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Tea industry remains severely affected despite increased production during pandemic

04 Aug 2021

  • Priority should be to reach out to intl. markets for necessary promotion: Industry experts 
BY Sumudu Chamara Reopening the country was everyone’s demand during the past few months, because of the notion that resuming day-to-day operations and businesses would somehow restore the country’s pandemic hit economy. However, that does not apply to all industries, especially those who depend largely on exports, even if their operations within the country returned to normalcy.  The tea industry is one such sector, among other export industries that were affected by the pandemic, and the minimum wages issue, chemical fertiliser ban, logistics pertaining to exporting tea, and losing foreign markets, are the key reasons why the revival of this industry as an export industry remains an uphill battle. According to industry experts, the newest challenge and priority is to reach out to international markets, for which promotion is necessary.  Status quo of tea industry  To look into the present situation, The Morning spoke to the Colombo Tea Traders Association (CTTA) Chairman and former Tea Exporters Association Chairman Jayantha Karunaratne, and the Dilmah Chief Executive Officer (CEO) Dilhan C. Fernando, who noted that despite the pandemic, this year, tea production has increased, and that Sri Lanka, however, needs to focus on export markets and promote Ceylon tea to revive pandemic affected international sales.  According to Karunaratne, even though there are mixed reactions with regard to the tea industry’s situation, this year, Sri Lanka has produced about 25% more in terms of the crop, compared to previous years.  “However, exporters are unhappy that there are restrictions on the importation of packing material required for packing. The producers are very unhappy about the controlling or banning of the import of chemical fertilisers and agrochemicals such as pesticides and herbicides/weedicides. In this context, currently, we have not seen anything to suggest that the tea industry is not performing well. We have performed well; but, we can expect some problems if the current situation continues. The only thing we can complain about is the progress, or the growth, of the industry, being slow. Maybe, there is no considerable growth. To address this situation, we need to improve the quality of tea, reach out to better markets, and do more promotions. During the pandemic period, the tea trade worked very closely with the Government, the Sri Lanka Tea Board (SLTB) and also the Plantation Industries Ministry. We got permission to continue work while adhering to the health guidelines and everything happened the way we wanted.” Adding that the Government can help the industry by promoting Ceylon tea in order to bring back some of the markets the country has lost, Karunaratne noted that some of these markets are kind of stagnant, and looking for new markets. “In addition, the Government can try to reduce costs, since producers are unhappy about higher wages and also the cost of production in addition to various other issues. I think that the Government can make it simpler for producers and exporters, in order to achieve our final goal of reaching out to a bigger market share and obtaining higher prices for Ceylon tea,” he opined.  Fernando also expressed similar opinions concerning the need to pay more attention to tea exports and international markets. Adding that Sri Lanka’s tea industry is full of potential and that there are incredible opportunities in the market, he observed that there are also tremendous challenges, the most significant one being the culture of giving discounts for tea products.  He explained: “Globally, we see discounts as high as 50%, which cannot be sustained by Sri Lanka. Therefore, I guess we could say that the most significant challenge we have now is to realign our industry towards the quality of Ceylon tea, which is something that has been acknowledged for over 150 years. In addition, we have to build a strategy around it, where marketing, branding, incentives for exporters to move in the direction of value addition, and specialty teas, are focused on. Internationally, tea is recognised as an immune booster, and tea is a natural beverage. There is the premium-isation that we are seeing happening in many countries and Sri Lanka can step up and harness some of those benefits, because our tea has a premium image and is a great product. I would say that the most significant issue that we confront today is with regard to the international markets. There is a growing emphasis on the discount culture; but, we also have an opportunity with consumers that understand the importance of natural products in a context where Covid-19 has introduced consumers to the importance of food safety, natural foods and beverages. Ceylon tea, in particular, is a herb that is unique in terms of its natural purity and antioxidant benefits, Therefore, I would say that we have an opportunity. But, we need to align our industry to forego the short term temptation of following discounting and instead go with the premium image, because we can do it together when everyone stands together. But if anyone breaks ranks, ultimately, that means that they compromise the image of Ceylon tea as a whole, which may lead to losing revenue potential and value addition.”  Among other challenges are congestion at ports and the lack of availability of shipping opportunities, according to Fernando.  “India was affected by significant crop shortages due to extreme weather conditions and the Covid-19 pandemic. Africa, on the other hand, has a different situation which is associated with oversupply and prices, among other factors. But I think that in general, Sri Lanka’s tea industry has sustained itself well. The industry should focus on the strategic opportunities we have against other tea producers. I do not think that there has been a sustained problem with the tea sector, and there is no sustained decline. Opportunities for the tea sector are tremendous. But the challenge is building a strategy and defining where Sri Lanka sits within the global tea sector.”  Impact of Covid-19  The prevailing pandemic situation affected every industry in different ways, and how it affected the country’s export sector was a topic of discussion in the recent past, due to it being one of the main avenues through which Sri Lanka generates foreign exchange. Even though those who spoke with The Morning claimed that tea production had continued despite the prevailing issues, they all agreed that the pandemic has affected the industry mainly due to increased costs associated with Covid-19 related measures.  Adding that the pandemic situation affected the overall performance of the industry, because it increased costs significantly, Fernando said that tea companies were compelled to introduce infrastructure that had never been considered before.  He explained: “We have parallel transport networks and precautions that are completely alien to us. But, it is the new operating environment. I think that what is most important for us now is not become like deer caught in the headlights when we confront the Covid-19 situation but to look at the solutions we have, because we have a practical approach that has been defined by the Government and we need to work within that and set about processes and protocols. It costs money, which supports the fact that we need to reposition Ceylon tea, or we need to take our position as a country that produces quality tea as a premium product, because that is very sustainable for Ceylon tea. Also, we need to look for solutions for us to align with this new reality, and we need to confront it and stay positive. The challenges the tea industry faced owing to the Covid-19 pandemic were not different from what every other industry confronted. However, we were fortunate that the Government took a very pragmatic approach in permitting the export industries to continue. Of course, there are operational issues; but, we had the ability to resume business. Whenever there was a Covid-19 positive case, since we have a very practical approach to the management of such situations, it was less of an issue. Later, we had a number of infections which have been contained through this practical approach. Also, I think that more than anything, the recognition of the importance of the export sector has helped us, because the export sector has become more prominent as an engine of growth, especially where foreign exchange is concerned. But, acknowledging the importance of permitting the export industries to continue to operate has really helped us. The thing is, we are going to have to learn to live with the prevailing situation; but, we are also going to have to learn to allow our economy to continue.”  Due to the pandemic, the CTTA had changed their auctioning system from manual to electronic, according to Karunaratne.  “The pandemic affected Sri Lanka’s tea industry from March last year. When it started affecting the industry, we changed the auctioning system. While adhering to Covid-19 related guidelines and having obtained permission from the authorities, the tea industry, especially its workers, worked during the pandemic and tea production continued in estates. The industry did not stop and the pandemic did not affect it. Overseas however, we had problems as some markets and buyers were not working as usual,” he said, adding that due to this, they had experienced issues on and off.  “The freight issue was a result of the pandemic. Freight rates have gone up by 300-400 times, maybe even more, due to the availability of ships and the number of containers. Owing to this situation, the entire industry has changed in terms of doing business, and that is affecting all of us since everything is connected. We are managing and getting good prices at auctions, and are continuing with a lot of hard work put in by everyone in the industry,” he explained.  Minimum wages  The plantation sector workers’ struggle for a minimum daily wage of Rs. 1,000, which was perhaps the most discussed topic about the industry in the recent past, is reasonable as they too have a right to enjoy better living conditions, according to Fernando.  “There is however a discrepancy where when it comes to the issue of wages, our position would be that the society has developed, and the workers have a right to expect more, but, in order to ensure the sustainability of the industry, it is important that we ensure that we do not kill the goose that lays the golden egg,” he opined. He explained: “Where the workers are concerned, we have the disadvantage of having inherited an industry that was formed around a colonial economy and yet exists in a modern, 21st Century economy. There are nearly one million people living in estates with less than 200,000 who actually work in tea estates. These people have to be provided with facilities such as housing, education, medicines and they have a right to demand them, and we need to acknowledge them because it is that artisanship that starts with the