Focus on CTC and green tea vital

C hairman, Tea Exporters' Association (TEA), Rohan Fernando told the Association's 15th Annual General Meeting last month, that the nagging worry haunting TEA is the deployment of the promotional marketing levy deducted from tea export revenue since 2011. This levy is a cost to the exporter and is not tax deductable. It is no doubt an issue to tea exporters. However, it is of greater concern how this revenue is deployed and the tangibles achieved by this huge amount of money for the Sri Lanka tea industry.

In the USA, the Silicon Valley earns a return of US $ 140-150 for every dollar invested. One may argue, it is difficult to evaluate the return on marketing and promotional funds in a short period of 3-4 years.

Value addition

The Tea Board, struggled to find a good advertising agency to promote out of the box proposals until recently. Sri Lanka's tea demands a higher price for its products, because it is the cleanest and the only Ozone-free tea compared to other exporting countries.

We also have more value addition in our tea exports. The credit for this cannot go to promotion alone. A major role has been played by the Tea Research Institute and exporters.

At the same time we have also lost some of the traditional markets such as the UK, Egypt and Pakistan to our competitors who have embarked on CTC teas which enables the making more cups of tea per unit weight. Therefore, the cost of a cup of tea is cheaper with CTC-type manufacture.

We have lost markets due to our concentration on orthodox teas and no spread of manufacture to cater to the CTC and green tea market.

On the other hand, no tea exporting company has reduced its profit margins but passed the cost to the manufacturers and smallholders.

After all, if they do not produce tea there would be nothing to export. Though there are government subsidies for fertiliser and grants for re-planting and new planting, the cost of other inputs such as labour and weedicides have gone up in price.

The branded tea in the export market is not at a satisfactory level. The issues have not been properly addressed. Tea is still a traditional cheap drink and a commodity auctioned in the global market.

We are still stuck as suppliers of cheap primary goods to the developed world. Europe and the USA have placed economic embargoes on countries such as Russia, Iran, Iraq and Syria which are the biggest buyers of our tea.

In turn, it has created monetary hardships for these countries and its currencies have been devalued automatically. Therefore, these countries look for longer credit facilities when purchasing our tea.

Auctions

Tea exporters and brokers have to rely on banks for cash flow for payments to tea suppliers. The cost of funds has to be financed by the brokers and their interest payment is depicted in the low auction prices and finally at the receiving end is the tea farmer.

There is little one could do to increase production due to the influence of many variable factors such as climate change, profit margins, and increase in labour charges.

The grant of Rs.5,000 to smallholders, will not reap the desired benefit in soil conservation, while costing Rs 32 million from public funds.

Soil conservation is a mammoth task as our soil has eroded l due to excessive use of artificial fertiliser and the washing off of surface soil.

The Rs. 5,000 is equivalent to five man-hour days and it is impossible to improve the soil to any significant level.

If tea exporters hope for better prices in the international market through market promotion, it will only be wishful thinking.

The spirit of entrepreneurship would not mean much unless it is put to practical grassroots level action with innovative and strategic thinking.

Gammanpila Sarath de Alwis Sirisena