Govt. considers bailout loan package for tea producers

Hiran H.Senewiratne (hsenewiratne@gmail.com)

The government is now in the process of considering a loan package for all tea producers, to salvage the sector from the on going trade union action and global market price impact on the industry.

The trade union action in tea estates is causing a major crisis to the sector with the sanction imposed against Iran by the USA and the currency crisis in Russia adding insult to injury.

Therefore, the Sri Lanka Tea Board and the Ministry of Plantation Industries were looking at releasing a loan package to tea producers in the country, Sri Lanka Tea Board sources told the Daily News business.

The government will release the package/loan which would be calculated to the value equalent to one month’s working capital of a factory that operates. This amount would differ from factory to factory based on its capacity, Tea Board sources said.

Director Lanka Commodities Brokers Limited Jehan Algama told Daily News business that Sri Lanka accounts for 65 percent of low grown tea production in the world. Russia’s economic crisis has caused a heavy impact on Sri Lanka’s low grown tea. As a result low grown tea prices have fallen drastically during the recent past, he said.

He also said that in recent months the Russian Ruble has depreciated by some 50 percent compared to the US dollar while the international credit rating agency Standard & Poor’s has said there are possibilities of Russia’s credit ratings being lowered further.

Sri Lanka exports around 300 million metric tons of tea annually while some 200 million metric tons from this is low grown tea. Around 40 percent of this low grown tea is purchased by Russia.While Russia’s economic crisis has decreased the amount of tea the country buys from Sri Lanka, this has caused the price of low grown plucked tea to fall from Rs. 85 per kilo to Rs 70 per kilo.

Algama also said the recent statement by US President Barack Obama to relaxed Iran sanction would also impact the tea sector because Iran being the fourth largest oil exporter oil prices would further go down. This would further affect Sri Lanka tea exports to Iran, he said. He added that tea manufacturing has come to a standstill due to the work stoppage in tea estates. Due to this issue tea has not arrived to the Colombo tea auction for more than 10 days.
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