SL Govt. to artificially hike prices at crisis-hit Colombo Tea Auction

  The Sri Lankan Government will intervene in the tea market (similar to traditional Central Bank intervention in money markets to prop up the Rupee) and ‘artificially’ increase prices at the crisis-hit Colombo Tea Auction, it was announced on Thursday. Plantation Minister Navin Dissanayake told reporters at a media briefing that the Sri Lanka Tea Board will purchase tea quoting higher rates aimed at pushing up prices which has taken a tumble in recent times. The tea sector has been grappling with lower tea prices compounded by less pressure from the Middle East, hit by political crises, and Russia, the two main markets.  Such intervention has happened in the past too but its a moot question such short term solutions would succeed. Some tea experts said this was not workable as tea prices have been coming down for many reasons including surplus production and the Government by stockpiling - in the hope that a reduced quantity of tea sold at the auction - will create demand is unlikely to happen. "Eventually the state will be sadddled with large stocks bought at higher-than-market rates and no one to sell at those rates, six months down the road," one expert said. The practice of market intervention is prominent in the money markets where the Central Bank intervenes to buy US dollars (when there is an oversupply) and  sells dollars when there is a shortage. Such intervention is based on the country's balance of payments, trade deficit and other considerations to ensure a smooth economy. (Sunimalee)