Archives

Kiriella says government has moved to lessen impact: Seventy percent of tea remains unsold at auction

by Chandani Jayatilleke and Channa Kasturisinghe

The Gulf war impacted on the Sri Lankan economy with a thud yesterday as the Tea Auction saw nearly 70% of the produce unsold.

Whatever Tea that was sold was also taken at prices significantly below last weeks in this first auction after the United States and its allies struck Iraq.

This will cause severe cash flow problems for the industry, which is Sri Lanka's largest agricultural export, brokers and producers said.

Prices tumbled from Rs. 15 to Rs. 20 per kilo and Brokers said that there was no buying interest at the auction at all as buyers kept away from purchasing large stocks. Cheaper low grown leafy teas decreased by Rs. 10 per kilo and small leafy grade by Rs. 15 per kilo while "below best and poor grade teas remained unsold. Teas remaining unsold were without any bids," a spokesman for the John Keells Ltd said.

It is a double blow because the industry had reaped a record harvest this year and already warehouses were full of unsold tea.

Industry analysts report that tea production in February was a healthy 22.7 million kg, an improvement of 1.2 million kg or a 5.6% growth from last year

Plantation Industries Minister Lakshman Kiriella said yesterday that the Government has taken measures to minimise the damage by providing additional storage space. "We have made arrangements to provide about one hundred thousand square feet storage facilities to store unsold teas at the auctions," he told the Daily News. "We have also instructed the banks to give credit to private tea factory owners who face cash flow problems. Earlier we took measures to pay on behalf of the tea factory owners 50 percent of interests they have to pay to banks for the working capital loans they obtained," he pointed out.

"Another measure we have taken is to offer a subsidy for growers for plucking lesser amounts of green leaves," the Minister said. He said the Government has provided financial assistance worth Rs.1.5 billion worth to private tea factory owners. "This time, we have also taken measures to help them. We have already approved about 40 applications for financial assistance," the Minister said.

He said some factory owners have lost their creditworthiness and banks are refusing to grant them loans.

More Tea is expected to be harvested in the coming months.

Chairman Colombo Tea Brokers Association Ishan Fernando told the Daily News that the value of about 2.4 million kilograms of unsold teas amounted to Rs.350 million. However, the impact on the high grown sector at today's tea auction would be much less as it mostly caters to markets outside the Middle East.

The CEO of the Tea Association of Sri Lanka Niraj de Mel said that commercial banks have advised some exporters that they will not be granting `packing credit' covering orders to the Middle East with immediate effect. The Bank of Ceylon and NDB have already issued such directives to exporters.

However, a senior official of the Bank of Ceylon told the Daily News that no such directive has been issued and banks are only watching the present situation carefully. "We consider each exporter's case separately in lending," he said.

www.crescat.com

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager