Tea prices inch higher, state intervention in the fray
Tea export prices have got a fillip since state intervention at the auctions announcement came through which sections of the industry believe led to the increase in prices by at least Rs. 40 to top at Rs.419 this week.
While some opine this is not a plausible venture to artificially intervene in the market, others believe the mere announcement of the move has also led to an increase in prices and it could boost the growers struggling to survive at present.
In the wake of Tuesday’s meeting with Prime Minister Ranil Wickremesinghe the industry was told the state would intervene at the tea auctions to boost prices and hold stocks to be sold off later.
In addition the state is looking at a long term solution to the problem by ensuring the industry finds new markets without exporting to traditional countries since these have troubles from time to time that hurt the sector, industry sources said.
In this regard, Sri Lanka would be looking at meeting with ministerial level counterparts in India, China, Turkey and Egypt to purchase teas from Colombo that could act as a boost to exports moving away from the country’s dependency on the Middle Eastern and Russian markets.
Moreover, the sources point out that the subsidy scheme that has been provided by the government might be stopped most likely after the budget presentation in Parliament this month.
It is believed that this could be a precursor to intervening in the market since the industry must not be overly dependent on the government which is unable to provide subsidies. State intervention process is being currently worked out at the Plantation Ministry however, it was noted that only about two million kilos of tea amounting to less than two days’ production would be bought by the government at the auctions.
Planters Association Chairman Roshan Rajadurai told the Business Times that this could be also mean a kickstart to achieving quality tea which is what would be bought by the state.
He pointed out that internally this could lead to increased production of better quality teas, and eventually with talks held with new markets it could lead to a push in prices as well.
Mr. Rajadurai pointed out that should prices increase up to Rs.430 then the tea smallholders would be able to make their earnings of Rs. 60 and would not require state intervention as a result.
The wage issues was not raised but mentioned during the meeting and the Regional Plantation Companies (RPCs) opine the system needs to change where they do not have to be held responsible for the workers, livelihoods amounting to about a million; and the onus should be with the pluckers to bring as much tea as they want to earn more.
Currently, there are about 193,000 employed in the RPCs but they continue to provide work as required and cannot simply shut down due to the losses made as they were compelled to pay the wages daily.
In the low country within the tea smallholders there were workers laid off and factories shut down due to the ongoing crisis.
However, exporters, who have been left out of talks the industry has had with the state, have been left in the lurch literally.
They believe that the market should determine prices and that there was no possibility of ascertaining how prices would fare in the next few months.
In this regard, it was pointed out that with an oversupply which the industry is facing at present this did not seem a plausible plan of action.
Though this was carried out in the past, it was noted that last time due to a blockage of shipments due to the collapse in importing countries exporters and the tea industry was sure there would be recall and reactivation but this time things remained uncertain.