The Colombo Tea Traders’ Association and Sri Lanka Tea Board will host the Colombo International Tea Convention (CITC) at the Cinnamon Grand Hotel from July 24 to 26.
The convention theme is “Tea: A Lifestyle & A Livelihood.” The event will explore Ceylon tea’s pivotal role, spark conversations, and inspire action toward a sustainable tea industry.
The program includes 50 speakers and will unfold in eight sessions over three days. Events include an outcry auction, gala dinner, and beach party on closing night. A Ceylon Tea Tasting Experience will introduce attendees to Sri Lanka’s growing regions.
Sessions include “Fair Price as a Global Challenge,” a topic of utmost relevance in today’s tea industry; an “Ozone Friendly to Zero Carbon” session on climate; and a conversation about the “Value of Tea.” Sri Lanka has emerged from financial, political, and social turmoil, addressed in a session on “The Resilience of Tea & Its Legacy.”
BIZ INSIGHT — I will moderate the Friday discussion on “Innovation,” which features a panel of ag technology experts presenting innovations such as streamlining financial transactions, online markets, new traceability tools, digital identification, and cloud-based analysis of tea as a service.
Colombo International Tea Convention | Episode 161
Usambara Tanzania 2023
Dan Bolton
Dan is a niche content creator who fosters genuine connections globally through informative, educational, and captivating conversations centered around tea. Host | Tea Biz Blog | Podcast
Romesh Walpola, Chief Executive Officer of Tea Smallholder Factories, Ltd. (TSFL) in Sri Lanka, explains how the Colombo-based firm taps the output of one to 10-acre farms to produce approximately three million kilos of tea annually. Investing in smallholder training, wellness, and educational programs, including internships for second-generation farmers, earns the loyalty of thousands of small tea growers and top dollar for teas sold at auction.
Caption: One way that Tea Smallholders Factories, a division of John Keells Group, invests in smallholders is by hosting events, including free health checkups pictured above, at which healthcare providers prescribe medicine to 1,021 factory employees and nearby community members supporting the Neluwa Tea Factory.
Tea Smallholder Factories Earn Loyalty that Maintains Competitive Quality Teas
By Dan Bolton
In aggregate, farms of 10 acres or less contribute 77% of Sri Lanka’s total tea crop, according to Plantations Minister Ramesh Pathirana. That percentage has increased over time. Bought leaf factories purchase an estimated 70% of the tea grown by smallholders.
Large estates own 56% of the 202,985 hectares under tea, according to the Sri Lanka Tea Board’s annual report, but contribute only a quarter of the 250 to 300 million kilos of tea processed annually. Sri Lankan smallholders cultivate about 44% of the land under tea, selling to large estates and bought-leaf factories. Only 18% of Sri Lanka’s factories process tea exclusively grown on their estate.
All sectors compete at the weekly Colombo Tea Auction, under the aegis of the Ceylon Chamber of Commerce. Around 6.5 million kilos of tea are sold weekly at this global marketplace where quality is rewarded with the world’s highest average auction prices for black tea.
Tea Smallholders Factories, Ltd. is an example of a successful public-private partnership, explains CEO Romesh Walpola. The company, which employs 411 workers, processes green leaf procured from 8,698 tea smallholders and green leaf collectors. In the fiscal year ending March 31, 2023, TSFL reported an 85% increase in revenue totaling LKRs. 3.74 billion compared to 2021-22 and a profit before taxes of Rs. 440 million (growth of 1,845% YOY with a dividend per share of Rs. 6.67). TSFL accomplished these strong results during a year in which Sri Lanka’s total gross domestic product (GDP) contracted by 7.8%.
Tea Smallholder Factories Output
Neluwa Tea Factory: annual production 883,000 kgs | 1,413 suppliers Halwitigala Tea Factory: annual production 888,000 kgs | 956 suppliers Hingalgoda Tea Factory: annual production 1,075,000 kgs. | 892 suppliers Kurupanawa Tea Factory: annual production 888,000 kgs | 925 suppliers New Panawenna Tea Factory: annual production 1,115,000 kgs | 1,473 suppliers Broadlands Tea Factory: annual production 952,000 kgs. | 3,100 suppliers Link to 2022 Annual Report | 2023 Annual Report
Dan Bolton: Romesh, how competitive are bought-leaf factories in a premium black tea market like Sri Lanka?
