Press briefing of Cabinet Decision taken on 2015-11-05

Government Intervention to stabilize the price at Colombo Tea Auction

- Due to the crises in the countries that buy tea from Sri Lanka, the demand for our tea has gone down and the price of tea in comparison with that of 2014, has been declining considerably from the beginning of this year. Although, the production cost of a kilogram of tea, generally, is Rs.450/-, the price per kilogram of tea had dropped to Rs.385.51 by August at the tea auction. This situation had adversely affected all stakeholders engaged in the tea plantation sector including the regional plantation companies. In order to provide relief for the tea plantation sector, a scheme was implemented to pay a guaranteed price for green leaves produced by tea smallholders at the cost of Rs.6000 million while loans were given to factory owners for their working capital on concessionary terms, as well. In a situation where the price of tea falls steadily, providing the above concessions alone is not practical, and the Government has to intervene in order to increase the price of tea at the auction.

When a similar drop in tea prices occurred in 2008 as a result of the World Economic Crisis, the fall of tea prices was controlled satisfactorily by the Government through purchasing tea at the auction. Taking into consideration the proposal made by Hon. Navin Dissanayake, the Minister of Plantation Industries, to provide the necessary funds by the Government to purchase good quality tea at a price of Rs.430/- per kg, through the Sri Lanka Tea Board, was approved by the Cabinet. The Government will cease to purchase tea in this manner, once the price of a kilogram of tea reaches the level Rs.450/- at the tea auction.