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Lanka’s crisis powers 22% spike in Indian tea exports

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Orthodox tea exports from India have increased by more than 22 percent during the first six months of the calendar year as its largest supplier, Sri Lanka, grapples with an economic crisis, Indian media reports say.

A report published by the Business Standard has said: “According to the latest data available on the Tea Board India website, tea exports from India, during January-June 2022, stood at 96.89 million kg, up by 10.43 million kg (mkg) over the same period last year. Much of the increase was from the orthodox segment, whose exports rose by 8.92 mkg to stand at 48.62 mkg. The increase in exports of CTC tea, on the other hand, was just about 0.80 mkg.The increase in orthodox exports is significant and it’s on the back of the deficit in Sri Lanka, said Kaushik Das, vice president, Icra.

“On an annual basis, Sri Lanka has seen a drop of about 19 percent in production. If this deficit remains, then we are looking at 60 mkg of lower production for the full year. And that is the total orthodox production in North India,” he pointed out.

Orthodox tea refers to loose-leaf tea, produced using traditional or orthodox methods such as plucking, withering, rolling, oxidation and drying. CTC tea is processed using the crush, tear and curl method.

Sri Lanka accounts for about 50 percent of global trade in orthodox teas. According to sources in the Tea Board, exports from India are expected to pick up further in the second and third quarters which will help meet the target of 240 mkg by the end of the year. In 2021, total tea exports from India stood at 196.54 mkg.

“The markets that have been vacated by Sri Lanka is where our teas are going at the moment. Going by the current trend, orthodox will see heightened demand,” the sources added.

The Tea Board, in fact, is planning to encourage more orthodox production by trying to incentivise it in its upcoming plans. Out of a total tea production of 1,344.40 mkg in 2021-22, orthodox production was 113.07 mkg.Data available on Tea Exporters Association Sri Lanka showed that January-July 2022, cumulative production totaled 153.03 mkg, recording a significant decrease of 35.07 mkg vis-à-vis 188.10 mkg during January-July 2021. It mentioned that the production is the lowest for the period since 1996.

India is reaping the benefits from the shortfall. Sri Lanka’s top five markets are: Iraq, UAE, Russia, Turkey and Iran. The major gains for India during January-June have come from UAE at about 9.1 mkg.

“UAE is mainly a re-exporting hub and much of the teas goes to Iran and CIS,” said Azam Monem, director, McLeod Russel India. “We will end the year with 10-15 per cent higher exports. We always exported to the UAE, which we will continue doing. Other major destinations for us will be the UK, US, Canada, and Germany,” he added.

Himanshu Shah, chairman M K Shah Exports, said that Iran had been very active this year resulting in almost 45-50 per cent higher prices of orthodox teas compared to last year.

“The January-June figures, however, don’t fully reflect the extent of buying as Iran mostly buys quality tea of second flush,” he said. The second flush comes to the auction towards the end of June.

“Exports to Russia will pick up in the third and fourth quarter,” Shah added.

The increase in exports to Iran during January-June was 1.39 mkg. “The demand for orthodox is booming. India has made inroads into Sri Lanka’s markets, the challenge is to retain the hold once the island nation returns to normal crop production,” said Anshuman Kanoria, chairman, Indian Tea Exporters Association.

In the last 2-3 weeks, however, orthodox prices have come off from its peak levels. “There is increased supply in the market and tea prices have gone up which is resulting in cash flow problems for exporters. Everyone has limited finance and that is a slight roadblock to increasing exports further,” Kanoria explained.The top two markets for Indian tea are Russia and Iran. Exports to Russia during January-June stood at 14.76 mkg as against 15.88 mkg in the same period of 2021.

Dipak Shah, chairman, South India Tea Exporters Association, said, in the last one month, buyers from Russia have been very active. “With the regular buyers, there is not much issue with payments though arrivals in Russia are still erratic. As of now, things are moving in the right direction.”



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State FM calls for report from IR, admits difficulty in punishing racketeers

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Sugar tax scam: National Audit Office estimates Rs 16.7 bn revenue loss

By Shamindra Ferdinando

State Minister of Finance, Economic Stabilisation and National Policies Ranjith Siyambalapitiya has asked for a report from the Inland revenue Department on the income tax returns of sugar importers who have allegedly benefited from an unprecedented reduction of duty on a kilo of sugar on 13 Oct., 2020.

The gazette pertaining to the duty reduction (Special Commodity Levy) from Rs 50 per kilo to 25 cents was issued by the Finance Ministry during the tenure of the then Prime Minister Mahinda Rajapaksa, who also served as the Finance Minister. S. R. Attygalle served as the Finance Secretary at the time.

State Minister Siyambalapitiya revealed his decision to call for a report during a visit to the Inland Revenue head office on Thursday (22).The Ministry spokesperson quoted Minister Siyambalapitiya as having told Inland Revenue Department officials that losses caused by the duty reduction couldn’t be recovered by re-imposing the duty even if a fraud had been perpetrated in the process. The State Minister was further quoted as having said that it wouldn’t be an easy task to punish those responsible for

the duty reduction. Those responsible could claim that their intention was to bring down the price of sugar, the SLFPer has said.The State Minister has intervened in the sugar tax scam in the wake of the National Audit Office recommending the recovery of revenue losses from those sugar importers. The National Audit Office has conducted a special audit to examine whether consumers benefited at all as a result of the sharp reduction of sugar tax.

The special audit revealed that within four months of reducing the tax (14th October 2020 to 8th February 2021) the cash-strapped government was deprived of tax revenue of a whopping Rs. 16.763 Billion.The audit investigation named one of the main sugar importers recorded a massive profit of some 1,222%.