Romesh Walpola: We compete heads-up with some of the key private factories. Competition is fierce, as you would know. We are located mainly in Galle and Ratnapura and have one factory in Ginigathhena. The competition is in Galle, and Ratnapura is quite tenacious and very competitive. Most are private factories owned and operated by listed companies.
Dan: The Sri Lanka Tea Board estimates growers earn about $6,000 (LKRs 2 million) per hectare annually. Yields average 4,000 to 5,000 kilograms per hectare. Input costs vary, and labor expenses are far lower for smallholders. Will you describe the typical smallholders that sell your factories green leaf?
Romesh: On average, they own about an acre or less outright.
Romesh Walpola, CEO of the Tea Smallholders Factory, a division of John Keells Group
Dan: May I summarize the basics? Tea is grown as a cash crop mainly for export. Plantations and smallholders alike plant at a density of 5,000 to 6,000 bushes per acre. Smallholders manage a mixed use property acquiring and apply fertilizer and inputs for tea as well as home-grown food. Smallholders often involve their children and extended families in farming to lower labor expenses.
Do the thousands of growers you work with produce tea in disciplined rounds? Or do they pluck on occasions when they’re not doing something else?
Romesh: Yeah, they maintain between seven to 10 days of plucking rounds.
Dan: Are they third-party certified? Organic?
Romesh: Not really, not organic. There are a few smallholders who own organic acres as well. But very few.
Regeneration is the process of renewal, restoration, and growth that makes cells, organisms, and ecosystems resilient to natural fluctuations and damaging events. Sea stars, or starfish, exhibit this behaviour – displaying incredible resilience in the face of change.
Dan: You explained that training and quality control are a big part of your contribution to their success.
Romesh: Yes. We have our extension officers in the field on a daily basis. And they have little pocket groups that are educated on basic soil management, the type of fertilizer to apply, pruning cycles, and recommended plucking rounds, all that is needed to maintain their plots. We give that service to the smallholders, but apart from that, they do their own thing as well.
Dan: It sounds like you are empowering these growers to become rural entrepreneurs, right? They control their fate. As growers, they maintain leaf quality. They must deliver a high percentage of fine-plucked leaves from each round.
Romesh: That is one area that we are very particular. I mean, we don’t take just any leaf. We are very selective. We encourage them to bring a decent standard because, as you know, if you put some garbage in, you get garbage out, right, so you have to make sure your raw material is good for you to have an end product so we’re very picky in terms of you know, selecting a reasonably good standard of leaf.
Dan: Do you incentivize quality.
Romesh: Yes. We give them a small incentive for what we call super leaf. Let’s say the current standard of fine leaf pluck (two leaves and a bud) is at about 50 to 55% of what they pluck when you get something over 60 to 65%; then, we give them an incentive for that amount of leaf they bring.
So that it’s, you know, encouraging them to raise the bar for themselves and get something back in turn. We teach them that the higher the tea price at the auctions, the higher the green leaf payment according to the tea board’s formula. So that’s the positive of this vicious cycle, we keep telling them.
Dan: Have you established a minimum rate for green leaf, a price floor?
Romesh: Most of the time, but there are instances we are not during the rush period. We look at what the competition is doing when there are lean months. And we try not to overpay because we don’t believe in, you know, just because the neighbor pays X, you go and try to match that? Because it has to make sense financially.
Dan: It’s a business.
Romesh: Exactly.
Dan: And the nature of the business is that your costs fluctuate, as does the price at auction.
Romesh: In the long run, if you go down that path of paying a rate based on what the neighbor is paying, it doesn’t make real business sense.
What we do is add a lot of value to their livelihoods.
The Smallholder Tea Factories process 3 million kilos annually
Neluwa Tea Factory weigh station
Smallholder at Neluwa Tea Factory weigh station
Modern sorters ensure consistency in finished tea
Key Performance Indicators (2023 Annual Report)
2023
2022
2021
Tea production in kilos
2,463,000
2,966,000
3,631,000
Net sale average USD | Rs./kg
$4.82 | 1,554.58
$2.03 | 653.67
$2.06 | 664.54
Revenue from Customers (USD)
$11,614,000
$6,262,000
$7,278,000
Profit after Tax (PAT) (USD)
$864,000
$47,500
$206,400
TSFL reported a 17.2% return on equity for the year ending March 31, 2023. Bought leaf is the single highest cost of sales, increasing by 96% YOY in line with the increase in the tea auction price. The price payable for green leaf is regulated by the Tea Board through the Tea Commissioner’s formula. TSFL purchased 12 million kilograms of green leaf during the fiscal year year while paying Rs. 2.88 billion to the green leaf suppliers. In 2021/22, TSFL incurred a cost of Rs. 1.47 billion to capture a green leaf supply of 14.5 million kilograms.
