By Chathuri Dissanayake
In a bid to create a conducive environment for negotiations to overturn the ban imposed by Russia on Sri Lankan tea exports, Cabinet yesterday decided to defer the asbestos ban until further review, a top Minister confirmed.
The surprise ban slapped on all agricultural product exports from Sri Lanka, including Ceylon Tea, following the detection of a single Khapra Beetle in a tea container was widely seen as a direct response to Sri Lanka’s decision to impose a blanket ban on all asbestos imports which is set to come into force from January next year.
The decision was announced in 2016, and importers of asbestos have been lobbying to overturn the pending ban. Russian-produced asbestos hold the largest market share in Sri Lanka, while Ceylon Tea accounts for 23% of Russia’s tea market.
Cabinet discussions centred on the influence Sri Lanka’s move to ban asbestos for Government projects may have had on pushing the Russian authorities to impose a total ban on agricultural products from Sri Lanka, a top Cabinet source revealed.
The Cabinet also noted that it was highly unusual for a total ban to be imposed on agricultural exports when only a single incident had been reported. Further, the Khapra Beetle is very rare in Sri Lanka with only a few records of its existence recorded by the Department of Agriculture, making the detection in a container of Ceylon Tea even more surprising, the Cabinet discussion noted. The Cabinet also focused on the possibility of the Russian ban having more strategic causes than the stated quarantine reason.
“The 2016 decision was to phase out asbestos gradually to ensure Sri Lanka is free of the material by 2029. It would have commenced with not using asbestos as roofing material for any government buildings from next year. However, yesterday the Government decided to defer this decision until further review,” Cabinet Co-spokesperson Dayasiri Jayasekara told the Daily FT.
The negotiations with the Russian authorities on the agriculture product ban are progressing as planned, Plantation Industries Minister Navin Dissanayake told the Daily FT. The Minister yesterday said that a technical delegation would leave for Russia this week to discuss Russian quarantine requirements to be met by Sri Lankan exporters.
Reuters, quoting the RIA news agency, yesterday reported that Russia’s agriculture safety quarantine services institution Rosselkhoznadzor was ready to hold talks with Sri Lanka’s Ambassador to Russia on resuming tea deliveries.
Tea Board Chairman Rohan Pethiyagoda told the Daily FT that as a first step the Director General of the Agriculture Department has written to his Russian counterpart.
The Director General’s letter sought to assure the Russian authorities of the food safety practices followed by the exporter in the midst of the controversy following a thorough investigation of the premises. Further, the letter also offered details of the inspection carried out along with the procedure followed by the department to issue a Site Sanitary Certification, Pethiyagoda said. The department has also spoken to all officials involved in issuing the certification to ensure proper procedures have been followed, the letter assured. In addition, the Russian authorities have also been requested to recommend the next steps to be taken to assure them of quarantine procedures in Sri Lanka to get the ban lifted while inviting a team from Russia to visit the country to inspect the premises and scrutinise the procedures followed.
“We are now waiting for their response,” said Pethiyagoda.
He was of the opinion that local authorities should handle the matter carefully and await the response of Russian authorities before a delegation of technical experts go to Russia for face-to-face meetings.
“It has to be carefully thought out and strategically handled,” he said, stressing that written communication through documentary proof was the best way to handle such a matter.
Pethiyagoda also noted that due to the holiday season in both countries the authorities would have close to a month to iron out issues and develop an acceptable procedure concerning quarantine processes. He also noted that the tea auction prices were not adversely affected this week thanks to the careful handling of the situation by buyers.
“Sri Lanka will be on holiday next week, there will be no tea auction. Russia will be on holiday from 30 December to 12 January. This will give us much-needed lead time to carefully handle the situation without rushing matters,” he explained.
Tea Exporters Association Chairman Jayantha Karunaratne also speculated that authorities would require close to a month to resolve the issue.
“Authorities will have to follow the procedure which will take time. The Russian authorities have requested for a dedicated plant and quarantine to handle the situation from Sri Lanka, a professional person, who is able to explain the procedures, follow and monitor the situation,” he said.
Karunaratne explained that the value of shipments delayed due to the ban amounted to roughly Rs. 300-Rs. 400 million.
