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Upsurge
in demand for Ceylon Teas from the Middle East
 There
is resurgence in the demand for Ceylon Teas from the Middle
Eastern countries. Higher Oil income and rising economic growth
have generated increased consumer spending, resulting in an
upsurge in tea imports by these countries. The exports of
Ceylon Tea to some of the selected countries of the Region
are shown below.
Although some of these countries channel part of their imports
to neighbouring Middle East countries, it has to be reckoned
that overall; the Middle East Region has substantially increased
the off-take of Ceylon teas this year. Russia / CIS countries
continue to be the largest importers of Ceylon Teas. However,
there has been no notable increase in the volume of their
off-take this year as compared with last year.
 An
analysis of the volume and value of teas exported during the
first eight months of this year indicate that the Tea Industry
has now moved up to a higher growth path. During this period,
tea exports grew by 10% over the same period last year. Most
importantly, the earnings generated by these exports totaled
Rs.95 billion, which is 38% higher compared with the earnings
of the corresponding period last year. This record performance
is the combined effort by all stakeholders of the industry,
supported and facilitated by the Sri Lanka Tea Board and other
Government Agencies connected with the Tea Sector. There has
been price decline in low-grown tea in the last few weeks.
Industry circles attribute this as merely a correction of
the unduly high prices fetched by these teas in the previous
month.
Tea consumption
The International Tea Committee Bulletin for 2008, published
recently in London, shows that the consumption of tea per
head in India and China lags far behind Sri Lanka’s annual
consumption of 1.39 Kilograms per head. Although China is
showing a steady increase in her domestic consumption of tea,
India’s consumption is virtually stagnant as shown by
the following statistics:-
These statistics clearly demonstrate that there is considerable
potential for domestic promotion of tea in India. If India
can drink an extra cup of tea per day, tea will rank as one
of the most remunerative commodities in the world.
Global financial crisis
It seems that the economies of United States and EU countries
are heading for a serious downturn. Will this have an adverse
impact on Sri Lanka Tea prices? From Sri Lanka’s perspective,
it would appear that Sri Lanka Tea Industry may be able to
weather this storm. The United States and EU countries absorb
only 10% of Sri Lanka’s total tea exports. Hence, the
recession in those countries may have only a limited impact
on Ceylon Tea prices. However, if the current financial crisis
extends to Russia and CIS countries, tea prices may be affected.
It is noteworthy that commodity prices are generally coming
down in the global market. Tea is still holding. The lurking
fear is whether tea will follow the trend of the prices of
other commodities. More than the financial turmoil in USA
and Europe, the developing concern for the Tea Industry in
Sri Lanka, is the high inflation compared with our competitors.
This will push up our production costs. Being a small country
with limited domestic demand for tea, rising production costs
may make our tea products uncompetitive in the world markets.
Budget 2009
As the Budget for 2009 is round the corner, industry circles
expect the government to introduce fiscal incentives to cushion
the rising costs of production to enable the Ceylon Tea products
to withstand global competition. An outstanding pressing issue
has been the taxation on the income derived from exports of
value-added, branded tea products.
The government policy framework exempts the processing and
export of primary agriculture produce from income tax for
five years. Within the ambit of this policy guideline, income
tax on exports of teabags has been exempted last year. Industry
circles have made representations that the same fiscal incentive
be extended for value added packeted tea products in next
year’s Budget.
(The
writer was a former Deputy Director at the Sri Lanka Tea Board.
This new column will appear monthly in The Bottom Line.)
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