Tea talk

CAN tea brighten the fortunes of Sri Lanka? This seems to be the thought weighing on the minds of stakeholders as Ceylon Tea gets the world’s first ‘Ozone Friendly’ tag. However, issues of high productivity costs and labour charges exist, making maintaining the positive momentum a challenging one.

According to the Central Bank Annual Report, the contribution of tea exports to total export growth was 15.6 per cent, followed by minor agricultural products (6.7 per cent), rubber (5.9 per cent) and coconut (0.6 per cent). Earnings from tea exports increased by 16.1 per cent to US$ 1,375 million, due to both increased volumes and high prices.

Ceylon Tea continued to fetch the highest prices in the major auction centres of the world in 2010 mainly due to the fine quality of Ceylon Tea and the high international demand for orthodox tea. The average export price of tea rose by seven per cent to US$ 4.38 per kg in 2010. There was a shortage of black tea in the international market due to drought conditions and high local consumption in other major tea producing countries. However, in Sri Lanka, tea production surpassed historically high levels in 2010, owing to overall good weather, timely application of fertiliser and good agricultural practices. As a result, export volume of tea increased by 8.5 per cent to 314 million kg in 2010.

These positive results have many bullish about the tea sector. However re-negotiation of the Memorandum of Understanding between the Tea Board and trade unions is still underway setting the stage for possible salary increases. Moreover, some of the trade unions want to dismiss the production-based pay mechanism now in place. This could seriously undermine efficiency, even though plantation workers are one of the most improvised sections of society.

Sri Lanka remained the third largest tea exporter in the world after Kenya and China in 2010. The Middle Eastern countries and the Commonwealth of Independent States (CIS) continued to be major destinations for Ceylon Tea exports in 2010. However, labour living standards remain low, with rampant social problems among plantation workers raising questions over sustainable and inclusive development. Profits from booming tea exports need to be funnelled into developing these communities if the true value of increased revenue is to be realised.

To encourage high value added tea exports, the Government increased the cess on bulk tea to Rs. 10 per kg with effect from 23 November 2010. Funds also have to be used for research and development. From around September 2011, cess money will be used for promoting the tea industry, while the Sri Lanka Tea Board will apply for international registration under GI of TRIPS, which falls under the purview of the World Trade Organisation (WTO). Discussions are also underway to promote Ceylon Tea in Iraq.

All these positive advances have to be balanced with the situation at home. One point is negotiating a mutually-beneficial salary scheme with the workers while the second point will undoubtedly be to ensure that the increased revenue be tied into a more inclusive development process.