The report underscored that the tax reduction did not provide relief to the people, but greatly benefited the importers and traders.The former Chairman of the Committee on Public Finance SLPP MP Anura Priyadarshana Yapa declared that consumers didn’t benefit from the duty reduction.

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Combination of ill-timed decisions prevented Lanka recover from pandemic shock

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The country has lost several hundred thousand jobs to Covid-19. The impact of the agrochemical ban on agriculture, the mismanagement of the exchange rate, a highly accommodative monetary policy, and the use of foreign exchange reserves for debt repayment thwarted the country’s ability to recover from the initial shock of COVID-19, an ILO study titled, ‘The labour market implications of Sri Lanka’s multiple crises,‘ has revealed.

“These policy decisions generated multiple crises which impacted on businesses, workers, and their families, manifesting in shortages of essential consumer goods including food, fuel, power, raw materials, and capital equipment on the one hand, and the disruption of key public services, such as education and health, on the other. The fiscal bind and looming debt crisis have also left Sri Lanka very little room to manoeuvre. The economic crises have, in turn, generated political instability and further constrained timely decision-making about how to deal with the crisis,” the ILO report said.

The multiple crises have intensified long-standing worrisome features of the labour market: they have expanded unemployment, widened gender gaps in labour force participation, and given rise to job insecurity, uncertainty, and hardship, it said.

“Sri Lanka lost more than 200,000 jobs to the pandemic between the fourth quarter 2019 and the second quarter 2021. The employment share of the informal sector increased because formal sector employment contracted more sharply. Although there was some recovery, during the second half of 2021, extensive job losse, among employers, augured ill for the vigorous regeneration of jobs,” the study reveals.

The report added that the pandemic also impacted the skills development sector. Efforts to provide education and training online were constrained, mainly due to problems of infrastructure access, particularly outside of the Western Province. Enrolment and completion of TVET courses in 2020, relative to 2019, declined by 50 and 57 percent respectively. However, the imposition of power cuts, in 2022, are likely to have disrupted even these limited measures.

“The pandemic also saw the emergence of the new poor — those who fell into poverty because of the pandemic – among the more educated and employed in industry and service sectors, particularly in urban areas and Western Province, the latter which accounted for the largest share of the new poor. These negative developments would have worsened in 2022 as the economic crises intensified,” it said.

Sri Lanka is currently in a full-blown debt and balance-of-payments crisis, leading to massive shortages of essentials and severe disruption to economic activity. As the crisis continues to deteriorate and is likely to lead to a deep impact on the labour market, which will require careful monitoring and analysis over the months to come, the ILO said. The severity of the crisis means that policy-makers need to grasp the nettle of structural reforms needed for recovery and job-rich growth, which will require carefully balancing macroeconomic stabilization with longer-term goals of creating decent, sustainable, and productive employment. The report suggests eight areas of policy intervention for the short, medium and long term.

They are; addressing current macroeconomic crisis through fiscal consolidation and debt restructuring, plus improved fiscal space, restoring investor confidence, reformulating investment, industry, and trade policies to support export-led growth, technological transformation, productive efficiency and job creation, especially for SMEs, increasing R&D and infrastructure investments with a clear focus on 3IR and 4IR technologies, promoting demand-driven skills development and adjustment to a post-COVID-19 economy, including remedial education/training, creating a social dialogue and legislative reform to support flexible arrangements while protecting workers, promoting policies that foster women’s entry into the labour market and support other hard-hit groups, and expanding access to adequate social protection to workers and families (including institutional reforms).

The report also said that Sri Lanka needs to work on improving learning outcomes. Even the TVET sector performs no better than the general education system, the ILO said. According to a 2018 ADB study, a sizable proportion of TVET graduates leave training programmes, without the skills that employers require. Tracer studies on the employability of TVET graduates reveal a high rate of unemployment among TVET graduates who had been trained for employment in even the fast-growing ICT, construction, tourism, and light engineering subsectors.

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Royal Park murder convict barred from leaving country

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The Supreme Court, yesterday, directed the Controller General of Immigration and Emigration to prevent Don Shamantha Jude Anthony Jayamaha, who was convicted for the murder of a person at Royal Park Apartment Complex, in 2005, from leaving the country, without Court permission.The Court made this decision when taking a case filed by Women and Media Collective seeking the suspension of the Presidential Pardon, granted by former President Maithripala Sirisena to Jayamaha.

The Court also granted leave to proceed with this petition for violating Article 12(1) of the constitution.A three-judge-bench comprising Justices Priyantha Jayawardena, Shiran Goonaratne and Mahinda Samayawardena fixed the petition for argument on 30 March 2023. Previously the Court allowed the petitioners to add former President Maithripala Sirisena as a respondent since he no longer has presidential immunity.

Women and Media Collective had named Attorney General, Jude Anthony Jayamaha, Commissioner General of Prisons, Controller General of Immigration and Emigration, Inspector General of Police, Justice Minister, President of Bar Association of Sri Lanka, as respondents. The petitioners also want the Court to issue guidelines governing the process of granting Presidential pardons.

Jayamaha was indicted at the High Court by Attorney-General for committing the murder of Yvonne Jonsson, on or about 01 July 2005. On 28 July, 2006, the High Court sentenced Jayamaha for 12 years of rigorous imprisonment, and a fine of Rs. 300,000. The Attorney General then filed a case in the Court of Appeal stating that the punishment was inadequate. The Court of Appeal sentenced Jayamaha to death. On 9 November, 2019, Jayamaha was granted a presidential pardon by Maithripala Sirisena during his last week in office.

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