workers that has helped Ceylon tea maintain its quality. Those are all issues that need to be addressed by the State. For this reason, there is still a dispute but I think we are significantly close to a practical and positive outcome. We are simply saying that we can connect the increased wage with attendance and productivity, because quite simply, it is not that the plantation companies are doing brilliantly. I mean, there are colossal amounts of debt, and the sector itself is facing an existential crisis because of the discount culture. Therefore, we need to be mindful of that, and we need to make sure that whilst we harness the aspirations and the workers right to get better wages and better living conditions, we also need to make sure that the sustainability of the industry is assured, so that we would not end up with an unintended outcome, which could be detrimental to both the parties.”  Organic fertiliser ban  The Morning also sought the industry experts’ opinions about how the Government’s plan to switch to organic fertilisers from chemical fertilisers – which was relaxed by Finance Minister Basil Rajapaksa recently through a gazette notification to allow the importation of certain chemical fertilisers – may affect the industry.  While acknowledging that the Government’s move is a good one as far as long term benefits are concerned, they said that the tea industry may face issues related to production. They have already commenced discussions with the Government in this regard.  “The tea industry has appealed to President Gotabaya Rajapaksa and the relevant Ministers to delay the implementation of this decision, because we feel that this is not the way to do it. Soil fertility is important and we need to improve soil conditions; however, chemical fertilisers are also needed because tea is produced and exported as a commercial product. In this context, we have appealed to the Government to either delay this ban, or to refrain from implementing it until we are ready to switch to organic fertilisers. Also, we believe that using 100% organic fertilisers will not solve the issues pertaining to obtaining the required quantity of tea. We have to use both organic and chemical fertilisers for the production of tea for exports,” Karunaratne noted.  Expressing his views as to how this move, if implemented, could affect the production process, Fernando told The Morning: “We are advocates of sustainability in every sense, and our business was established on a philosophy that business is a matter of human service and the objective behind this measure is laudable. It is the pathway to achieving that objective that we need to consider. The debates and discussions that are taking place right now are all discussions that should have taken place, some time ago. Whilst we accept that the objective of Sri Lanka becoming organic is significantly sustainable, there are concerns about the soil, which must be balanced by taking into account the current conditions of the soil and the time we require to build the infrastructure that is going to give us the means to enhance soil based organic matter. We should also keep in mind that we are also talking about a host of matters including food security. Sri Lanka has generally been at the forefront where these matters are concerned, and the regulatory mechanism that is enforced by the SLTB is a very good one. I believe that we should establish short term objectives as well as medium term objectives and eventually phasing it out to a significant extent. However, that must be tempered by the costs associated with it. I think that we have a fantastic objective; how we get there is what needs to be determined, and perhaps scientists, agriculturalists and economists can all come together and write a common policy.”  Authorities’ response  Even though attempts were made to contact Plantation Minister Dr. Ramesh Pathirana, Plantation Ministry Secretary Ravindra Hewavitharana, the Export Development Board (EDB) and several organisations working in the industry, at the time of writing of this article, they were not reachable for comment.  However, Dr Pathirana had recently said that taking into account the fertiliser needs of the tea industry, the Government would ensure that the tea industry receives adequate fertilisers. He had further revealed that the country’s tea production in the first half of this year had grown by 24%, which is the highest growth in Sri Lanka’s history.  Meanwhile, the Company Estate Reforms, Tea and Rubber Estates Related Crops Cultivation and Factories Modernisation and Tea and Rubber Export Promotion State Minister Kanaka Herath had recently said that despite the prevailing pandemic, the tea industry has the potential to grow further. He had further said that in a context where around 30% of foreign exchange is generated by the country’s plantation sector including tea, attention has been paid to revive these industries.  Amidst all forms of economic burdens, one of the biggest challenges the country is facing currently is diminishing foreign reserves, as the country’s export and tourism sectors, among other key sectors, have been severely affected by the pandemic, according to the Government and economists.  Even though the authorities are making efforts to revive the export sector including the plantation sector, industry experts who spoke to The Morning highlighted that in addition to increasing production and helping the industry locally, there is a pressing need to promote Ceylon tea internally and win international markets.


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