Electricity tariff hike threatens to burn a hole in Ceylon Tea cup

• TEA asserts sudden tariff increases make it impossible to do even short-term planning
• Says sudden systemic shocks can destabilise sector
• Urges authorities to manage sector “very carefully” to avoid future shocks

The tea sector yesterday joined the chorus in warning about the potential consequences of failing to control the situation after a 66 percent increase in electricity prices that went into effect last week.

Tea Exporters Association (TEA) Head Ganesh Deivanayagam claimed that all industries and people are threatened by the frequent and abrupt increases in electricity expenses at high rates and that the tea industry is not exempt from the consequences that result.

“In most cases, we sell tea globally at prices pre-agreed for a period of time. Sudden increases make it impossible to do even short-term planning,” Deivanayagam told Mirror Business.

Although highlighting that as responsible citizens, the tea industry does not want the government-run Ceylon Electricity Board to operate at a loss, he also pointed out that sudden systemic shocks such a sharp spike in energy costs, can destabilise the sector.

“This is a sector that is critical to the survival of the industries, our exports as well as common people’s day-to-day living standards. We urge that this sector be managed carefully and thoughtfully to avoid such future shocks,” said Deivanayagam. 

Prior to the second hike in power tariffs, the cost of production of the local tea sector expanded by about 35 percent towards the latter part of 2022. The increase is attributed to the depreciation of the Sri Lankan rupee against the US dollar and the expansion of the cost of fertilisers globally.

Adding to the sector’s woes is also the increase in raw material prices and wages. The high cost of production, particularly the estate sector worker pay, is an issue that is yet to be properly addressed, as it is not linked to productivity, which has impacted the overall output.

The sea sector players have repeatedly stressed that the higher production costs compared to other large producers and exporter countries undermine the competitiveness of the local tea industry. (SAA)