Loyal Smallholders
Romesh: We’ve identified that group of loyal smallholders who don’t go to any competition if they offer a few more rupees.
I will give you some examples of what we are doing for them. Last year we completed 20 projects and initiatives to positively impact the communities surrounding our business operations.
Just a month ago, we arranged the region’s largest health camp on our premises, so we had roughly 1,000 plus villagers and smallholders coming in to get their health checks. And that was a huge deal for them because some of them had never even had a simple blood sugar test so you could detect problems. Then this is what we do for the community.
They are concerned about the next generation in tea, their children.
There are scholarship programs that we are conducting for the schoolchildren in the vicinity, and for the next generation of smallholders, we offer internships to study the whole factory process and learn about manufacturing. Plus, we explain what happens after the dispatch so that they understand the sampling and laboratory testing that happens between the broker and buyer. Then we take them to a buyer and give them that full experience and exposure. And after completing that cycle, we will find them employment within the industry. They could eventually become a buyer or brokers — even own their own factories. So that’s the educational part that we’re doing.
We do this on a regular basis training 11 interns last year. And once they finish, we give them a certificate. Young people leave our farms otherwise.
Smallholder Profile
Smallholder Mrs. Chandra Jayasingha, 62, farms an acre of tea on land where she and her husband also grow several cash crops, including spices, pepper, coconut, and bananas. The approximately 5,000 tea plants (Cultivar D2026) are not certified organic but are cultivated using organic practices.
Neluwa Tea Factories Smallholder Supplier Mrs. Chandra Jayasingha. Photo by Dan Bolton
“The significance of social and relationship capital as a valuable asset for creating value will continue into the future, playing a crucial role in driving the sustainable growth and performance. Accordingly TSFL’s primary focus will be on sustaining our green leaf suppliers, especially small holder partners by providing value-added services to support sustainable agricultural practices and environmentally friendly approaches.”
– TSFL 2023 Annual Report
Dan: Sri Lanka’s tea industry, led by the tea board, plantation owners, and growers’ associations, have signaled their intent to make tea production sustainable.
Romesh: Sustainability is something that we are also looking at. Smallholders are fully aware of, you know, its importance. Sustainable practices at the factories and by the company contribute to stickiness amongst loyal smallholders.
So for us, it’s not about paying something a little bit more than the competition when taking leaf; it’s about actually deep diving into, you know, looking at enhancing the livelihood of the community and the smallholders.
Smallholder Profile
Dayananda Matarage, 67, owns the 10-acre Gulanahena Estate in Thiniyawala in the foothills of the Sinharaja Rainforest. The son of a planter, he produces 3,000 kilos of green leaves on six acres planted in TRI 2022-27 and 4042-49 cultivars. He first planted tea on 1.5 acres in 2001, expanding gradually, recently adding two acres. The main fertilizer is an organic compost, to which he adds bioliquids to enhance micronutrients. He does not use plant protection chemicals or herbicides. He hires local field workers part-time to pluck tea and harvest coconut, pepper, pineapple, sopa, rubber, papaya, and bananas, and he offers a homestay through Sinharaja Holiday Bungalows. Tea generates 75% of the farm’s revenue. A retired engineer, he makes a delicious homemade kombucha he shared with us in his kitchen with rice and coconut milk welithalapa and oil cakes.
Neluwa Smallholder Dayananda Matarage
“The COVID-19 pandemic and the worst economic crisis in Sri Lanka’s post-independence history resulted in an increase in poverty rates of up to 25% in 2022, a dramatic increase from 11.3% in 2019. Although one fourth of the country’s population has fallen into poverty, many do not receive monetary support from the government, largely due to the weaknesses of social welfare schemes. More than 50% of Sri Lanka’s poorest population is not covered by the government welfare programs”
The International Labour Organization describes Sri Lanka smallholders as farming 10 acres (four hectares) or less. As defined in the Tea Control Act, Small Tea Holdings produced approximately 95% of the low-country tea, 59% of the middle-country tea, and 15% of Sri Lanka’s up-country tea in 2014.
