LBR,Tuesday 22 November 2011
Sri Lanka’s tea production, hit by bad weather and low prices is expected to reverse the current downward trend and reach 340 million kilos in 2012, while producer margins will continue to shrink due to escalating costs, Central Bank said.
The country’s national tea production during the first eight months of 2011 saw a marginal decline of 0.08 percent to 220.9 kilos compared with the same period in 2010, mainly due to adverse weather conditions.
By end this year, total national tea output is expected to touch 335 million kilos, marginally up from the 331 million kilos recorded last year on the back of favorable weather conditions and attractive prices, the bank said in a pre-budget report.
High grown tea output grew only 1.7 percent while low grown was up 0.2 percent. Medium grown tea declined by 7.7 per cent during the period January to August 2011.
However, the report noted that ‘Wage increases, cash flow difficulties of tea exporters due to the delay in realization of export proceeds from Iran on account of UN sanctions and rising shipping cost to Sri Lanka’s major tea trading nations in the Middle Eastern and North African regions remain challenges for the tea industry.’
The report cited issues such as political turmoil in the Middle East, the island’s largest tea importing region and North African countries and the likely slowdown in global consumption as challenges to the industry.
Sri Lanka ships nearly 52 percent of its 300 million kilos of annual tea produce to the Mid East in both bulk and value added form.
The industry raked in nearly USD 1.5 billion in exports last year making it the third largest foreign exchange earner to the island.
‘Therefore, in addition to efforts to increase yield, it is equally important to further promote Sri Lankan tea in both traditional and non-traditional export markets,’ it said.
The expansion of the fertilizer support program to cover the estate sector and higher tea prices at the Colombo Tea Auction (CTA), especially in the first quarter, helped to maintain production levels despite adverse weather conditions during this period, the central bank said.
However prices at the Colombo auction, the largest tea auction in the world decelerated from the second quarter of 2011 with the trend continuing in the third quarter.
The average tea price of CTA during the first nine months of 2011 also declined to Rs. 363.00 per kg from Rs. 369.00 per kg in the corresponding period of 2010.
Improved world tea production from the second quarter of 2011 added to the decline.
The State budget for 2012, presented to parliament yesterday noted that if local plantations are to increase their yield a minimum two percent new plantation needs to be maintained.
The President promised a two percent subsidy increment to tea smallholders for re-plantation from Rs 250,000 to Rs 300,000. Subsidies for new plantations will be increased from Rs 50,000 to Rs 150,000.
‘I also propose to introduce a concessionary loan scheme at eight percent annual interest, repayable in 7 years, to assist plantation companies to plant and re-plant,’ the President said.
The government is also to take back 37,000 acres of unused land from regional plantations companies and distribute among small holders on rent for 30 years at the rate of two acres each.
President said the government had done surveys of plantations and identified the land that had been lying unused since the estates were privatized in 1992 with the land leased and estate management given to regional plantations corporations.
The small farmers will also be given low cost loans to develop the land along with plants and fertilizer.