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FOCUS: Sri Lankan tea exports set for record 300 mil. kg.

COLOMBO, Nov. 7 Kyodo

Sri Lanka is set to maintain its position as the world's largest tea exporter this year, with production poised to reach an all-time high 320 million kilograms because of ''big potential buyers'' such as Russia, India and China.

With the increase in production, exports are expected to hit the 300 million kg mark for the first time, with domestic consumption usually not exceeding 25 million kg, according to tea industry officials.

In 1999, production reached a new high of 283 million kg, of which 263 million kg was exported.

''Most satisfactory is that we achieved this high production without adding an inch of land to cultivated area,'' said Hasitha de Alwis, director of the Ceylon Tea Promotions Bureau. ''It was mainly a result of privatization of tea plantations.''

He said the use of high-yielding varieties, scientific methods for harvesting and plucking, and introduction of new machinery were factors that led to the increased production.

Sri Lanka in recent years has been scouting for new markets to offset losses in traditional European markets.

''Russia will be the top buyer this year as its share is likely to be around 50 million kg,'' de Alwis said.

''Only last week, the two countries signed another agreement under which Russia will buy another 20 million kg of tea.'' In 1999, Russia was the second biggest buyer with 38 million kg, following the United Arab Emirates with 41 million kg.

Sri Lanka has also identified China and India as two potentially big buyers. While China is yet to make large purchases, India has granted duty concessions for 15 million kg of Sri Lankan tea under the Indo-Sri Lanka Free Trade Agreement that came into effect this year.

''However, hurdles are yet to be cleared and only 26,461 kg could be exported to India until the end of September this year,'' said a spokesman for the Ceylon Tea Board. ''That is only 2% of the allotted quota for the second quarter of 2000.''

Carlo Perera of Akbar Brothers, a leading tea exporter, said the lack of concerted efforts to expedite agreed clauses of the agreement between the two countries was the reason behind tea exports to India not picking up despite attractive duty waivers.

''India allows only two entry points for Sri Lankan tea -- Cochin and Calcutta,'' he pointed out, adding ''Unless Mumbai and Chennai are included, exports will not pick up.''

Perera also agreed there were other factors such as the lack of awareness of popular Sri Lankan brands in India. He said Sri Lanka could import more Indian tea and sell back tea bags and other up-market quality tea products to India. ''For that, India should waive off the 'country of origin' clause,'' he said.

The Tea Promotions Board believes Sri Lankan exporters should target the upper segment of the huge Indian market.

''Quality tea products can be sold to the top bracket of the Indian market, the upper middle class, which is looking increasingly for quality and does not mind paying a high price for top products,'' said de Alwis.

Trade Ministry officials said Sri Lanka will try to crack open China's lucrative tea market next year. Similarly, the Ceylon Tea Board will promote tea in Japan by participating in trade fairs, a spokesman said.

While India is the world's biggest tea producer, Sri Lanka is the biggest exporter. India and Sri Lanka together account for about 60% of the world's black tea export market.

Although the Sri Lankan tea export volume has increased, tea prices have remained more or less stagnant for a long time, resulting in only a small increase in foreign exchange earnings.

''A decade ago a kilogram of tea was $1.80 and now it is $1.90-2.10. The increase is negligible compared to the price hike of other products,'' said Tilak Alawattegama, a tea consultant at John Keels Brokers.

''Sri Lanka must go for up-market products to increase tea earnings,'' he said.
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Publication:Asian Economic News
Date:Nov 13, 2000
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