Sri Lanka’s tea exports continued to decline in September 2015 severely affected by lower demand from main tea buyers in Russia and the Middle East reflecting declines in both export volume and export prices.
Tea exports recorded a drop of 20.4 percent in September this year compared to the corresponding month in 2014, official data showed.
The average export price of tea decreased to 4.32 US dollars per kilogram compared to 5.01 US dollars per kilogram recorded in September 2014.
Official data shows Sri Lanka exported 106.3 million US dollar worth tea in September 2015 compared to the 133.6 million US dollar tea exports in the same month last year.
For the first nine months from January to September 2015, tea exports declined 17.2 percent to 1007.5 million US dollars compared to 1216.7 million US dollars in the same period of 2014.
Sri Lanka’s government plans to purchase quality tea from the tea auction for the price of 430 rupees per kilogram to artificially raise the tea prices until the price reaches the limit of 450 rupees and the market stabilizes.
However analysts argue Sri Lanka’s government intervention into the Colombo tea auction will be detrimental to the sector as it will make Sri Lankan tea less competitive in a global market that is over-supplied.
The government allocated 1.0 billion rupees to purchase tea at the Colombo auction, a decision which has yet to be implemented.
The last time the government intervened to prop up tea prices was in 2008.
Delivering the budget speech 2016, Sri Lanka’s Finance Minister Ravi Karunanayake said that the country plans to liberalize the tea industry through allowing tea to be imported into the country within a regulatory framework and a committee would be set up to study this process.
“Tea has remained a key export of our country but the value addition is not as significant to the extent expected,” Karunanayake said.