Sri Lanka is set to maintain its status as the world's largest tea exporter in the year 2000, with production poised to touch an all-time high of 320 million kilogram, much of which may be directed to "big potential buyers" like India and China. With the increase in production, exports too are expected to hit the 300 million kg mark for the first time, with domestic consumption usually not exceeding 25 million kg. In 1999 production had 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 Mr Hasitha de Alwis, director, Ceylon Tea Promotions Bureau. "It was mainly a result of privatisation 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 lead to 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," said Mr de Alwis. "Only last week, two countries signed another agreement under which Russia will buy another 20 million kg of tea." Sri Lanka has identified China and India as two potential 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 till the end of September this year," said a spokesman for Ceylon Tea Board. "That is only two percent of the allotted quota for the second quarter of 2000." Mr Carlo Perera of Akbar Brothers, a leading tea exporter, said the lack of concerted efforts to expedite the 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 that "unless Mumbai and Chennai are also included, exports will not pick-up." Mr Perera also agreed that there were other factors like 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". Under the Harmonise System (HS) of coding, products like tea bags are four points below the duty concession entitlement level, the spokesman for Akbar Brothers said. However, the Tea Promotions Board is of the opinion that Sri Lankan exporters should look for 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 Mr de Alwis.

Trade Ministry officials said Sri Lanka will try to open the Chinese market for tea next year. Similarly, the CTB will promote tea in Japan by participating in trade fairs, the spokesman said. While India is the world's biggest tea producer, Sri Lanka is the biggest exporter of the beverage.

India and Sri Lanka together account for about 60 percent 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 Mr Tilak Alawattegama, tea consultant at John Keels Brokers. "Sri Lanka must go for up-market products to increase tea earnings," he said. (04/11/2000)

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