Sri Lanka's tea industry has been forced to raise funds for tea promotion and marketing through a new export levy of Rs.3.50 a kilo as the money collected from the existing tea cess of Rs. 4 is controlled by the Treasury and not being disbursed adequately to develop the industry.
The cess now goes to the Consolidated Fund at the Treasury and is then disbursed among the Tea Board, Tea Smallholders Development Authority, Tea Research Institute and plantation companies. Earlier it was collected by the Tea Board.
Plantations Minister Mahinda Samarasinghe told the Business Times recently that delays and inadequate disbursements are hindering factory modernization work, tea promotion and marketing in highly competitive world tea markets.
Due to the shortage of funds, he said all stakeholders including tea exporters and Planters Association members have given their consent to the new tea promotion and marketing levy which became effective last month. The marketing and promotion campaign will be carried out with the assistance of tea exporters and the money collected from the levy will be spent for the campaign.
The Minister noted that assistance will be provided for value added tea exports. The new evy of Rs.3.50 a kilo on tea exports has been introduced to raise Rs .1 billion a year, he said. "This is private sector money and they will decide how to spend it,” he added. The Minister said that the country has lost its tea markets in Pakistan, Egypt and several other countries due to the lack of proper marketing campaign.
This situation cannot be allowed to aggravate and Sri Lankan exporters should find new markets for Ceylon tea. The main markets for Ceylon tea are Russia and other Commonwealth of Independent States, and the Middle East. Other important but smaller markets are the Far East, Europe and North America.
Planters Association Chairman Lalith Obeysekera told the Business Times that the Plantation Industries Minister has given them an assurance that the exporters will not pass their additional cost from this levy to producers and therefore it will not affect the market price. The new levy increases exporters' tax bill to Rs. 7.50 rupees per each kilo they ship. "There was, and still will be some apprehension whether the funds that are been raised by the new levy will be made available as promised. But we have received tangible assurances from the officials that they will," he said. Therefore he noted that the additional levy would not destabilize the market price for this commodity.
Melsna Tea Ltd Chairman Anslem Perera pointed out that that the money collected from the new levy will only be used to promote Ceylon tea. Individual exporters will have to carry out their marketing and promotion campaigns on their own using their funds. With this initiative, all the tea exporters will be benefited, he said adding that currently Ceylon tea fetches the highest price of US$3.50 a kilo and this could further increased by proper promotion campaign.
The industry had been virtually starved of funds for overseas tea marketing in recent years and has been expressing concern especially on mega promotional campaigns by other tea producing countries. The new export levy aimed at overseas tea promoting will be levied for five years and reviewed after two years to evaluate its effectiveness. The Tea Board will monitor the spending of funds and it will also act as a facilitator, Minister Samarasinghe said.
A 20-member committee comprising representatives of all stakeholders has been appointed to implement this aggressive marketing cum promotional strategy of Ceylon Tea. This committee will manage the fund directly under the supervision of the Sri Lanka Tea Board, (SLTB).
This export levy will be collected at the point of approving the Customs declaration form, and the funds will come to the Tea Board and it will be collected in a dedicated account of the Tea Board, said Hasitha De Alwis, Director Promotions at the SLTB.
Mr De Alwis said the committee has drawn up a plan to spend $50 million over a 5-year period and will soon issue a tender for global advertising agencies to submit proposals for ad campaigns. The SLTB plans to increase the share of value added tea exports to 65 % from the current 41 % within the next five years and boost total export revenue from tea to $5 billion by 2020 by increasing the amount of value added exports, he said.
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