent of the Sri Lankan tea production was from the low country. “The industry will certainly be uplifted and would face happier times,” he added.

SL tea eyes US$ 1.5 b two year high

SRI LANKAN tea traders are expecting a US$ 1.5 billion turnover from the tea industry at the end of this financial year.

If the expected turnover is reached, it would mean a US$ 1.2 billion increase over the last two years, Chairman of Tea Exports Association Jayantha Keragala said.  



“It would be a remarkable improvement,” he said, adding, “We have well passed the US$ 1.3 billion mark as at now.”

In 2009 the tea industry exported tea to the value of Rs. 136, 171 million. Quantity of the tea was 289. 7 million kgs, according to the CBSL’s published economic and social statistics of Sri Lanka in 2009.