Tea Board Chairman details diverse dimensions of Lankan cuppa

Sri Lanka Tea Board Chairman Lucille Wijewardena – Pic by Lasantha Kumara

Ceylon Tea, that most famous brand which has offered a well-known ‘cuppa’ for over 150 years, today produces 350 million kilograms annually and employs over 2% of the population of Sri Lanka. It has become the most important agricultural commodity, serving as a key export earner of more than $ 1 billion in revenue for the economy per annum. The tea industry is inherently linked to the very fabric of Sri Lankan society and has made an impact on the social, cultural and economic spheres, having withstood many challenges over the years. 

The Daily FT sat down with Sri Lank Tea Board Chairman Lucille Wijewardena for a detailed discussion on the current status and way forward for the country’s tea industry. Following are the excerpts of the interview.

By Charumini de Silva

Q: Could you give a snapshot of the current status of Sri Lanka’s tea industry?

A: At present the industry is producing around 320 million kilograms of tea but the industry requirement will be much more than this as Sri Lanka is now looking at new markets. 

The industry has to have a supply because all of our main buyers have told us that they are concerned. The demand is increasing but there is insufficient supply. For example, a top Russian buyer who was in Sri Lanka recently categorically pointed out that if we don’t provide them with a plan as to how we are going to increase our supply they will have to look to other teas in Kenya and various other countries. 

Now the problem is that the industry is not replanting tea due to the high labour cost and various other factors, but having said that, tea prices have also gone up. I think it is not fair for them to always say it is not possible to replant, especially the Regional Plantation Companies (RPCs) which should also take this responsibility seriously. However, some of the RPCs have already commenced replanting very successfully and they are having extensive replanting programs particularly in the Ratnapura, Matara and Galle districts as well as in mid-grown areas like Pussellawa. 

The problem is mainly with the high-growns as the teas in these areas are very old and the yields are low. Sometimes the yields are as low as 600 kilograms per hectare. I suggest that they cut down on the area and have major in-filling programs. 

Major in-fillings are a mechanism where you fill in one block with a minimum of 1,000 plants. The tea plucker has to move from one bush to the other, then the productivity goes down. Ideally you should have 13,500 plants on a hectare, but at least if they can go up to 10,000 bushes on one hectare it is then economical, viable; it will give a good yield and the cost of production will also come down. 

To get this initiative going I think we have to give a ‘carrot and stick’ or both. We give them a subsidy at the moment but I think we should give a little more than a subsidy, like free plants, as we have identified that the non-availability of plants has been a major issue for most companies. We are now planning to do a nursery for 15 million plants during this year, in collaboration with tea smallholders and the Tea Research Institute (TRI). 

At a cost of around Rs. 20 per plant, we are now in the process of finding a financial plan as a priority. We are quite keen to plant 1,000 hectares of tea for the next season in 2019 and to do that we need to get the nursery project implemented as soon as possible. 

At present, most people are using the battery plants — small two-inch substandard plants where the root system is very weak. When you plant a tea tree, it is for 35-40 years and it is a crime to have a substandard nursery plant. Our aim is to provide a proper nine-inch polybag where the nursery plant is planted in. At the moment we are in the process of discussing some of the important factors such as how to do it, where to do it, particularly considering the soil factor and the methodology of doing it. 

We think that the TRI estates can be used for this project. It is very important to plant 1,000 hectares of tea and also help the industry by giving it the mechanisation. I think it is important to facilitate such things. 

Q: Since taking up the chairmanship, what were the key issues that you discussed with the industry?

A: Yes, I had discussions with all three major stakeholders in the industry. One was the tea factory owners, RPCs and tea traders. I work very closely with all three of these parties; in fact I am in touch with them on a daily basis. 

Although the Tea Board is the regulator, we are not a police unit; we have to hold hands with them and walk. So far it has been quite a successful exchange of opinions and ideas to uplift the industry. The main concerns raised by the tea factory owners were that they think the Tea Board is too strict and that we should understand them more, which I believe we should. I think we should work together. It is not that they are perfect, but as a regulator we should be perfect and appear to be perfect. 

