Tea promotion levy to be split equally between promotions and replanting: Navin

• Levy revised from Rs. 3.50 to Rs. 3.00 per kilo of exports
• TEA says Minister promised 50% reduction beginning of the year with complete write off by year end
• Says exporters can carry out promotions on their own
• TEA not confident of global promotional campaign taking off on time

By Chathuri Dissanayake  

The Government has decided to allocate 50% of the tea promotion and marketing levy to fund replanting, while the rest is to be allocated for promotional activities, Plantation Industries Minister Navin Dissanayake said. 

“The split will take effect from August, and we hope the replanting will increase replanting from current 1% to about 2% with this fund infusion. The amount is a small amount, and the exporters can afford to give it,” Minister Dissanayake told Daily FT. “We have to give larger subsidies to tea smallholders to encourage them to replant, and we need funds to give the subsidy.”

The decision also approved a revision of the levy from Rs. 3.50 to Rs. 3.00 per kilo. The Tea Exporters’ Association (TEA) welcomed the move by the Government to reduce the tea promotion levy as “a step in the right direction” but contended it was “too little.”

The Minister, proposing the move, told Cabinet that a reduction was necessary as production costs are set to increase “as a result of the direct and indirect levies and the economic service charges made.” The Minister obtained approval to instruct the Legal Draftsman to draft legislation to revise the tea promotion and marketing levy as Rs. 3.00, per kilogram and issue a Government Gazette to be presented to Parliament for approval.

“We feel it’s too small, but in the right direction,” TEA Chairman Jayantha Karunaratne told Daily FT.

The revision comes after lobbying by tea exporters to gradually remove the levy, as the fund has not been utilised for promotional purposes as outlined in the gazette setting out the Sri Lanka Tea Board (Collection of Levy for Tea Promotion and Marketing Strategy) Regulations, No. 01 of 2010.

However, the levy will not be completely written off, Minister Dissanayake said. He noted that the fund is for overall industry development, but highlighted that 50% of the levy is still allocated for promotional campaigns.

The fund at present has accumulated over Rs. 5 billion, with Minister Navin Dissanayake having to battle with former Finance Minister Ravi Karunanayake to prevent it being taken over by the Consolidated Fund.

As administrative challenges have caused delays in kicking off the promotional activities, TEA asked the Government to terminate collection of the levy last year. TEA claims that the Minister in charge and the Tea Board had given assurances to do so by the end of this year, with a 50% reduction at the beginning of the year. 

“The Minister agreed with us on the reduction of 50% immediately and eliminating the levy completely by end of the year. The Tea board is aware of this,” Karunaratne said. 

“We understand it is in the correct direction, but our request was to initially reduce to half and eliminate this 100 % by the end of the year, as we did not see much progress in the last nine years, and feel exporters can do much better if this money is spent by them directly to increase sales.” 

TEA is also sceptical of the tea global campaign taking off in September, with different procurement hurdles and Government red tape delaying the promotional activities. The Tea Board earlier said the campaign was to be launched in Russia in August, but the Minister announced last week that the campaign would be kicked off in September. 

Highlighting the dynamic nature of markets, the exporters stressed that the same market information strategies cannot be discussed over nine years, emphasising the need to carry out timely promotional activities so that plans do not become outmoded.