India and Sri Lanka – New Moves Aim to Support Both the Tea and Coffee Sectors

Both India and Sri Lanka are renewing their separate national programs to support the tea and coffee industries. Here’s a summary of their recent initiatives and why they're important.

Key Initiatives in India

The national government in India is rolling out a program that’s structured in ways that will help to realize the potential of Assam, a key State of India, which is based in the country’s northeast.

The program is spending funds in order to increase multimodal connectivity and regional trade with the 10 countries of the Association of Southeast Asian Nations (ASEAN) – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – as well as with Bangladesh, Bhutan and Nepal.

The national government in Delhi, together with its partners, now believe that Assam’s favorable geo-strategic location offers opportunities to strengthen regional and cross-border trade. Developing economic corridors, which link India to regional neighbors in Southeast Asia, is not an easy effort. But it's considered to be a national strategic priority in India, both economically and politically. This builds on the vision for Assam to follow an outward-looking growth strategy and become a US$75 billion economy by 2025. The underlying vision is geared toward ensuring that both the State of Assam and the rest of India remain committed to the U.N.’s Sustainable Development Goals.

Indeed, the government thinks that the northeast region of India can become a big player in the global market for agricultural products. However, the region produces surpluses and has been a net exporter.

Overall, the tea industry in Assam is about 180 years old. The first Indian tea produced in Assam was sent to the United Kingdom for public sale in the year 1838. Assam is the second-largest tea production region in the world after China. About one-sixth of the tea produced in the world comes from Assam. Assam’s local tea industry contributes more than 50 billion yen annually as agriculture income and adds to foreign exchange earnings through its exports. Assam tea is currently exported to more than 70 countries, including Pakistan, Egypt, Japan and Israel. Iran, the Russian Federation and United Arab Emirates command more than 50 percent share of Assam tea exports.

ADB’s latest report on Assam said that “the current strategy of selling CTC tea leads to low-value output in a highly competitive, commodity-led market. Investments in de-bottlenecking infrastructure and leveraging the small tea growers (STGs) of Assam can develop the entry into the high value global and Indian leaf tea market”.

ADB goes on to say that, for the past couple of decades, Assam’s tea industry has had to deal with numerous challenges. The list includes increased competition from new tea-producing countries; steadily declining price of tea, high cost of production; labor issues; sporadic rainfall due to climate change; a lack of storage facilities; low research and development. These issues have been exacerbated by the inability of the local supply chains to adapt to changing patterns of consumer demand.

More than half of Assam’s tea production comes from small tea growers who now number more than a lakh. The small tea grower’s movement in Assam came up after 150 years of the introduction of tea in the state. It was in 1978 that Soneswar Bora, who was agriculture and cooperation minister, declared that the state government would like to encourage the Assamese people to take up tea plantations in their homesteads and fallow lands at their disposal.

ADB's expert report said this about Assam's tea sector: “Traditionally, the STGs were not part of the Tea Board database. According to discussions with industry experts, the dramatic shift post-2014 in the number of STGs is on account of the increase in outreach to connect the STG to the overall tea supply chain system. In view of this, a rediscovery and reorientation of Assam’s tea garden management strategy toward STGs are overdue.”

The ADB programs aim to incentivize STGs to move toward organic cultivation could make the Single Estate or Single Origin Tea even more exclusive and high value. 

Key Initiatives in Sri Lanka

In a new effort which aims to assist the national tea and coffee industry in Sri Lanks, the Colombo-based SME Development Bank Sri Lanka (known as SDB Bank) entered into a joint initiative with the ADB. The goal is to provide a line of credit (LoC) to selected small and medium-sized enterprises (SMEs) in Sri Lanka. Among those SMEs within this lending program will be firms which are led by women and/or are first-time borrowers. The emphasis will be on those which lack sufficient collateral and those who are located outside of Colombo.

The new financing facility is the main part of a larger project, which includes technical assistance for developing innovative financial schemes for SMEs. Promoting export-oriented cluster development is one primary aim, as is developing an ecosystem for women entrepreneurship in Sri Lanka.

Both SDB Bank and the ADB are known for their commitment towards SMEs, and towards the export-oriented businesses and women-owned and run enterprises which will participate in this initiative.

ADB is a very active promoter of social and economic development in the Asia-Pacific region. It by provides low-cost and no-cost loans, plus technical assistance, grants and equity investments. ABD has decided to focus its “2030 Strategy” on achieving what is calls “a prosperous, inclusive, resilient and sustainable region,” while sustaining its efforts to eradicate extreme poverty.

SDB Bank has worked during the last 25 years to support Sri Lanka’s SMEs and MSMEs for the development of its rural economy, and the ADB sees SDB bank as a key strategic partner in the region.

In addition, new information has been announced by Champa J Dasanayake, the head of SME banking at SDB Bank: “The SME LoC from ADB is a lifeline for local SMEs, especially those driven by women, those that are not financially included and those located outside Colombo city areas and are thus exposed to economic vulnerabilities.” She added that “Sri Lanka is at the edge of a precipice with an unforeseen economic crisis, with a scarcity of power and energy and food security that is detrimental to the entire nation, including SMEs that are not financially and operationally stable.”

All types of SMEs are permitted to apply for the loan facility, with priority given to agriculture and agro-processing, plus export-oriented businesses, excluding trading, leasing and renting businesses. Among these, a special loan allocation is being made for first-time borrowers, women-led enterprises, business owners with non-collateralized working capital loans and SMEs located outside the Colombo District.

The project also includes technical assistance to develop innovative financial schemes for SMEs and promote export-oriented cluster development – an initiative funded by the Japan Fund for Poverty Reduction (JFPR), which will help to augment SDB bank’s existing technical assistance initiatives for SMEs and MSMEs.

In addition, the technical assistance will support the development of an ecosystem for women entrepreneurship in Sri Lanka, funded by the Women Entrepreneurs Finance Initiative (We-Fi). The We-Fi grant can be applied for by qualified enterprises, including SMEs requesting a minimum of Rs. 750,000 and a maximum of Rs. 30 million and where women play a significant role in the enterprise either in ownership, control, management or board operations. These sub loans are provided for working capital, land purchasing and construction, while trading, hiring, renting and leasing businesses are exempted.

The project also includes a Tea Small Holders Refinance Loan scheme, which is designed to encourage new planting and replanting activities, considered to be a timely need to enhance the sustainability of the tea industry.

The loan scheme is provided to support capital investments in all types of projects that will increase leaf production through good agriculture practices such as planting, infilling, nursery development, irrigation, water and soil management etc. Passionate about empowering women entrepreneurs, facilitating digital inclusion of the country’s masses and driving sustainability both financially and environmentally, SDB bank will actively roll out this SME project in partnership with the ADB in the coming months to uplift the nation by enabling deserving SMEs – the real drivers of Sri Lanka’s economy.

For 40+ years, Gordon Feller has examined the big and small changes effecting agriculture. He serves as Global Fellow at The Smithsonian Institution; lectures and consults widely on all continents; has been awarded numerous prizes, including The Japan Foundation’s Abe Fellowship; served as Wallach Fellow at Columbia University in N.Y.C.; and founded Meeting of the Minds. His first book, published in 1979, is still in print, and he’s a contributor to World Tea News.

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