Cess hike on bulk tea put on hold; terms to be revised

In a fresh turn of events, the Ministry of Finance and Planning on the intervention of the Ministry of Plantation Industries, has decided to stay its decision to increase the cess on bulk tea exports.

This was communicated to the industry stakeholders through a gazette notification by the Ministry of Finance and Planning.

The new decision was reached following representations made by the Ministry of Plantations and will see the imposition of a new cess being delayed till March 1.

Additionally, the imposition of the cess will be calculated on a monthly basis, instead of a weekly basis at a rate of 2.5% of the Colombo Tea Auction average price or Rs. 10 per kg depending on which is higher, in line with rates previously called for by the Colombo Tea Exporters Association (CTEA).

The Colombo Tea Auction average price will in turn be determined for each month by the Director General of Customs in consultation with the Director General of the Tea Board and will come into effect from the first day of the month.

The auction average price will be computed by taking the average price of the Colombo Tea Auction during the three months prior to one month from the effective date.

Issuing a statement on the matter, Chairperson of the CTEA, Rohan Fernando said: “The appeal made to the Minister of Plantation Industries received immediate response to take damage control measures and arrive at an amicable solution. The CTEA wishes to express their appreciation to the Minister of Plantation Industries, Mahinda Samarasinghe for resolving this issue expeditiously.”

The decision to retroactively revise the tea cess up by approximately 100% effective from January 23rd sparked outrage amongst tea industry stakeholders last Wednesday drawing caustic criticism from stakeholder organizations including the Colombo Tea Traders Association and the CTEA.

Furthermore, the revision had reportedly taken place in the bizarre absence of any form of consultation with the Line Ministry, or Regulatory Authority of the tea industry. Stakeholder organizations too were kept uninformed of the decision and were left scrambling to respond to fundamental changes in costing and their implications on future contracts.

The Treasury’s about-face on the issue comes at a time when volatility in important markets for Sri Lankan tea in the Middle-East, including Syria and Egypt, face political instability whilst trade embargos against Iran, one of the world’s largest buyers of tea, continues to constrict demand.

Meanwhile, on the domestic front, production factors are an on-going source of concern for the industry due to the immediate effects of drastic weather conditions causing sharp swings between severe droughts to excessive rains, in combination with long-term declining yield trends due to a lack of replanting programmes and increasingly high costs of production.