SL tea exporters defend them over allegations of stashing dollar earnings
Sri Lanka’s tea exporters have come forward defending their industry along with the bandwagon categorically stating that they were not stashing their dollar earnings without bringing it to the country and they have been abiding by the Central Bank’s relevant rules and regulations.
Amid allegations regarding exporters not converting the export proceeds as mandated by the monetary watchdog, the Tea Exporters Association (TEA) has met with Central Bank (CBSL) Governor Nandalal Weerasinghe recently to clarify the position.
In the first week of December, the local apparel sector too clarified on the misconceptions in this regard.
The TEA, in an elaborated statement to the media yesterday, pointed out that the sector does not have the “luxury” of either delaying the receipt of payments or the opportunity to differ the conversions of export proceeds into Sri Lankan rupees.
This is due to the tea cost amounting to almost 75 percent of the value of the exported items and the survival of the exporters depend on the timely receipt of sales proceeds, specially during the current high interest rate regime.
“Most tea export companies, due to intense competition from other tea producing countries and extended payment terms demanded by supermarkets, provide a reasonable period of suppliers’ credit within the repatriation period mandated by the Central Bank of Sri Lanka,” the TEA said.
The association noted that the tea export business is highly working capital intensive. The teas purchased at the auction are settled within seven days while the sales proceeds are often received within 30-90 days from the shipment date or in certain cases full or part payment is received in advance.
They added the tea export companies convert a much higher proportion of their export proceeds into local currency in comparison with the figures indicated by the Central Bank.
Most tea exporters, to remain competitive, borrow their working capital requirements (packing credit) from local commercial banks in foreign currency.
Once the exporter receives his export proceeds, the borrowed working capital component is deducted by the bank and only the remaining portion is left for conversion into the local currency.
“The exporters believe this financing component caused the discrepancy between the CBSL figures, which were ascertained from the commercial banks and those from the tea exporters based on their actual foreign currency conversions,” clarified the TEA.
At present, the exporters are authorized to make five types of payments in foreign currency—import of packaging materials and other inputs, settlement of loans obtained in foreign currency, payment for brand promotion activities.
Moreover they have to pay legal fees, certification charges and commissions for overseas agents/distributors, payment to suppliers deemed as indirect exporters who have a large import component and payment of shipping and freight charges.
The remaining balances are converted into local currency by the seventh of following month by the respective commercial banks, as per the Central Bank regulations.
The TEA asserted that as responsible stakeholders, it recognizes the necessity for the strict monitoring of the repatriation of export proceeds under the prevailing economic situation.
“Further, they called on commercial banks to maintain accurate records of all inflows related to tea exports, covering advance payments as well as deferred payments and report these complete figures to the Central Bank