SL to strike oil-for-tea barter deal with Iran

Plantation Industries Minister Navin Dissanayake (right) and Sri Lanka Tea Board Chairman Licille Wijewardena

•  Govt. looking to settle US$ 240mn outstanding oil bill to Iran through tea exports
• CPC to pay tea exporters subject to a maximum of US $ 10mn a month
• U.S. envoy in Colombo briefed over the plans, says Plantations Industries Minister
• Colombo tea auction prices expected to bounce back from August

By Nishel Fernando 

Sri Lanka is planning to export tea to Iran under a barter system from this September onwards at least for the next two years, as the U.S. sanctions on Iran disrupt Sri Lankan tea exports to that country negatively, impacting the Colombo tea auction prices. 

Plantation Industries Minister Navin Dissanayake said he plans to submit a joint Cabinet paper with the Highways & Road Development and Petroleum Resources Development Minister Kabir Hashim in the next 2-3 weeks to establish a mechanism to settle an outstanding US $240 million oil import bill to Iran through Ceylon tea exports. “Under the proposed system, the exporter needs to immediately inform us once their tea shipments are sent to Iran, submitting a voucher. Then, the CPC (Ceylon Petroleum Corporation) will take measures to release the necessary payments to the SLTPB which is to be paid to the exporter,” Dissanayake told reporters in Colombo yesterday.

Following extensive discussions, he said the CPC agreed to release maximum of US $10 million per month to settle payments for tea exports bound to Iran.

The government also plans to sign an agreement with Iranian tea importers on the proposed barter system. 

Dissanayake said he held further discussions with the United States Ambassador to Sri Lanka and the Maldives, Alaina B. Teplitz recently to explain the adverse impacts on the Sri Lankan tea industry and its stakeholders stemming from the dwindling tea exports to Iran due to economic sanctions. 

“I informed her regarding our plans and I explained the current situation to her. She understood why Iran is such a vital market for Ceylon Tea. I am very hopeful once this mechanism in place, the United States won’t jeopardise it,” he said.

The minister pointed out that the proposed barter system is a win-win situation for both CPC and for tea exporters, as CPC would be able to settle their debt to Iran gradually. 
Although economic sanctions don’t apply for agricultural exports into Iran, he noted that as Iranian banks have been kept out of the international banking system, there isn’t any reliable payment method to conduct trade with Iran.

At present Sri Lankan exporters trade with Iran via the hawala method and other third party payments methods, which are time consuming and prone to abuse.
Iran was among the top three markets for Ceylon Tea, which has fallen to the fourth position now.

Ceylon Tea exports to Iran declined to 27, 418 MT in 2017 and to 23,914MT in 2018 from over 33,000 MT in 2016. 

According to the Tea Exporters Association (TEA), the export volumes have further declined by over 500 MT during first five months of the year. 

Meanwhile, upon completion of field trial data on herbicide MCPA, Tea Research Institute (TRI) has begun negotiations with Japanese authorities to increase the level of maximum residue level (MRL) in Ceylon Tea.

The Sri Lankan government has requested to increase MRL to 0.06 ppm from the current default MRL of 0.01 ppm for MCPA.

Following the discovery of MCPA in Sri Lanka, Japanese authorities in 2017 imposed a default MRL of 0.01 ppm for MCPA for the first time for Sri Lankan tea exports as a temporary measure before completely banning the chemical until they come up with a standard MRL.

Sri Lankan planters turned to MCPA following the ban of popular weedicide, glyphosate in 2015. The ban was relaxed in 2018 for tea and rubber after the country risked the Japanese market for Ceylon Tea exports. However, there is still a shortage of glyphosate in the market, forcing planters to continue the use of popular substitute MCPA.

The minister opined that Colombo tea auction prices would bounce back from August onwards with the normalisation of tea exports to Japan and Iran.

Further, he noted that the current dip in Colombo tea auction prices is seasonal as there’s an increase in the supply during the peak summer period. 

Sri Lanka’s tea industry is eying 300 million kgs export target and a revenue of US$1.5 billion this year.

Global tea promo campaign to kick off in September

Plantation Industries Minister Navin Dissanayake yesterday said that everything is set to launch the long-delayed global campaign to promote Ceylon Tea this September starting from Russia.

“After a three-year delay, we were finally able to get over government bureaucratic red tape and tender procedures which are burdensome, and launch the campaign,” Minister Navin Dissanayake said.
The Rs.5.5 billion campaign will roll out in twelve different markets in three years, with an emphasis on social media. 

The global Ceylon Tea promotion will commence in Russia with a Rs. 600 million budget followed by Ukraine Japan, China, Turkey, Saudi Arabia, United Arab Emirates, Iran, the United States, Chile, Australia and Germany. 

Dissanayake said that is the largest Ceylon Tea promotion campaign to be launched in the 150-year history of Sri Lanka’s tea industry. 

Licenses of 15 errant tea factories suspended

Sri Lanka Tea Board (SLTB) has suspended the licences of 15 tea factories this year for adulterating their teas with sugar.

Plantation Industries Minister Navin Dissanayake vowed on taking tougher action against ‘naughty’ tea factories in the future.

“We have increased our detections and we are increasing the fines. The 3-month suspension is already a huge financial loss for tea factories. If they get caught for the second time, we will cancel the licence,” he stressed. 

He noted that establishing of baseline sugar contents for individual tea types by SLTB with the assistance of the Tea Research Institute has now provided the necessary legal background to take firm action against these factories. 

Meanwhile, Dissanayake said that he would soon present a Cabinet paper to grant moratoriums on capital for struggling tea factories. 

The Sri Lanka Tea Factory Owners Association (SLTFOA) recently claimed that over 100 factories were struggling to service Rs.5 billion worth of outstanding loans, and loan facilities of 33 such factories had already gone into the non-performing loan category.

However, the minister noted that the government could only assist tea factory owners who have borrowed from the banking sector, while noting that there are some factory owners who had borrowed from brokers. 

SLTB Chairman Lucille Wijewardane said that despite the claims by factory owners, there may be about 20 factories that are actually in financial difficulty.