Dan traveled more than 1,500 kilometers during a 10–day visit to Sri Lanka in May 2023. My travels were sponsored by the Sri Lanka Tea Board, chaired by Naraj de Mel, with accommodations at the Tea Research Institute courtesy of Dr. K.M. Mohotti. “I’m deeply grateful for the joyful days spent with Pavithri Peiris, the tea board’s Director of Promotion, Gayan Samaraweera, Market Promotion Officer, and Chathura Fernando, Market Analyst. Gayan and Chathura photographed the scenes above.
This fascinating book illuminates the all too often overlooked tea region of Ceylon, present-day Sri Lanka. The authors draw on the letters of James Taylor, pioneer and founding father of the Ceylon tea industry, to explore the life of a Scottish migrant who, through experimentation and determination, forged a new industry out of the ruins of the coffee blight. This uniquely complete collection of correspondence reveals this pivotal time in tea history through the eyes, thoughts, and actions of a key player. Some of the standards (two leaves and a bud) and machines that Taylor developed are still in use worldwide today.
We learn about the decline of the former plantation crops over several years and the fight to find a viable replacement: tea. James Taylor’s letters home to family, to local friends, and newspaper articles of the time are explored and expounded upon by the authors to offer a historical account by someone for whom the creation of tea was not just a vocation but an avocation too. Uniquely the story is told “as is.” That is to say, it is told in and of its time with explanation and exploration of the who, how, and why things were as they were, centered around the direct views, thoughts, and experiences of James Taylor. Unlike other works that look at this period, this book seeks not to offer judgment or rear-view mirror thinking but merely to show us what was happening at the time and why. First-hand accounts serve to explain and illuminate the period and the people as they were, as they lived, as they thought and spoke. This is the story and experiences of one man who lived through and shaped the birth of an industry. Not because he set out to change the world or get rich but because he was there because he worked with and in response to the situations, the place, and the time in which he found himself.
More broadly, this book also explores the legacy of Scottish education and the thought that the Scottish diaspora played such a significant role in the colonial world, particularly in Ceylon. It also looks at the legacy and, indeed, rediscovery of the legacy of James Taylor and his place in both the history of Sri Lanka and the Ceylon tea industry.
Although interesting, thought-provoking, and generally engaging to read, there are times when the reading can be a bit dry. Perhaps a case of two different writing styles. But push through those dry bits, and you’ll be riveted by the fascinating history within. TeaBookClub members agree that this is an essential book on your tea bookshelf that explores important tea history.
I’m really glad I read as much as I did, it seems like it’s very important history in the history of tea. – Audrey, USA
It being a first-hand account is what really made it interesting – Michaela, Austria.
I found it refreshing that the authors didn’t give Lipton much airspace. This was a book about James and what he did, achieved, and his life. I really appreciated that within the context of Ceylon at that time. – Taraya, Canada
It had very interesting and very boring parts but overall very good to read. Some parts were easier to read than others, maybe because there were two different writers. – Mariella, Netherlands
Fascinating that some of his machine designs are still being used today – Mariella, Netherlands
Based in the UK, The Tea Book Club is an international group of tea lovers and readers who meet up virtually every month to discuss tea books. If you’d like to join us for the next read, visit teabookclub.org or @joinTeaBookClub on Instagram.
Tea & Empire
Goodreads: This book brings to life for the first time the remarkable story of James Taylor, ‘father of the Ceylon tea enterprise’ in the nineteenth century. Publicly celebrated in Sri Lanka for his efforts in transforming the country’s economy and shaping the world’s drinking habits, Taylor died in disgrace and remains unknown to the present day in his native Scotland. Using a unique archive of Taylor’s letters written over a 40-year period, Angela McCarthy and Tom Devine provide an unusually detailed reconstruction of a British planter’s life in Asia at the high noon of empire.
Sri Lanka is facing its worst economic crisis since gaining independence. Following the pandemic, many industries on the island ceased to exist due to political and financial difficulties. However, the island’s tea industry continues to battle on. Tea Biz correspondent and PMD Tea MD Dananjaya Silva discusses with Dr. Roshan Rajadurai, the Managing Director of Hayleys’ plantationshow Hayleys’ plantations have adapted and continue to produce tea, given the economic hardships.
