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Sri Lanka loses Rs. 400m in Libyan tea deal
By Ayesha R. Rafiq
Sri Lanka has lost more than Rs. 400 million due to the latest controversy over alleged undercutting by tea exporters in a huge Libyan tender for Ceylon tea.

Tea exporters said that while most exporters quoted a market fair price of Euro 2.20 (Rs. 225) per kilo, Selimpex, a powerful consortium of tea exporters quoted a price of Euro 1.90 (Rs. 194) for which they were allocated the lion's share of the 20 million kilo tender. This tender was subsequently cancelled, and at a fresh tender last month teas were sold at Euro 1.70 (Rs. 174) per kilo, which producers say is below the cost of production of some of their teas.

The Sri Lanka Tea Board's Acting Director General Hasitha de Alwis confirmed that Sri Lanka had lost more than Rs. 400 million. "All arrangements were finalised for the sale at Euro 1.90 per kilogram, but due to undercurrents some of the exporters had agreed to market at Euro 1.70 per kilogram resulting in a loss of more than Rs. 400 million," he said. "It was unfortunate that we could not capitalise at a time when Libya had already agreed to purchase the tea at a higher price," he said.

Mr. de Alwis also said that Sri Lanka had gained a contract to supply an additional five million kilograms of tea as India had been black-listed for the past three years and this would be the last year that Sri Lanka would have this opportunity as India would be re-entering the market next year.

Merryl Fernando, Chairman of the MJF Group - producers of Dilmah tea and one of the main players in the tea industry said that the consortium in vying to snatch the business of other exporters, had sold the tea for "ridiculously low prices and depressed auctions and hurt producers and other exporters seriously". He said that while his company would not be able to make the margin hoped for, "this tender has been an extremely bad experience for us and we will never again participate in any tea auctions".

Mr. Fernando said that the climate of undercutting prevalent in Sri Lanka was resulting in unnecessary losses for the country. "When Libya was buying from India, they would buy a small amount of tea at a fair market price. They would then come to Sri Lanka and purchase a majority of their requirements at prices far below the market price due to unethical practices among the exporters", he said.

Members of the Selimpex Consortium did not want to comment until tomorrow. Meanwhile the Ministry of Plantation Industries together with the Treasury Department will meet with tea producers tomorrow to formulate policies to bring financial relief to tea producers and exporters who are suffering setbacks in view of a possible war with Iraq.
(Pls. also see Releted story)

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