Trouble continues to brew in Ceylon Tea cup

• Tea traders blame bureaucracy for delay in lifting ban on glyphosate
• CTTA Chairman reveals massive blunder by Lankan embassy in Japan
• Says new tax structure on tea industry restricts new investments
• Urges Regional Plantation Companies to act responsibly 

By Nishel Fernando 

Ceylon tea continues to face major hurdles this year due to ad-hoc policies pursued by the State, government-red-tape, irresponsible actions of certain stakeholders and volatile conditions of key export markets, the umbrella organisation of Ceylon Tea, the Colombo Tea Traders’ Association (CTTA) highlighted. 

Addressing the 124th AGM of (CTTA) last week, CTTA Chairman, Anslem Perera, who was re-elected unanimously for the fifth time lamented that the ban on herbicide for tea hasn’t been lifted as yet following the media announcement at the end of April, though it was imposed overnight following a public announcement. 
“The Head of State through Minister of Plantation Industries announced the lifting of the ban via media by end of April. However, the lifting of the glyphosate ban has still not been gazetted and regularised. 

It is ironic to note that the ban became effective from the very next day following the announcement three years ago. But de-banning of same takes many months to be implemented. This is the beauty of bureaucracy at its highest.” He said. 

Perera termed the ban on the most widely used glyphosate herbicide as the second most catastrophic situation the tea trade has ever been pushed into during the last 5 decades, only second to the socialistic move of the nationalisation of tea plantations in 1974.

He pointed out that the decision was taken without any consultation with the trade and or any intelligent scientific basis, and for purely sentimental and politically motivated reasons. 

“The ban was imposed without any warning, thus creating practical and economic chaos within the tea trade.” 

Perera emphasised that the consequence of the glyphosate ban resulted in great disaster when Japan announced that they were imposing higher maximum reside levels (MRLs) for Hexaconazole and MCPA while EU also tightened standards on Diuron herbicide.

“Shipments in Japan were held back and some returned as the MRL levels that were set made conformity almost unachievable. The crisis developed into international proportions. Japan has already threatened total suspension of Ceylon Tea, if the ban on glyphosate is not lifted immediately.  We will then face an economic disaster.” 

Perera noted that the imprudence of Sri Lankan authorities was beneficial for Ceylon Tea competitors, as replacements for rejected consignments were purchased from them.

However, Perera stressed that the crisis could have been averted, had the Embassy of Sri Lanka in Japan conveyed that Japan was proposing to revise MRLs relating to some chemicals last year, as Japanese authorities had informed the proposed revisions to Sri Lankan mission in advance. 

“It was revealed that the proposed revisions relating to the MRLs of some chemicals had been advised as way back as in year 2017 by the Japanese authorities to the Embassy of Sri Lanka in Japan. 

This was well in advance of their introduction which would have given us adequate time for the submission of an appeal at a comfortable higher level. The embassy in 2017, perhaps due to an oversight, failed in their duty to transmit this information to the SLTB and TRI in a timely manner.

“Once again, it was a disastrous bureaucratic breakdown of a different dimension,” Perera lamented. 

Meanwhile, he also criticised the government’s move to remove the concessionary tax rate on specialised warehousing in the tea sector, which had been brought to the same level as corporate taxes.

He emphasised that the move will de-motivate investors in creating the much needed state-of-the-art warehouse facilities to meet international food standards.
“The new revised high levels of taxation introduced to investors in the plantation sector will de-motivate entrepreneurs, as heavy taxation will reduce profits and leave very little accumulation of funds for re-investments. The burden of heavy taxes will leave very little room for reasonably attractive wages to motivate village youth to stay back in the village,” he elaborated. 

Perera also criticised RPCs for acting in an irresponsible manner bringing great financial difficulties to all exporters and buyers in Japan. 

“RPCs gave an assurance on 23rd of January 2018, to the then SLTB Chairman, Rohan Pethiyagoda that the use of weedicides containing hexaconazole and MCPA will be stopped immediately. 