“The only loss of revenue would be if there is a decline in Russian purchases, which is about 12% of Sri Lankan produce,” he said. However, purchasing for Russian markets will only resume in mid-January, giving local authorities enough time to negotiate a removal of the ban.
Tea exports in November lowest since May
Customs data analysed by Asia Siyaka Research confirms that Sri Lanka exported 23.6 Mnkg in November this year, up a sharp 16% on last year’s low drought-restricted figure of 20.4 Mnkg.
The current year’s November quantity is however the lowest since the May figure of 24.3 Mnkg. Going back five years from 2015 exports have been in the region of 26-28 Mnkg in November.
Exports for the period January-November 2017 have reached 265 Mnkg, a figure even lower than last year’s drought-restricted quantity of 266.1 Mnkg. The figure is the lowest since 2000.
Rupee earnings are at a record high of Rs. 213.8 billion, approximately $ 1.4 billion. These earnings convert to an approximate FOB value of a highest ever $ 5.29 per kg and a record rupee value of Rs. 807.12 per kg.
Sri Lanka exported 57% of all teas in value added form, a proportion equal to last year. Contributing to the value-added segment, packet tea comprised 46%, tea bags 8%, instant tea 1% and green tea 2%.
Russia/Commonwealth of Independent States (CIS) is the leading cluster of markets with imports of 49.2 Mnkg accounting for 19% of all tea exports from Sri Lanka. Last year‘s figure was marginally higher at 49.4 Mnkg (19% share).
Within this cluster Russia imported 31 Mnkg and accounted for 12% of all imports. Russia/CIS is also the second largest market for tea bags, with imports of 1.19 Mnkg, whilst Australia is the prime destination with absorption of 1.75 Mnkg.
Exports through Turkey have risen sharply to 35 Mnkg (13%), up 43% on last year’s quantity of 24.7 Mnkg. This market is followed closely with exports to and through Iraq, 31.3 Mnkg against 30.8 Mnkg a year ago.
Direct shipments to Iran have dropped sharply by 20% YoY 2016 from 31.3 Mnkg to 24.9 Mnkg. The UAE handled 14.5 Mnkg and Libya 11.5 Mnkg. Exports to China have grown to 8.9 Mnkg from 6.9 Mnkg. Japan has increased to 7.15 Mnkg from 7.03 Mnkg. Syria has declined 40% from 11.1 Mnkg to 6.6 Mnkg this year. Chile has grown from 5.9 Mnkg to 6.4 Mnkg and is followed by Germany at 6 Mnkg, down from 6.4 Mnkg last year. Hong Kong has grown from 4.1 Mnkg to 4.6 Mnkg.
Russia to discuss restricted tea imports with Sri Lanka in end Dec.
Moscow (Reuters): Russia’s agriculture safety watchdog Rosselkhoznadzor plans to discuss restricted tea imports with Sri Lanka at the end of December, it said in a statement on Tuesday.
Russia placed temporary restrictions on imports of tea and all other agricultural products from Sri Lanka from 18 December after a beetle was found in a tea consignment.
The watchdog met a delegation led by Sri Lanka’s ambassador to Russia in Moscow on Tuesday and requested information about steps being taken in Sri Lanka to secure the safety of tea intended for export to Russia.
The insect, known as the Khapra Beetle, was discovered in the packaging of the consignment of tea from Sri Lanka, which has said it was an isolated case and that it would work with the Russian authorities to resolve the issue.
Russia was the second largest buyer of Sri Lanka’s Ceylon tea after Iran in 2016 with $ 143 million worth of purchases, according to Sri Lanka’s Industry Ministry.
Sri Lankan tea accounts for 23% of the Russian market, with other supplies coming from India, Kenya, China and Vietnam, according to the Rusteacoffee association.
Tea crop down 10.6% in November
Sri Lanka has recorded a lower tea crop for November compared to the corresponding month last year following adverse weather conditions experienced last month across all plantation districts.
“Only 24.7 Mkgs have been harvested in November 2017 which represents a decline of 10.60% over November 2016,” said Lanka Commodity Brokers.
It said all three elevations were subject to poor growing conditions as a result of freak weather resulting in tea factories running under capacity during the entire month.
The cumulative production for January/November this year is 283.3 Mkgs which is a year-on-year increase of 17.9 Mkgs (6.78%). This increase however cannot be taken too seriously as 2016 is known to have been a very poor year for tea production.