Sri Lanka tea industry in crisis

Sri Lanka tea industry in crisis

Steve A. Morrell, The Island/ANN, Colombo | Sun, 08/11/2013 1:25 PM | Business

With limited crop on hand, members of the Sri Lanka Tea Factory Owners’ Association (SLTFOA) are in dire straits. Rising costs stemming from low crop and the increasing cost of inputs have all but restricted routine.

"We are facing liquidity problems and eventually the spectre of closure", says SLTFOA’s chief executive officer, Gehan de Livera.

The industry is now dependent on the tea small holder sector and as consequence some 400,000 small holders would also be affected. Eventually, the tea industry and its future would be in jeopardy, he warned.

Tea brokers, who asked not to be named, confirmed fears that the industry is heading for a crash. A bad situation worsened because to attract limited leaf on offer, some factories are offering prices for bought leaf exceeding the Tea Commissioner’s formula, they warned.

Consequences have been severe. To make good the artificial prices offered to leaf suppliers, they have had to increase their debt exposure at the risk of facing insolvency, they warned.

As confirmed by the brokers, De Livera said most factories are facing liquidity problems because of accumulating losses. "Some factories have already closed down."

Prevailing extreme monsoon conditions caused retarded cropping patterns. Stemming from these minus circumstances, crop decreases have reached alarming levels, and tea produced in Sri Lanka would be an insignificant blip on the world tea scene, he noted.

Most factories are operating below 60 per cent of their capacity.

Approval for building new factories without proper surveys or adequate feasibility reports have had repercussions on the overall picture of the tea industry, he said.

De Livera said that fertiliser not supplied in time also had their debilitating overall effects on the industry.

Brokers confirmed these concerns. Government intervention was not an option anymore, but a necessity. Immediate assistance was essential, they pointed out.

Some two million estate workers will suffer loss of livelihoods if relief was not forthcoming quickly, De Livera warned.