Based on this assurance, teas were offered with certificates of analysis from accredited laboratories in India.  Unfortunately, some of these teas when re-tested in Japan didn’t meet required standards.” 

Consequently, he pointed out that irresponsibleness of RPCs have compelled buyers to have their purchases tested in Japan at exorbitant costs paying as much as US $100 to 180.

“In the absence of RPCs’ honest support, the Japanese exporters who ship in bulk and in value-added products will naturally have to source teas from other markets to meet their commitments in the Japanese markets,” Perera warned. 

He said that Plantation Industries Ministry and SLTB have agreed to reimburse 50 percent of the analysis cost by the buyers up to end of May.

Elaborating on the consequences of losing the Japanese tea market for Ceylon Tea, Perera said that though Sri Lanka only exports 10 mn kgs of premium grade Ceylon Tea with a value over US $50 million to Japan, it creates great competition at the Colombo Tea Auction maintaining auctions prices. 

“The bidding encompasses a much larger volume of tea to at least 5 times the quantum that is purchased. This bidding bolsters prices at the auction by as much as Rs.150-200 per kilo.

“In an event of a total ban from Japa, prices will be impacted seriously and lower auction prices will result in serious revenue losses to the entire plantation industry impacting the livelihoods of over 2 million individuals involved in the industry.” 

Despite the pessimistic outlook, Perera was hopeful that the field trials oragnised by the Tea Research Institute (TRI) will push to Japanese authorities to revise the MRLs for Hexacionazole and MCPA. “Reliable sources have informed us that Japanese authorities are certainly in favour of revising the MRLs for Hexacionazole and MCPA based on TRIs field trial data.” 

Speaking of the external environment required for Ceylon Tea, Perera pointed out that the current civil war in Syria, political uncertainty in Middle Eastern countries as well as devaluation of currencies in Russia and Turkey have adversely impacted Sri Lankan tea exports.

Hence, he suggested that Sri Lanka should carry out the global tea promotion campaign on emerging markets such as China and India.

“China and India are proving to be potential large markets with their rapidly increasing populations and their ever-growing thirst for tea. As we know their own production cannot meet their growing domestic requirements, we should actively nurture these markets,” he stressed.

Ad-hoc policies have delivered a deadly blow: Harsha 

The ad-hoc policies not backed by scientific evidence but by impulses and emotions have delivered a deadly blow to the Ceylon Tea industry, a prominent State Minister said. 

Delivering the keynote address at 124th AGM of CTTA, the State Minister of National Policies and Economic Affairs, Dr. Harsha de Silva said: “The sudden appearance of the beetle lava in a container led to the immediate suspension of our tea exports to Russia. But of course we know that there wasn’t really a beetle, but another ad-hoc decision to ban imports of Russian asbestos.”

The State Minister noted that despite his requests pointing out to potential negative consequences of the ban, President Maithripala Sirisena decided to listen to his advisors. 

“In fact, I did speak to the President and said we must not make such ad-hoc decisions. But of course other peoples’ advice was what he listened to,” he lamented.
He pointed out that clearest failure in inconsistence and non-scientific, ad-hoc policymaking is exemplified by the glyphosate ban for its complicated fallout. 

“We must try to reduce these uncertainties by making decisions based on scientific evidence, research and careful weighing of options. Once a good decision is made, barring new evidence, we must stick to those policies,” he asserted.

Further responding to Anslem Perera’s criticism on the government and regulatory framework, de Silva affirmed that the industry stakeholders must reach consensus on how to take Sri Lankan tea forward, as there are two varying proposals from exporters and planters.

Planters have been insisting that diversification should take place under the Ceylon Tea umbrella, while the exporters have been arguing that diversification should take place via integration into global supply chains.

However, de Silva pointed out that it’s possible to integrate into global supply chains while protecting the Ceylon Tea brand and Sri Lanka’s tea industry.

He also stressed that the production cost could be cut down by automation and integrating operations into IT platforms with investments into R&D.