Rising fuel prices and logistical disruptions caused by instability in the region are particularly painful for Sri Lanka’s central highlands, where the country’s largest tea plantations are concentrated, Reuters writes.
Sri Lanka’s tea industry, worth about $1.5 billion, employs about 2.4 million people. At the same time, almost half of tea exports worth about 680 million dollars a year go to Middle Eastern countries, making the industry highly sensitive to the crisis in the region.
According to Sri Lanka’s Export Development Board (EDB), tea export earnings in March fell 17.3 percent year-on-year to 114.75 million dollars. Exports to Iraq, the largest market for Sri Lankan tea, fell 38%, while shipments to the United Arab Emirates fell 93%.
Additional pressure on producers comes from rising transportation and logistics costs. Companies report higher fuel costs, supply disruptions and increased transportation costs along key trade routes.
Dilmah, which has products in more than 100 countries, has begun to increase its supply to Canada, South America and the US. About 30% of the company’s business is related to the Middle East, so instability in the region directly affects sales.
Dilhan Fernando, head of the company, said rising fuel prices are adding to inflationary pressures across the supply chain, from domestic transportation to international logistics between Colombo and Dubai.
The problems in the tea industry are adding to Sri Lanka’s economic woes as it continues to recover from the financial crisis of recent years. Authorities have already raised fuel prices by about 40%, imposed restrictions on energy supply and taken steps to reduce energy consumption.
According to industry representatives, people in plantation regions are being forced to cut back on food expenditures and seek more stable sources of income amid rising prices and declining export earnings.
