Economy

TEA awaits govt. response to blending hub proposal

12 Jun 2012 - {{hitsCtrl.values.hits}}

The Tea Exporters Association (TEA) is still awaiting a decision from the government with regards to its proposal on the importation of tea to Sri Lanka for the purposes of blending, according to TEA Chairman, Niraj De Mel.

“There needs to be an openminded approach to this issue. But when you consider the mentality of some producers and brand marketers, I see very little chance of the proposal going through.” De Mel said.

He further stated that, in his opinion, Sri Lankan tea will see its market share in global tea consumption decrease even further over the long term, if efforts to convert the country into a tea blending and packaging hub fall through.

“I’m not very confident that we will be able to increase tea production in the country much more than the levels it is at now. At present our production levels are at around 330 million kilos of tea. However global consumption of tea stands at approximately 3.7 million metric tones. So, we already have a very small portion of the market share, and this will likely decrease

even further as our competitors increase production along with increasing tea consumption globally. In such a scenario, our income from tea exports can only be expected to shrink even further.” De Mel said.

He noted that a production increase would be highly unlikely in future if replanting programmes were not implemented in the near future.

“I think producers are waiting for an injection of capital from the government in order to carry out replanting programmes, but there is a significant cost involved with replanting and during that time there would be about 4 years in which producers will not be able to harvest anything. So, the government would probably have to provide incentives during that period as well, and I don’t know if that is an expense the government can afford to incur.” De Mel said. He noted that as long as Sri Lanka restricted itself to being mostly a producer of raw materials, then tea prices too would be dictated largely by external factors.

“So, long as we remain a supplier of raw materials only then prices will be dictated by issues like the ones we have now as a result of the Iranian sanctions and that is not a commanding position to be in. If we were to become a tea blending hub, then we would be in a better position to dictate prices ourselves instead of going from month-to-month being unsure of what prices we’ll get.” “If you look at some of the large multinational brands around, they have a wide portfolio of products and they target the mass market through a focus on supermarkets and that means having set prices for 6 month contracts for example. As Ceylon Tea is blended in places like Russia, we have no say in what percentage of tea is actually blended and sold as pure Ceylon Tea. With our proposed tea hub we would be able to maintain our own stringent standard. So, I think the tea hub concept is something that needs to be very seriously considered.” De Mel stressed.

Economy

TEA awaits govt. response to blending hub proposal

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