Caption: Dr. Roshan Rajadurai, the Managing Director of Hayleys Plantations, left, discusses with Tea Biz correspondent and PMD Tea MD Dananjaya Silva how organizational discipline and adaptations enabled tea production to continue during the pandemic and recent economic hardships.
Listen to the Interview
Dr. Roshan Rajadurai, MD, Hayleys PlantationsFounded in 1992, there are 25 estates in the valley covering 13,000 hectares. Photo courtesy Kelani Valley Plantations
How Sri Lanka’s Tea Industry is Coping with Continual Crisis
Production is down and export volume declined compared to last year but auction prices are at a high mark and Ceylon tea remains in demand. I traveled to Sri Lanka to assess the condition of a resilient tea industry following an unsettling spring marred by high unemployment in the aftermath of the COVID pandemic. For several months tens of thousands protested the inflation-driven cost of food and shortages of basics, including fuel, cooking gas, and electrical power. The upheaval led to the resignations of both the prime minister in May and the nation’s president, who fled the country in July.
Dananjaya Silva – How did the COVID pandemic restrictions show Sri Lanka’s plantation sector to be resilient and adaptive?
RoshanRajadurai – The plantation sector has a legacy of 150 years of very well-organized, centralized management structure, so when this pandemic situation suddenly came up the government imposed a three-day curfew which we had to abide by. But on the fourth day onwards, we quickly got on board, and made things as normal as normal could be.
The moment we caught wind of this pandemic situation, we put in place a series of measures at our 60 tea and rubber plantations. First, of course, we made our people aware of what this is all about.
There was an influx of people from Colombo and outstations, flowing back to the estates. So, we made sure their names were recorded, and if they showed signs of infection, we had isolation quarters. We isolated them for 14 days, and kept the medical and other authorities informed when they returned to the community. The organized sector has one million people living in a village-style setups in close confines. The measure we took were effective. Up to about the end of last year, we didn’t have a single casualty arising out of COVID. That is because we identified and limited exposure to the people who were coming from outside.
In addition, we did fumigating and provided simple medicines. And most importantly, we ensured that people didn’t have to congregate and that they didn’t have to go to bazaars and townships.
We organized distribution with the large food suppliers, like the government warehouse system, and brought in food in lorries. And we had stocks for two or three months. We delivered food packets practically to their doorstep. What is important is that we ensure that the workers did not spread this COVID.
There was also a group of people who had no other means of earning more income. Although last year was not a good year financially, we ensured that their wages were paid. And as a means of helping the people in this situation, we opened our industry to those who arrived from Colombo and elsewhere, and gave them work in areas that we could not manage with our regular workforce. So, their family unit had more opportunities to earn more when sons and daughters returned.
We already had in place a revenue share model, so we expanded it. There were a lot of people who didn’t want to be registered workers but they still got into the earning pool for their family and were able to enhance their family income.
So we had a very, very tough and a very well disciplined control system and to the credit of workers, I must say they cooperated fully.
They listen to the management; they follow the advice of health departments. So that’s an example of success and how after long years of practice the plantation sector was able to manage a crisis like this.
Dananjaya Silva – How did adaptations forced by the pandemic help Hayleys prepare for the political turmoil of 2022?
Roshan – After COVID came the financial crisis. There was no work to go back to in the construction industry as it had crashed, and also the eateries and small hotels. So, all the people came back to the estates and we made available opportunities for employment. One example is paying workers to remove weeds. We said we will pay you by the kilo and that was a very good intervention as people who don’t want to return to sort of plucking or harvesting work, they go to the field, remove the weeds and we pay them. This was essential because of the limitations on fertilizer. We convert the weeds to compost. Soil augers were given to each division and placement of holes tracked. Once the compost is made, we filled the holes and incorporated the bulk material and the compost into the soil so that it enhances the soil fertility.
Dananjaya – What you’re saying is that this 150-year-old industry, that has been the backbone of the Sri Lanka economy, continues to be that because workers who are from plantation backgrounds who’ve worked in hotels, construction, they once again come back to live on the estate.
