By Dilshani Samaraweera
Tea Board tea party
The Sri Lanka Tea Board went shopping with Rs 231.5 million from the Stabilisation Fund, and bought 917,000 kgs of tea from the Colombo Tea Auctions this week.
“Our intervention was to stabilise prices and raise buyer confidence. We paid around Rs 270- Rs 280 per kilo, which is sufficient to pay green leaf suppliers a little over Rs 40 per kilo to cover their costs. We will watch the market and do this again if needed,” said the Chairman of the Tea Board, Lalith Hettiarachchi.
The Board said it would sell its newly acquired tea stocks with the help of local brokers and the government. Already, the government is sounding out countries like Iran and China, as potential customers for the Tea Board. Tea exporters said the Board’s intervention had stimulated buying but said the shopping spree may have to be repeated a few more times to make a significant impact on the market.
In addition to buying up tea the government has made Rs 1.5 billion available to the Stabilisation Fund, to help the tea industry that is already feeling a cash crunch. The government also negotiated with the commercial banks to reduce lending rates by 6%, which will be offset by the Stabilisation Fund. (DS) |
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Local exporters using the EU’s GSP+ duty-free export scheme have been told to issue redeemable preference shares in return for government assistance, if the GSP+ is terminated.
Last week the government announced a US$ 150 million support package for exporters using the GSP+, if the EU does not renew the scheme for Sri Lanka.
This week government officials and exporters met to decide how the assistance could be delivered, without violating World Trade Organisation (WTO) rules. Under WTO rules governments cannot subsidise industries, which means the government cannot directly provide funds to exporters.
“The decision was for exporters using the GSP+, to issue redeemable shares to the government, up to the value of assistance they receive. So this is not a government grant. The companies can redeem their shares whenever they want. Also this will only be available if, and when, the GSP+ is not available,” said the head of the Joint Apparel Association Forum (JAAF), Ajith Dias.
The government assistance is expected to cover the additional costs that exporters will have to absorb, in the form of duties, when the GSP+ is no longer available. Garment factories, for instance, will have to absorb around 8%-10% in duties, if the GSP+ is not available.
Meanwhile the garment sector welcomed the Central Bank announcement on allowing greater flexibility to the exchange rate. The industry says that in addition to increasing costs, the exchange rate was also working against industry competitiveness.
“In our opinion the rupee, at its previous value, was over valued. This, together with the increase in utility costs, is making it extremely difficult to remain competitive,” said Mr Dias.
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