In terms of the exporters, I must say they are very well-geared and it is on top of the line. However, I have mixed feeling about the RPCs because I was an ex-RPC person for the longest time. I think they have the capacity to do much more than their current capacity, but not all RPCs. Around 50% are doing their job but the other half can do far better than this - so that is a cause for concern. 

The RPCs need to be more entrepreneurial, up their manufacturing practices and replanting. I have noticed that even at highly recognised entrepreneurial companies, plantation is run as a separate unit, which I believe has led to many issues within the industry. The entrepreneurial thinking has to come to the plantations. 

Q: What are the major challenges you foresee in the immediate future?

A: One major concern is the shortage of the crop and the adulteration by various producers. One of the reasons they have started this adulteration is because the quality of the green leaf has come down and in order to mitigate this situation, they add sugar. 

The quality of the leaf has come down but even the smallholders are not replanting. Therefore, there is a major challenge in getting all RPCs and smallholders to replant. As a responsible body, I think we should help them replant particularly by providing plants and the mechanisation of planting.  

Q: What’s your take on using weedicide for commercial agriculture? 

A: Japan is the top weedicide and pesticide user in the world, even above India, but their farmers are the most educated and that is the differentiation. The Tea Board as a responsible body I think should also have a massive campaign not only for tea but for all crops on the use of weedicide for commercial agriculture. We should initiate a campaign like the anti-dengue program for the entire country covering areas from responsible importation to the usage on the ground. 

I think it is imperative to educate our farmers as well as consumers on the correct usage of weedicides and pesticides through television and social media. I propose that we facilitate such an awareness campaign. 

Q: Could you shed light on the current status of the glyphosate issue?

A: At the moment there is no finality with the issue. I hope it will be finalised sooner rather than later. We are eagerly anticipating that the ban on glyphosate will be lifted soon. Any weedicide is harmful but glyphosate is the least harmful — even in Japan, the US, Australia and the EU it is the weedicide of choice. 

I hope that the issue with glyphosate will be sorted out. It was not only affecting the tea industry but it very badly affected Sri Lanka’s economy. Having said that, I think we should also take some responsibility in educating people on how to use glyphosate and weedicide. So far I think the tea industry has made a loss of about Rs. 80 billion. 

Q: To mitigate such losses in the future, how should the industry advise the Government on unscientific and short-sighted policies?

A: My observation is that there needs to be an independent scientific committee which makes decisions and recommendations for the Government. It is critical that the Government doesn’t take ad-hoc decisions as it impacts the entire economy.  

Q: Purity, the adulteration of tea and refuse tea are some ongoing issues which the Tea Board has been fighting for years. What steps have been taken to address these issues?

A: Around 54 companies were alleged to have practised sugar adulterations, but there is a question on the methodology used by the Tea Board as the TRI has a different view. To address this issue, we have now imported a part of a machine where we can measure the sugar content of made tea and establish a baseline. 

The people who are alleged to have found sugar adulterations claim that the Tea Board has not established a scientific baseline. By next month we will be establishing a baseline on the sugar content of black tea or made tea, at the Tea Board level as well as the TRI level. Upon agreeing with the stakeholders on the baseline, if the alleged factories are found guilty of sugar adulterations, we can directly cancel those licences. 

There is a huge myth about so-called refuse tea. The story behind it is that when you clean the tea according to colour the stems are thrown into the last box which is remaining. It is not refuse or kasala tea, it is perfectly good tea which has a good flavour and red colour. There are 30-35 kg of refuse tea annually, which amounts to more than 10% of the production. 

I think there is a clear need to decriminalise the myth behind refuse tea. As a result of people thinking that tea should look black, they mix other additives. There is nothing illegal about using refuse tea for consumption, but its use is illegal according to the Tea Board export regulation market. The crude fibre content should be less than 16.5% to export. If we can educate our people that refuse tea is a good product the whole country can enjoy a perfect cuppa tea.    

