By Quintus Perera

The Board of Investment (BOI) came in for criticism for approved tea-related projects that adversely affected the domestic tea industry.

Indrani Sugathadasa, Secretary, Ministry of Plantation Industries, making the keynote address at the 17th AGM of the Private Tea Factory Owners Association (PTFOA), pointed to one instance where a company floated to obtain BOI status on the pretext of tea planting had in fact made a deal to obtain a huge bank loan. The investors had then scooted off with absolutely nothing to do with the tea industry.

Under these circumstances Ms Sugathadasa said that the BOI has been instructed to obtain prior approval before granting BOI status for tea industry and to avert the repetition of such incidents. Anil Perera who was re-elected for the second time as Chairman, PTFOA in his address was also critical of the actions of the BOI in that he mentioned that the BOI has allowed a timber processing factory to operate with almost all the firewood available being channeled to this factory causing a major scarcity of firewood which has been used in tea factories.

He said that firewood is extensively used in the tea industry and due to the BOI approved wood processing factory coming in, the firewood prices have hit the ceiling, as this factory consumes large quantities of wood without planting trees to maintain its sustainability. Mr Perera said that to resolve this serious energy crisis they had to meet the President.

He said that the tea industry is facing an immediate challenge due to the global recession as the average price per kg of Rs 341 in July declined to Rs 290 per kg last week recording a drop of Rs 50 per kg of tea.
The low grown tea averaging Rs 391 per kg in July declined to Rs 306, a Rs 85 drop per kg. He said that the drop was unprecedented over such a short period of time.

The volume of the teas at the Colombo Auctions that remained unsold each week has been around 40 % and still climbing, thus the industry is going to be cash trapped indicating very challenging times ahead. He said that on top of these serious constraints, there is also the credit crunch with high interest rates being factors that need to be addressed.

Mr Perera said that the issue of revision of the green leaf formula has been under discussion for nearly seven years and it is a great pity that it is not resolved yet. The report of the Regulatory Review Task Force of 2002 has been signed by all the stakeholders with the recommendation that the Reasonable Price Formua should be reviewed periodically and the failure to arrive at a consensus has forced them to go before courts to get the matter resolved.

He said that in February 2007 they presented to the courts a settlement package and one of the items identified therein was the formation of the Tea Advisory Committee and the PTFOA is happy about this development.

Some 679 factories in 2007, he said, consisting of 158 factories for the High Growns, 136 factories for Mid Growns and 385 factories for the Low Growns have seen lower manufacture. Of this 679 factories around 450 factories manufactured less than 500,000 kg of made tea per annum. Average throughput of a tea factory in Sri Lanka is in the region of 450,000 kg of made tea per annum.

He said that tea is no more considered as a beverage but now defined as a food product. Sri Lanka produces the cleanest tea globally. To ensure high quality in processing the facilities in the factories need to conform to international standards.

He said that the view of the PTFOA has been that a broad policy framework needs to be developed to meet the global challenges in the production and marketing of tea.

He said that in Vietnam the tea production level in 2003 was 88 million kg but today Vietnam produces 135 million kg. Sri Lanka’s tea industry is able to capture the heart and mind of tea connoisseurs of the world. He said that today the tea industry in India is supported by the Indian government. Lalith Hettiarachchi, Chairman, Sri Lanka Tea Board also spoke.