Tea prices to recover

Ravi Ladduwahetty

Sri Lanka’s tea exports expected to recover by February 2009 with the nett sale averages are expected to raise to Rs. 270 per kilo vis a vis the present Rs. 220.

“Sri Lanka’s tea exports to the key markets- Iran, Middle East, Russia, and Turkey plummeted to an all time low of Rs. 190 in October which has slightly improved to Rs. 220 by the time of the last auction last week and it should stabilize to Rs. 270 by February 2009,” Tea Exporters Association (TEA) Chairman Jayantha Keragala told Daily News Business yesterday.

The TEA Chairman also said that if the Government could depreciate the rupee further to around Rs. 120 to the Dollar which will save the tea industry or can have a two tiered exchange rate, one for exports and the other for imports similar to a financial adjustment made during the tenure of Finance Minister Dr. N.M. Perera.

One of the other tangible measures for saving the tea exports to Iran is to have a Government to Government deal where the Sri Lankan exporters receive their revenues in rupees and where the Iranian importers receive their money in their currency (Tuchman) which will prevent them from searching for dollars at black market rates, he said, adding that the trade balance between the two countries were heavily weighed towards Iran on account of the oil imports.

He conceded that there was no reduction in the demand in those importing countries but settlements were difficult as all the countries had devalued their currencies which were affecting the local exporters getting their payments on time. Turkey has devalued their currency by 30%, Russia by 26%, Iran by 8-9%.

Though there has not been any devaluation by the Middle Eastern countries, the crunch for the US Dollars exists in those markets.

One of the further drawbacks is the Central Bank regulation of the 120 day limit on the foreign exchange receivables in the backdrop of the foreign exchange delays of the buyers, he said.

Chairman of the Planters’ Association and Director of both Kotagala and Agrapathana Plantations PLC Damitha Perera said that what the estate companies needed right now was assistance in working capital, low interest loans, deferment of the capital payment by a year and moratoria on the lease rentals.

“We were also zero rated status for VAT where we were able to recover the input taxes but now we incur around Rs. 30 million extra costs to each of the companies which make it a total of Rs. 630 million for all 21 companies,” he said.