20 December 2022 05:10 am Views - 1953
Sri Lanka’s tea exporters joined the bandwagon in clarifying its stance on the issue revolving around repatriation and conversion of export proceeds, pointing out they have been abiding by the relevant rules and regulations.
Amid allegations regarding exporters not converting the export proceeds as mandated by the monetary watchdog, the Tea Exporters Association (TEA) has met with Central Bank (CBSL) Governor Dr. Nandalal Weerasinghe recently to set the record straight.
In the first week of December, the local apparel sector too clarified on the misconceptions in this regard.
The TEA, in an elaborated statement to the media yesterday, pointed out that the sector does not have the “luxury” of either delaying the receipt of payments or the opportunity to differ the conversions of export proceeds into Sri Lankan rupees.
This is due to the tea cost amounting to almost 75 percent of the value of the exported items and the survival of the exporters depend on the timely receipt of sales proceeds, specially during the current high interest rate regime.
“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,” the TEA said.
The TEA went on to stress that the tea export business is highly working capital intensive. The teas purchased at the auction are settled within seven days while the sales proceeds are often received within 30-90 days from the shipment date or in certain cases full or part payment is received in advance.
According to the association, the tea export companies convert a much higher proportion of their export proceeds into local currency in comparison with the figures indicated by the Central Bank.
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,” clarified the TEA.
At present, the exporters are authorised to make five types of 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 the Central Bank regulations.
The TEA asserted that as responsible stakeholders, 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,” the association said.
Further, the TEA called on commercial banks to 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.
It also asserted the need for strict measures to be taken on any tea export company that 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 public that the tea exporters are in compliance with the country’s regulations in respect of repatriation and conversion of export proceeds,” it said.