Says tea exports and revenue will improve gradually
Top tea industry representatives yesterday sounded a note of optimism concerning Ceylon tea’s ability to brew a stronger cuppa with the announcement on the easing of sanctions on Iran.
While there will be a period of wait before the sanctions are fully lifted, the industry is collectively of the view that the move is timely and will help boost the performance of the struggling industry.
“The easing of the sanctions in Iran will allow Sri Lanka to enjoy a good price increase in the auction system and also help gain wider market opportunities in the Iranian tea trade,” Sri Lanka Tea Board (SLTB) Chairman Y.G. Wijeratne told Mirror Business.
Shedding light to the current situation the local tea industry is faced with, the SLTB Chief shared that one of the main issues is the Indian traders re-exporting Ceylon Tea to Iran, and its benefits in terms of revenue being passed on to those traders.
“Once implemented, our exporters will be able to trade directly with Iran, which will result in an increase in the volumes exported and revenue earned. We are certain that within six months of the lift, exports from Sri Lanka would reach to the levels before the sanctions were imposed,” said Wijeratne confidently.
In 2013, 22 percent of Sri Lanka’s tea exports were to Iran. In 2014, it dropped to 12 percent and in the last six months of this year the amount further decreased.
Colombo Tea Traders Association Chairman Anslem Perera noted that the ease will help Ceylon tea fetch an addition of Rs.100 per kilo, which will help address the current average loss of Rs.6 billion per week.
“Tea prices were severely impacted and the sanction was a prime reason for this. The estates are selling below cost. The impacts are all round. This is what we were all waiting for and we are already geared to make the most of this move,” said Perera.
While the decision is a broad agreement and needs US Congress and UN Security Council approval as well as that of the Iranian Government, Ceylon Tea Exporters Association Vice Chairman Jayantha Karunaratne noted the process will take time to be implemented, thus its benefits cannot be reaped immediately.
“We cannot expect an increase in volume terms in the immediate future, but nevertheless, positive sentiment could have some effects on tea prices. Once everything is approved, we hope that the Iranian Rial exchange rate will appreciate with the additional forex income to Iran by the sale of oil and the lifting of the banking embargos.
In the medium term they would purchase more tea which will benefit Sri Lanka,” Karunaratne opined.
Speaking as to how exporters could capitalise on the lift, SLTB Director Promotions Premala Srikantha noted that the positive signal would help encourage exporters to focus more on Iran and look at ways to further activate trade.
“Currently our exporters don’t prefer Iran as they are not sure about their proceeds. They will now be able to concentrate on their quality and increase their value. Since the remittance will be made easy, they will aim at exporting higher volume that will help improve the current condition the tea industry is in,” she said.