Roshan – Actually, Dananjaya employment is only part of the solution that we provided, because there was an influx of workers. And it’s actually stretched our services. But we made sure that we accommodated them, that we looked after them in terms of food supply, because there was no food because the COVID curfew and restrictions. So our managers went out and bought curfew passes, they really did a great job on the ground. I mean, they volunteered – they could have waited and said, look, we don’t want to expose ourselves. But every company, every manager, every planter, took it upon himself to look after his community on the discharge of food, medicine or the wherewithal. Everything was provided and absolutely no breakdown. And ours is the only industry right now maintaining the industry as it was before a lot of challenges, a lot of stress, a lot of issues, but we still maintained the industry as it was.
Dananjaya Silva – Fertilizer was banned last year then the government subsequently reversed the policy. How is this affected Hayleys estates?
Roshan – Well, on the whole, banning of fertilizer was a shock and surprise to all of us due to the ill effect and the consequences of this hasty, unscientific and illogical strategy. We made significant protests, voicing opposition in media and TV talk shows and whatever but to no avail.
We are a large organization and we stock sufficient fertilizer for one or two applications ahead. Last year I did not plan for the banning, but I thought that we learned some lessons on logistical problems, with fewer ships coming, curfews on crews and the slowed movement of goods. So we gave instructions to our managers to store fertilizer for six months, anticipating a breakdown of logistics. Then, in the meantime, they banned the fertilizer, and therefore we had some stocks. Uncertain supply and high prices completely changed the way we apply fertilizer now because we know that for a year or two, we might not get cost effective fertilizer.
In the past we used to broadcast fertilizer but we quickly reverted to a system called placement where we dig a hole and put in a measured 24 grams of fertilizer per bush. In this way, you’re reducing the wastage from volatilization, and leaching while improving efficiency by a significant level. We are also stretching the fertilizer as one application done in this manner means we can sit out two or three future applications. Fortunately for Haley’s group, although we didn’t plan for the ban, we had planned for something else. It also gave us sufficient fertilizer and for food crops raised by workers, so they could infuse some so that they are not going to go without food.
Tea factory at Tallawakelle Tea Estate. Photo courtesy Hayleys Plantations.
Dananjaya – When you talk about ensuring food for workers, that’s a stark contrast to the situation for someone living in an urban area, isn’t it? People there don’t have the opportunity to stock food, and are relying on retail supply. There is no guarantee for them, as they might find themselves standing in a queue for days, and not be guaranteed any food at the end of it.
Roshan – The plantations you know, care for not only the direct workers, but all dependent family members. So if someone has got COVID, we say, don’t worry, we have given the family food over the year in some cases, we can recover it. So by that action, people have confidence in the management that we have looked after them in a very, very critical time. And when they were sick, we made sure that the government medical authorities or personal care management were involved. We offer a holistic total system of care for our people.
In towns, as you said, we all have to stand in queues, and those who do are not sure there’s stocks, but in our case, we bagged provisions and dry rations and brought it to their home so that they don’t have to come and interact or mix with people and spread COVID. So that way, I think we got a huge boost in terms of human resources. When we gave very tough guidelines and instructions, they followed the advice like keeping a distance while working whereas traditionally they were together in a row. We said you have to separate immediately and without any protest they showed wholehearted obedience and support for us.
Dananjaya Silva – Fuel shortages have crippled and decimated many sectors of the country what provisions and adaptations Hayleys have made to ensure the smooth running of operations.
Roshan – After the crisis came on, definitely we have taken radical measures to reduce the running of unnecessary trips and vehicles. We have mapped out all the roads in each division and compared distances and identified the shortest routes to make transport more efficient.
We also introduced some innovations like ziplines. These were built before the crisis, but came in handy. We can save about 90 kilometers a day on trips to the factory because the tea otherwise has to be driven along a circuitous route. It’s eco-friendly and does not use fossil fuel. We have instituted several eco-friendly practices. Now our managers and assistant managers are provided with good Push bicycles, and they have resorted to more walking,
“ We are maintaining the tea industry as it was before in spite of a lot of challenges, a lot of stress, a lot of issues.”
– Roshan Rajadurai
Dananjaya – One area that you touched on was moving tea from estates down to Colombo, there has been some disruption. How are you working through that situation because because the logistics are provided from from outside of the estate.
