TEA rattled by move to use exporters’ funds for replanting

•  Expresses concern over splitting of Tea Promotion Levy to support tea replanting activities
•  Says the move by Plantation Industries Ministry is a breach of legitimate expectation of tea exporters
•  Stresses producer segment should create their own fund to support re-planting activities

The Tea Exporters Association (TEA) issuing a statement yesterday expressed concern over the government’s plan to use part of the funds collected from tea exporters to give a boost to replanting activities by amending the Tea Promotion Levy Gazette.

TEA said they were surprised by the Plantation Industries Ministry’s recent move to present a Cabinet paper without any consultation with the exporters to amend the Tea Promotion Levy Gazette.

“The Association was not aware that the Ministry of Plantation Industries was planning to split the Tea Promotion Levy between promotion and re-planting with the reduction of the levy from Rs. 3.50 to Rs. 3.00 per kg. 

“The information available after the Cabinet meeting on July 19, 2019 was only on the reduction of promotion levy by 50 cents, and details appeared only after the Plantation Minister made a statement to the press,” the TEA statement noted. 

TEA said during a recent meeting with the Secretary to the Plantation Industries Ministry, the Association strongly objected to a suggestion to amend the Tea Promotion Levy Gazette and split the fund into finance and re-planting.
TEA said they sent a letter through their lawyers on May 7 to the Sri Lanka Tea Board (SLTB) Chairman conveying its objection for obtaining funds from the Tea Promotion Fund to provide subsidies to tea producers for re-planting purposes.

“The letter categorically mentioned that, any attempt to amend the gazette notification would be a breach of legitimate expectation of tea exporters and also contrary to the specific undertaking given by the previous Chairman of the SLTB in 2016 that the Tea Promotion Fund would be used exclusively for tea promotion work as specified in the gazette notification,” the statement said.  

The Association pointed out when the then Plantation Industries Minister Mahinda Samarasinghe proposed to introduce a tea promotion levy in 2010, it met with stiff resistance at the outset with many industry stake holders questioning the need for a second cess when the industry was not reaping any benefits from the other two cess payments imposed on tea exports.

TEA said Samarasinghe assured the tea exporters that SLTB will use the fund to put Ceylon Tea back on the world map and it will not be utilized for any other purpose.  “With this assurance, tea exporters consented for the creation of the Tea Promotion Levy in October 2010, and the gazette notification contains a clause ‘that collected funds shall be used exclusively by the board for the purpose of engaging in activities related to tea promotion and marketing strategy within and outside Sri Lanka’ to safeguard the interests of tea exporters,” TEA pointed out.  The Association further said it is the responsibility of Regional Plantation Companies (RPCs) and smallholders to increase the tea crop by investing in re-planting and new planting.

“It is rather unfair to collect tax from tea exporters and disburse among the producers for re-planting of tea. All stakeholders in the tea industry should operate on proper business models to suite the current requirements of the market,” the TEA statement noted.
“The government providing subsidies to producers to continue with the same old model will lead to continuation of inefficiency within the system and also would be a burden on the entire economy,” it added.

TEA said the producer segment should create their own fund to support re-planting activities similar to the Tea Promotion Fund established with the contribution from tea exporters.
Meanwhile, the Association pointed out that Sri Lankan tea exporters pay more taxes than the tea exporters in other tea producing countries, which influences their competitiveness in the world market.

“Tea exporters do not receive any subsidies from the government although they face a number of difficulties due to the current situation in Russia, Iran, Syria, Libya, Ukraine etc.  Although the Association has made a number of requests to the Ministry of Finance and Ministry of Plantation Industries to review the current cess payment, it has not received a favaourable response up to now,” the statement said.  

At present, in addition to the Tea Promotion Levy, tea exports are subject to two cess payments ie. Rs. 4.00 per kg for tea packets and tea bags and Rs. 10.00 per kg for bulk tea exports.  From the latter two cess payments, government collects over Rs. 2 billion per year. 

As per Sri Lanka Tea Board Law No. 14 of 1975, the two cess payments are collected to be used for supporting planting, re-planting and development of tea estates while the collection of tea promotion levy to be used exclusively for promotion and marketing activities of Ceylon Tea.   TEA said when the implementation of Global Ceylon Tea Campaign was dragging on for many years due to strict government tender procedures and regulations, TEA requested the Plantation Industries Minister to suspend the collection of Tea Promotion Levy.  The association said at a meeting arranged by Export Development Board at the Prime Minister’s Office on July 27, 2017, Minister Dissanayake agreed for submission of a Cabinet paper for removal of the Tea Promotion Levy, though it was not honoured. 

“When this matter was taken up with SLTB Chairman, by his letter dated April 6, 2018, he appealed to the TEA to differ the suspension of the Tea Promotion Levy until December 31, 2019. He suggested reducing the levy to Rs. 1.75 per kg by January 1 2019 and remove it completely by the end of 2019.

The members of TEA are dismayed to note the action initiated by the Ministry of Plantation Industries to revise the Tea Promotion Levy gazette notification despite the assurances given by the Minister and Chairman, SLTB to remove the Tea Promotion Levy,” the statement noted. 

In conclusion, TEA requested the Plantation Industries Ministry to honour the assurance given to the tea exporters that the Tea Promotion Levy will be utilized only for promotion and marketing of Ceylon Tea.