Will Santa bring cheer to tea industry?

By Nizla Naizer
The much talked about Stabilisation Fund has been put back into gear with an allocation of Rs. 225 million promised by the Treasury before December 31.

According to Tea Board Chairman Lalith Hettiarachchi, the Treasury will provide funds on a monthly rotating basis till the sector is able to replenish the amount themselves.

“The plan has been put up for cabinet approval. We hope to see it implemented soon.” Along with the initial fund, Hettiarachchi explained that the proposal to provide loans to the sector at a concessional rate of 6% less than the current interest rate will also be implemented.

The fund will be monitored by a committee chaired by a representative of the Central Bank and it will include representatives from the Treasury, the Plantation Industries Ministry and the three sectors, tea, rubber and coconut.

Meanwhile, Hettiarachchi explained that the industry is seeing a slow recovery. “This week held the last auction for the year; so predictably, we saw a larger quantity of tea sold to the international buyers who stock up for the next three weeks.” The next auction is to be held in the first week of January and he is confident that there will be higher activity at the first auction of the year.

But the activation of the fund comes as welcome news, according to Hettiarachchi, the industry still needs help: “They have many expenses they cannot cover, including overdue wages and outstanding loan payments. The industry needs a boost. If we can sell our tea at Rs. 240/kg, we can be assured of a comfortable sale, but the current prices of Rs. 210-220/kg is reasonable enough and covers the cost of production.”

Forbes and Walkers Director Dilan Polonowita was just as upbeat. “Overall the auctions this week were high and we expect the overall average to move up.” According to Polonowita, there was activity when it comes to most types of tea with the low country teas, lower end teas and the higher end teas moving up compared to quantities traded last week. There were 6.4 million kg traded at this auction and the brokers are encouraged by the level of activity.

“It could be due to the three-week interval till the next auction on January 6,” he cautioned, “But we are optimistic. We feel that we have cleared the bottom and the markets will keep improving.”