Roshan – Normally, we manufactured and made arrangements to send our produce to Colombo, and to ship it out. What we do is provide measured fuel to take the tea down to Colombo and even for firewood suppliers because we need firewood to run our dryers. So we assist them in some form. Because of the fuel shortage we are trying to harvest wood that is already grown on the estate for this purpose and adding branches cut to reduce some excessive shade.
All those initiatives and energy efficient measures add up. We are relying more on hydropower and we are trying to put almost 60 to 70% of our roofs in solar. So all those things can happen after the crisis. These are interventions that happened before COVID and the financial crisis, which have a beneficial use for us right at this moment.
Dananjaya Silva is the managing director of London-based PMD Tea and a third-generation tea man whose family business, P.M. David Silva & Sons, dates to 1945 during the Plantation Raj in Ceylon’s Maskeliya Valley.
Sri Lanka is in turmoil politically and financially; the country of 22 million is struggling as widespread demonstrations continue. Unrest is tied to food inflation exceeding 50%, with critical shortages of cooking gas, fuel, and reliable electricity. The country has defaulted on its foreign debt, and its currency devalues with a credit rating that discourages outside investment. Government bankers are at an impasse in negotiating a bailout from the International Monetary Fund that will depend on difficult reforms, including higher taxes and governance changes. Tea producers are confronting all the above challenges, yet the Ceylon tea brand remains resilient. Last year, the industry generated $1.32 billion in US foreign currency, exporting 300 million tons of tea, of which 270 million was high-value orthodox tea.
Export earnings increased 6.72% during the 2021 calendar year compared to 2020. Every subcategory reported growth, with exports of tea bags growing 84%, tea packets up 10%, sales of bulk tea up 2.5%, instant tea sales of 19.5%, and green tea up 22.8% through December, according to the Export Development Board.
Industry veteran Niraj De Mel was named Chairman of the Sri Lankan Tea Board in June 2022, his second appointment to a position that he previously held in 2004. In this discussion with correspondent Dananjaya Silva, Managing Director at PMD Tea, de Mel explains the challenges and solutions facing Sri Lanka’s tea industry.
Listen to the Interview
Sri Lanka Tea Board Chair Niraj de Mel discusses challenges for the tea industry.Niraj de Mel with Bigelow Tea CEO Cindi Bigelow and Prasanna Panabrooke. Photo via Bigelow Blog
During his 45 years in tea, Niraj de Mel has worked as a taster, broker, exporter, and educator. He is past chairman of the Tea Exporter’s Association and the Colombo Brokers Association and served as vice chairman of the Colombo Tea Traders Association. He is the founder and director of The Mel’s Tea Academy in Colombo.
Dananjaya Silva – Tea professionals globally say they are happy to see a safe and steady hand on the tiller as you return to steer the Sri Lanka Tea Board. Given the current political situation, how secure is your position?
Niraj de Mel – Well, to start, let me tell you a bit about the developments before my appointment [on June 20]. Come the middle of May, the industry got together, and because they thought it was time, we told the authorities what we knew best and what was best for the industry.
So, arising from that, they also decided on the people best suited best-suited for the positions at the TRI [Tea Research Institute] and the Sri Lanka Tea Board. I was asked to step back into my previous role as chair for obvious reasons. The immediate past chairman went along with this delegation and met the minister [Minister of Plantation Industries, the Hon. (Dr.) Ramesh Pathirana] to discuss these things and told him that after the debacle as a result of a wrong decision on fertilizer, it’s time that we get the feedback from the experts. Plus, the industry will tell them exactly how things should be run. We have been doing this for the last 155 years, and it’s arising from that conversation that I’m in this seat today.
Dananjaya – Now that a new president has been named, will changes in the cabinet likely means a new appointee to the Minister of Plantation Industries post?
Niraj – I sincerely hope that he [Dr. Pathirana] will be reappointed to the position. Of course, there is no issue whatsoever because he and I will get on.
He’s a minister who sizes up things quite well. He’s a learned man being a medical doctor himself. If there is going to be a change in ministers, the Associations will take up with whoever who’s appointed to the position of Minister plantations that you know that I should remain. Be that as it may, I’m here to do the job.
First and foremost, we need to steady the ship.
Dananjaya –The ban on importing chemical inputs, including most fertilizers, was halted in October, but the effects of the setback linger.
