The concerns raised by tea exporters that the tea promotion fund is to be also used for the tea replanting program seems unfounded, according to the Sri Lanka Tea Board (SLTB),which is the body responsible for the promotion of tea.
SLTB Chairman Lucille Wijewardena said the notion that the tea promotion levy is to be split between promotion and replanting is a misconception.
“It is incorrect to use the word ‘split’ as there is no split of the fund other than a reduction of the total promotion levy from Rs. 350 to Rs. 300 per kg. What we have proposed is a levy Rs. 1.50 per kg that will be contributed by the entire tea value chain,” he said.
However, the Tea Exporters Association (TEA) in a statement has expressed its displeasure over the move to split the tea promotion levy between promotion and replanting.
Excerpts from the statement:
The Tea Exporters Association (TEA) wishes to draw attention to recent media statements made by Minister Navin Dissanayake on ‘Tea Promotion Levy to be split equally between promotion and replanting’. The TEA was rather surprised to note the statement made by the Minister informing of the proposed amendments to the 2010 Tea Promotion Levy Gazette notification for division of the levy.
In fact, when Secretary, Ministry of Plantation Industries at a recent meeting, suggested that the Tea Promotion Levy Gazette should be amended to obtain funds for re-planting, TEA strongly objected to this move and sent a letter through their lawyers on May 7, conveying its objections.
The letter categorically stated that, any attempt to amend the gazette notification would be a breach of the expectations of exportrs and also contrary to the specific undertaking given by the previous Chairman of SLTB in 2016 that, the Tea Promotion Fund would be used exclusively for tea promotion work.
When then Minister of Plantation Industries Mahinda Samarasinghe proposed to introduce a tea promotion levy in 2010, it met with stiff resistance at the outset with many industry stake holders questioning the need for a second cess when the industry was not reaping any benefits from the other two cess payments imposed on tea exports. He then assured the tea exporters that it will not be used for any other purposes but tea promotion. With this assurance the tea exporters consented to the creation of the Tea Promotion Levy in October 2010 and the gazette notification contains a clause, “that collected funds shall be used exclusively by the Board for the purpose of engaging in activities related to tea promotion and marketing”.
However, this time there was no consultation with the exporters and the Ministry of Plantation Industries on their own has submitted the Cabinet paper for revision.
The association was not aware that, the Ministry of Plantation Industries was planning to split the Tea Promotion Levy between promotion and re-planting with the reduction of levy from Rs. 3.50 to Rs. 3.00 per kg. The information available after the Cabinet meeting on July 19, 2019 was only the reduction of promotion levy by 50 cents and the details appeared only after the Plantation Minister made a statement to the press.
The tea producer segment in Sri Lanka consists of two parties namely the corporate sector (regional plantation companies) and smallholder growers. It is their responsibility to increase the tea crop by investing in re-planting and new planting. It is rather unfair to collect tax from tea exporters and disburse it among the producers for re-planting of tea. Subsidies to producers with the same old model will lead to continuation of inefficiency within the system and also would be a burden on the economy. Tea exporters do not receive any subsidies from the government although they face a number of difficulties due to the current political situation in Russia, Iran, Syria, Libya, and Ukraine. In fact tea exporters pay more taxes than the tea exporters in other tea producing countries and that fact negatively influences their competitiveness in the world market. Although the association has made a number of requests to Ministry of Finance and Ministry of Plantation Industries to review the current cess payment, it has not received a favourable response.
Chairman, SLTB, by his letter dated April 6, 2018, appealed to TEA to differ the suspension of tea promotion levy until December 31, 2019. He suggested reducing the levy and removing it completely by the end of 2019. The members of TEA are dismayed to note the action initiated by the Ministry of Plantation Industries to revise the tea promotion levy.
At present, in addition to Tea Promotion Levy, tea exports are subject to two cess payments. As per Sri Lanka Tea Board Law, the two cess payments collected are to be used for supporting planting, re-planting and development of tea estates while the collection of tea promotion levy is to be used exclusively for the promotion and marketing of Ceylon Tea.
The TEA is of the view that, the producer segment should create their own fund to support re-planting activities. - LF