Business

Tea industry slams fertiliser ban

  • Exports to be nearly halved
  • A planned expansion of the ban would have been feasible
  • Tea quantity at weekly auction drops

By Shenal Fernando

The Planters’ Association of Ceylon (PA) at its 167th Annual General Meeting (AGM) yesterday (30 September) predicted a 40% drop in tea exports next year due to the anticipated drop in tea production, driven mainly by the Government’s policy to ban the import of chemical fertiliser and agrochemicals.

According to the PA, due to the sudden ban on chemical fertiliser, they expect a severe loss in tea crops, which shall result in the constriction of export earnings that will become apparent in as early as the end of 2021.
The PA claimed that it doesn’t oppose a gradual and a carefully planned expansion of organic agriculture in Sri Lanka, but believes that the manner in which the current transition to organic agriculture has been managed is not feasible considering the practical realities.

Meanwhile, during the AGM of the Colombo Tea Traders’ Association (CTTA), Chairperson Jayantha Karunaratne slammed the Government’s decision to ban fertilisers which has adversely impacted the tea industry.
Karunaratne stated that the decision by the Government to ban the use of chemical fertiliser and agrochemicals, effective since May 2021, is of grave concern to the tea industry. This matter has been discussed at many forums and the CTTA has addressed a communication to the President and other relevant authorities related to the industry, he added.

“Collectively, we are of the view that the decision to ban the use of chemical fertiliser and agrochemicals has begun to show a negative impact on the industry. The quantity of tea offered at the weekly auction has shown signs of decrease, whilst the quality characteristics have recorded a noticeable decline, as well,” Karunaratne noted.
On the other hand, PA Chairman Bhathiya Bulumulla commented: “Ideally, this ban should have been carried out in a phased out manner in order to provide stakeholders with an opportunity to prepare themselves with suitable alternatives which are recommended by the agri research institutes.”

According to Bulumulla, once a market is lost, it is incredibly hard to recover it – a perfect example being the problems faced by the industry in recovering the lost markets following the 2015 glyphosate fiasco – and establishing new markets takes time and precious resources, he added.

Commenting on the Government’s decision to suddenly transition to organic agriculture Kelani Valley Plantations, Talawakelle Tea Estates, and Horana Plantations CEO Roshan Rajadurai stated that the organic tea market amounts to less than 1% of the global tea market and organic tea is subject to a strict certification process requiring a plantation around three years to adequately comply. He further stated that based on studies, transitioning to organic tea results in 30% less yield, which requires over 100 additional man-days per hectare, and results in over a 70% increase in production cost. Therefore, considering the limited market available for organic tea, this organic strategy is not commercially viable.

According to the PA, in 2020, Sri Lanka produced 278.5 million kg of tea, of which 265.6 million kg were exported, generating an approximated export income of $ 1.24 billion in 2020 down from $ 1.35 billion and $ 1.43 billion in 2019 and 2018, respectively.

Conversely, during the first seven months of 2021, Sri Lanka has generated $ 766 million in export earnings from tea, which represents a 7% YoY increase compared to the equivalent period in 2020.
However, this increase was largely due to favourable weather conditions and the low base figure in 2020 due to severe droughts.

Therefore, according to the PA, a more valid comparison would be to compare with the equivalent period in 2019, which shows a 4% decrease.

The exporters are currently faced with new challenges in addition to high volatility exchange rates in Sri Lanka. In the recent past, most of our main importing countries have depreciated their currencies. The cost of packing materials has gone up by 30-50% and freight rates have gone up four to five times more. Additionally, all stakeholders’ cost of operation has gone up due to the current pandemic situation.

Tea industry slams fertiliser ban