Niraj – Mistakes were made, but circumstances that led to that decision have changed. The big development is a result of the Russian-Ukrainian war, a conflict between some of the world’s largest fertilizer suppliers. Fertilizer has since become scarce and prices went sky high, impacting Sri Lanka at a time when our currency itself also depreciated, compounding matters for the average tea farmer. It’s now virtually impossible for him to afford this kind of price.
To address that, the Sri Lanka Tea Board considered an initiative that has been knocking on the door since January. I see from the minutes a request for funds from the promotion levy to be used to facilitate a loan scheme so that farmers get fertilizer to start feeding these bushes, which have been starved for nutrients.
The board has since delivered fertilizer to nearly 100 factories to offer to smallholders and regional plantation companies. They are working to ensure that the estates will have sufficient fertilizer within about one and a half months.
Editors Note: The Hindu reports that India, on July 17, delivered 44,000 metric tons of urea under a credit line extended to Sri Lanka, as part of New Delhi’s ongoing efforts to support the island nation’s farmers and help bolster bilateral cooperation for food security, the Indian High Commission in Colombo said.
Dananjaya – It seems we’ve returned to the days of old during the colonial period when the Planter’s Association essentially told the Governor of Sri Lanka what was good for the country. Because what was good for the planters’ community was good for the country.
Niraj – Absolutely. Absolutely. It’s time actually that all the private sector did that, not only tea. The private sector has long been the engine of growth in this country, be that planting, manufacturing, exports or brokering. All that is well handled by the private sector and the government sector, such as the Tea Research Institute of Sri Lanka, does the research.
Dananjaya – The crisis not only impacts the rural tea sector. Service providers report difficulties obtaining financing, fuel, and reliable electrical power in Colombo, Sri Lanka’s hub for blending, packaging, and shipping. Will you describe how the tea board is addressing these concerns?
Niraj – I think there needs to be some clarification on this. The private sector basically handles it, but we are trying as far as possible to assist. I have tried to instill into the minds of the officials that we have to be an enabling outfit.
Going back to your question No. 2, there’s one item that was missed: the fuel factor. Actually, that has taken precedence over fertilizer now because the collection of leaves as well as bringing the manufactured tea out is essential to run your factories. Exporter functions, particularly the tea bagging sector, where the machines have to be run continuously, all require an uninterrupted power supply. Power cuts that have been prevailing in this country for the last 4-5 months are an encumbrance to the people, as a result of that, now compounded by the fact that there’s fuel scarcity, particularly diesel. So given the availability of fuel we are trying our best to contact all concerned with the right message to ensure that the producers get their fuel quota.
They cannot have it the way they used to have, because the country itself is, you know, is importing fuel ship by ship. The private sector importers, in particular, have stepped in, which is very magnanimous on their part. To fast-track this process, the government has said, well, if you can produce the foreign exchange, you can certainly get the fuel across. So, the private sector exporters banded together to give off whatever they could.
Dananjaya –As new problems have arisen over the course of this year, from power cuts to rationing fuel, the tea industry has drawn on a battle-hardened core of tea professionals who are able to react quickly and make provisions to see that the industry continues to operate.
Niraj – That’s right. That’s right, reaffirming that Sri Lanka tea has for 155 years been one of the most resilient industries in this country.
There will be little disruptions here and there, but the fact of the matter is we are managing, though it’s challenging. There is great unity among the stakeholders, particularly now with these current issues which they had to face together. We started at the beginning of the pandemic back in 2020. Everybody came together in two and a half weeks to quickly convert to an electronic platform to conduct the auctions, which was great. That carries on to this day. The Colombo traders are very, very confident that there will not be a return to the old outcry system. I started life as a broker and enjoyed the outcry system, but the fact-of-the-matter is we have to move with the times. The platform has enabled us to quicken the process, giving buyers, producers, and brokers time to spend on other things.
Cricket is an apt metaphor… Cricket is the only game that stops for Tea, the country might be 74/8, with a bumping pitch and blinding light, but the Tea sector continues to bat on at the crease.
“Play up! Play up! and Play the Game! “
– Niraj de Mel
Dananjaya Silva is the managing director of London-based PMD Tea and a fourth-generation tea man whose family business, P.M. David Silva & Sons, dates to 1945 during the Plantation Raj in Ceylon’s Dimbula Valley.
