BoC ceases to advise LCs on  tea exports to Iran


By Ravi Ladduwahetty

The Bank of Ceylon, the only bank which was assisting tea exports to Iran amidst the turmoil in relation to US led sanctions, has stopped advising exporters on Letters of Credit from end last week.

The Bank of Ceylon has told the tea industry that the bank will exit from the advise on Letters of Credit for their exports. This has been the reason for the low prices seen at the Colombo tea auction this week for the first time, Tea Exporters Association Chairman and Van Rees Ceylon Ltd Managing Director Niraj De Mel told The Island Financial Review yesterday.

Exporters are unable to service new orders under these circumstances and this comes in wake of not only the US sanctions but also the European sanctions which will come to effect from June 30.

However, he said that the government was working on a different mechanism to work out a solution. Some exporters will continue to export tea to that market, possibly not with the same steam, but by using other channels of receiving payments.

"It is heartening to note that from a Sri Lankan perspective that Iranians will not stop to continue drinking Ceylon Tea, and especially the Flowery Grades which is sold as a niche product in that market and it will be time that will see how the market forces will settle down to import Sri Lankan teas," De Mel said.

Another moot point is that Iran has been importing Ceylon Tea steadily from end May 2011 to now, and their tea stocks are expected to remain until the end of Ramadan in August.

There was a total export of 30 million kilos of tea which Sri Lanka exported to Iran last year through the legal and official channels and a further 15 million kilos through the unofficial channels and the losses to the local industry is estimated at around US $ 150 million by very conservative estimates.

animated gif
Processing Request
Please Wait...