Q: What new efforts have been taken to ensure the quality of Ceylon Tea?

A: As you know, we are getting a very high price at the Colombo Tea Auction. Our teas are generally of high quality and no one can deny that but there are new regulations being introduced for MR (Maximum Residue) levels. Therefore, the industry needs to take proactive measures to check these MR levels before they are detected by someone else. 

We have already told the brokers and exporters to get their own testing equipment so that they would be in a better position with their export standards. At the moment we have a problem with Japan as they don’t have a MCPA and they have slammed a default value and then the US and the EU have their own levels. 

So in general all these countries will be more stringent on their MR levels; hence we have called on the industry to be ready. I think rather than us reading or banning the teas, let the trade practice self-regulation; that is a more effective way of regulating the industry. 

The capital investment to get this equipment, which is around Rs. 50 million, is not so significant when you consider the important impact it adds to the industry. I think every broker should have it so that they could charge their clients a reasonable amount. However, in the initial stage we will look at how we can assist them within our rules. I must comment that both brokers and exporters have responded positively to this request as they have also recognised its importance.    

Q: What’s the latest progress of the global marketing campaign?  

A: The global campaign is essentially a generic promotion of Ceylon Tea and the lion logo. I think the digital campaign for this is very important so I think we will take that route as well. At the moment it is being developed and once it is in a draft form we will have to re-discuss it. 

The global campaign is likely to kick off before the end of the year. In addition to the generic promotion, we have launched a brand campaign where we assist exporters with 50% of cost for brand promotion. We have already started the process for the Rs. 1 billion brand promotion and the campaign will hopefully start by July. The promotional fund has a total of Rs. 6 billion at present, out of which Rs. 3.5 billion will be used for the global campaign. 

Q: How would you describe the support extended by the Plantations Ministry?

A: We have to understand that the Tea Board is working on a Government regulated place and we are tasked with coming out with solutions to best serve the tea industry of Sri Lanka, which is the top foreign exchange earner of our economy. We cannot change the systems in place, but within that system we are doing the best to strengthen the industry. The ministry is quite helpful at the moment. 

Q: Given the volatile situation in the Middle Eastern region, Russia and Japan, how effective was is to venture into new markets and were those efforts successful?

A: After the issue we had with Russia they have once again resumed purchases from Sri Lanka, although maybe not at the same level. The Middle East also somehow needs our tea as they are used to the taste of Ceylon Tea. Therefore, the market is going on in some form or another. 

Now, in Iraq it may be going over land and Libya buys the lowest of the tea possible. The entry of the Chinese has made the whole equation very different as they have started to fall in love with our black tea. We are hoping that the industry will need around 400 million kilograms of made tea because China is in the process of becoming a major buyer. During the past three years, China has increased its buying of black tea tremendously, so much so that we have to think of increasing our production capacities at least up to 400 million kilograms. 

The Chinese market is huge and if they are even buying 1% of high-end black tea, our tea equation can change dramatically. In addition to the traditional black tea markets, we are focusing on South American countries, which include Chile and Argentina.  

Q: What are the Tea Board’s plans for 2018 and beyond?

A: The Tea Board was more into the promotions and regulation part of it, but I think we should now go into backward integration support to ensure that there is replanting, sufficient tea for exports and maintaining standards. 

Now the promotion part is done by the private sector with the Tea Board. I think the private sector is doing a good job on that, hence we must take on backward integration to support the grower to ensure we have 1,000 hectares of new tea in-filled annually for the next five years.  

Q: In terms of export earnings, what are the targets set for the industry this year?

A: The projection for this year is Rs. 260 billion. The country earned a highest-ever Rs. 233.3 billion from tea exports in 2017. In order to predict export growth beyond 2019, the industry will have to commit on a firm in-filling and replanting program.  

Q: Is there anything else you would like to emphasis to the industry?

A: At one point, there were very negative sentiments about the pricing, problems with the labour pay and cost of production but with the new markets that picture has changed for the long term. So they can be very happy about the future of the industry, but replanting is a must to sustain this momentum.