Sri Lanka’s tea export, one of its major foreign exchange sources, may see a steep decline this year amid the ongoing fuel crisis as factories limit working days to four to five weeks. The crisis, if not addressed, could disrupt the entire supply chain and bring its prized industry to a complete standstill.  

Around a week ago, the government suspended the fuel supply to private vehicles amid the fuel shortage and prioritised distribution to essential sectors, including health and export-based industries. However, supply remains irregular, with some factories receiving fuel shipment once in three-four weeks. 

Sri Lanka’s Tea Factory Owners’ Association has warned that the $1 billion tea industry could come to a standstill if the concern is not addressed. Currently, 264 private tea factories and another 258 factories employing 400,000 people operate in seven tea-growing districts in the crisis-hit island country.

In the first five months of this year, income from tea export was recorded at around $461 million, down by almost 13 per cent compared to the same period last year when it was around $526 million. 

Lionel Herath, chairman of the Sri Lanka Tea Factory owners’ Association, said that factories located in areas such as Balangoda and Matara have started to operate just four or five days a week. This, he warned, could spread further, forcing factories to operate just two to three days.

To support the industry, the government has introduced a series of measures—including offering a fixed assured supply if they make payment in dollars—but implementing these measures on the ground remains problematic. 

For Sri Lanka, which is in dire need of foreign exchange reserves, tea is among a few commodities offering an assured income in dollars. The industry faced immense hardship during the last year’s ban on chemical fertilisers.
 
Furthermore, the consequences of the industry collapse would be significant as over 400,000 people are directly employed in the tea sector, and almost two million are getting indirect jobs. 

The severity of the crisis has reached a level that international banks and fuel suppliers are now refusing to accept the letters of credit issued by Sri Lankan banks, forcing the government to pay in cash.
 
Over two weeks have passed the government has not been able to place any new order. Transportation, schools and businesses are severely affected by the crisis. Tourism, which used to bring over $4 billion annually, is also facing the heat of the crisis, with a successive decline in tourist footfall. 

The government's efforts to procure fuel on credit through bilateral understandings with countries like Russia, Qatar, and UAE have not yet yielded any result. So far, India, which has extended assistance worth over $4 billion this year, remains the only country supplying fuel on credit to Colombo. 

(SAM)