11th January 1997

Uphill task for tea industry this year

By Mel Gunasekera

Sri Lanka is once again tipped to have become the largest exporter of tea in 1997, overtaking Kenya.

But a drought forecast for 1998 may again push Sri Lanka back, industry analysts say.

By the end of September 1997, Kenya had exported only 141.2 mn kgs compared to 186.7 mn kgs up to September 1996.

Though 1997 final statistics are yet to be released, Sri Lanka is said to have exported around 250 mn kgs of tea during this period, a Tea Board official said.

Sri Lanka exported 233.6 mn kgs in 1996, compared to 244.2 mn kgs exported by Kenya in the same year.

The drought in Kenya has also led to a shortfall of around 40 mn kgs of tea in the world market.

"This is only a short term victory. Kenya will soon catch up in 1998, as they have a very young terrain, good climate and excellent soil," a leading tea planter said.

"In the early 1970s, Kenya was a fledgling producer, and we used to treat them with utter contempt. Now the situation is different, and they will catch-up with us this year," he added.

Rising tea prices have made the plantation sector attractive for stock market investors, with foreign investors in particular showing keen interest.

Recent tea auctions have fetched high prices for Ceylon tea.

"A majority of bulk tea was sold at Rs. 145-Rs.150. The B.O.P category fetched around Rs. 137, and CTC teas (PF1 category) recorded an all-time high of Rs. 188," Forbes & Walker Tea Division Director Lal Alewattegama said. "The tea industry is in for a good run and if the marketing and quality improve, we are in for a good season," he said.

Despite the fear of El-Nino hanging over our heads, he was confident that prices would continue to be high, depending on the supply and demand of tea in the world market.

The Tea Research Institute and other private companies have warned of the danger of El-Nino. The TRI has advised planters to use coir fibre pith to retain moisture content by reducing the direct exposure of soil to sunlight.

SocGen Crosby Securities Research predicts that tea production may fall to around 225 mn kgs if Sri Lanka is significantly affected by El Nino. In the El Nino years of 1983 and 1992 Sri Lanka has had more months with below average rainfall and tea production had fallen. However in 1987, another El Nino year, the tea industry had escaped relatively unscathed in terms of production volumes.

In a related development, India signed an agreement with Pakistan recently to supply one million kgs of tea. Pakistan previously bought large amounts of orthodox tea from Sri Lanka, but has since switched to CTC tea (used in tea bags), imported from Kenya. This may sound insignificant but industry observers say India is quietly encroaching the Pakistani market, whose consumption of tea has risen considerably over the years.

Share certificates: freedom for plantations workers

Plans to place shares gifted to plantation workers in an Employees Share Trust may not materialise.

The government has instead decided to hand over the share certificates to the workers themselves, a top government official told The Sunday Times Business.

"We decided to treat the plantation workers as equal to the management. The workers have earned the shares. So the government is keen that they should have them in their possession to do what they like, even to sell them off," the official said.

The share certificates of 14 of the 23 Regional Plantations Companies (RPCs) are now ready for distribution. The balance would be presented as and when they are ready," the official added.

The certificates were to be ceremonially handed over by the President, on January 5. Each eligible RPC was to send 15 representatives for the ceremony, from which one would be nominated to receive the certificates from the President.

However, difficulty in locating a suitable venue has led to its postponement till the end of February. The date may be brought forward if matters are expedited. Due to the large numbers of plantation workers in each company, they are sometimes entitled to only small numbers of shares (under 100 shares). This was one of the reasons a share trust was originally contemplated, officials said.

In the last budget it was proposed to transfer the workers shares to a trust to provide maximum benefit to them. The budget allocated Rs. 200mn as capital contribution to the proposed trust to be managed by the Labour Commissioner.

The trust was expected to manage the shares belonging to employees and offer a variety of benefits such as medical insurance, housing, mortgages using the income of such shares. Employees who hold shares of already privatised companies were to be given the option of depositing their shares to this trust to obtain membership. Members were also to be permitted to sell their shares to the Trust if they wished to, thereby forfeiting their membership.

Mind Your Business

By Business Bug

Tender matter

Much has been said about the Secretary boy since the recent train tender went off the rails.

The greens are interested in making political capital out of the issue saying he was being victimised for being honest.

But the Secretary boy would have none of it. He will leave when his time comes and he doesn't want a hue and cry about it.

And who is the successor? The Boss of the Big Bank is not interested any more and Pee Bee will replace Bee See we hear.

No more!

There may be cut-throat competition in the trade and expansion maybe difficult but the communication industry is still very lucrative.

This is why there were several applications for the setting up of new networks.

Now, the guideline is that landline networks will be encouraged but there will be no more cellular networks, at least for the time being.

Lend with care

Recently there were renewed assurances that the two major state banks will not be privatised.

While that maybe so, there will also be new guidelines for these two banks when lending funds to the state sector.

The viability of the state sector enterprise would be assessed as any other private banker would do and no more would the rupees be doled out just because the borrower is a government institution.

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