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Pakistan to join the club of tea producers

The ever-increasing illegal trade of tea is causing serious problem to the trade as well as losses to the government revenue

By AMANULLAH BASHAR
July 30 - August 05 , 2001

Pakistan perhaps is among the few countries where tea has attained the status of basic food especially among the poor. While it is used as a source of entertainment by all segments of the society, it is essentially required at the breakfast especially in the urban areas of Pakistan.

Out of the total consumption estimated at 130,000 tons over 100,000 comes through legal imports costing something $210 million or Rs120 billion a year. Remaining portion of the tea consumed brought in through illegal channels and is sold in loose form throughout the country. It is however surprising that the price level both of the branded tea or the loose one is almost the same.

Since the economy has to bear a considerable amount of foreign exchange on import of tea every year, the government as policy matter has encouraged the private sector for production of the black tea within the country. It may be mentioned that in order to locate the area for cultivation of tea, expert opinion was sought from the Chinese tea experts who identified over 150,000 acres of land in Northern parts of the country which they recommended can be utilized effectively as the rich tea growing area. Currently, Pakistan is cultivating tea on 87 acres of land. The results and handsome returns on the existing land are expected to motivate others to bring more areas under tea cultivation.

At present the Pakistan Agricultural Research Council in collaboration with Chinese technical support has set up a pilot project for tea processing at Shankiari District Mansehra in NWFP. The Shankiari Tea Processing Plant having a production capacity 1000-kg per day is likely to go into production sometimes next month. Services of the Chinese engineers were sought for installation of the tea processing plant, which is now ready to go ahead.

Being the second largest tea consuming country Pakistan had to spend a handsome amount of foreign exchange, which was certainly an additional burden over the economy. With the cultivation and processing of tea at home the country would be joining the club of tea producing countries besides saving the precious foreign exchange which was draining out on account of imports and illegal trade.

Smuggling

The illegal trade of tea becomes more active with the rise of prices in the international market. During the current year, the global markets were very strong due to high prices prevailing coupled with the devaluation of Rupee in Pakistan. The declining of the Rupee value is always an added incentive for the smugglers who do not pay duty and taxes and are not documented.

The arrival of tea through illegal channels was estimated around 50,000 tons last year. There are indications that the volume of illegal trade in tea is likely to take a quantum jump this year in view of the increasing prices internationally. According to informed sources there has been a noticeable increase of smugglers operating in the major auction centers. It is also alleged that the dry port facilities are also being misused as the tea consignments are allegedly cleared without payment of duties/taxes. Another trouble area is the Afghan transit trade, which again misused and extraordinary quantities of black tea are re-routed into Pakistan market.

It is alleged that Pakistan's green tea requirement estimated at 3-4 million KGs is entirely catered to by the Afghan transit trade.

According to Pakistan Tea Association, the ever-increasing illegal trade of tea is causing serious problem to the trade as well as losses to the government revenue estimated to the tune of Rs1.4 billion. Smuggling of tea into Pakistan is highly attractive because of duties/taxes total 58-ad valorem particularly in a strong international market environment. The continued increase in duties and taxes reached a record level of 108 per cent of C&F value in 1997. Smuggling of tea reached to the level of 38,000 tons. The smuggling in tea trade however was contained to some extent in 1998 when import duty was reduced by 20 per cent.

Since the smuggled tea evades duties and taxes it is sold at a discount of Rs40 to Rs50 per kg. This type of incentive is becoming a great source of attraction even for the legal tea importers and a large number of them have naturally diverting their buying towards the smuggled tea. If this trend is allowed to prevail the tea business is likely to be the haven of the smugglers.

Under these circumstances, the arrival of Shankiari Tea Processing Plant certainly is the light at the end of the tunnel. Earlier the green tea produced within the country was far superior to the imported one. The results of the black tea have yet to come. However one should hope for the best. The soil plays mother's role in giving the taste and quality to the products. Let us hope that locally produced and processed black tea would also repeat the experience of the green tea.

Legal tea import statistics for the last five years

1995

1996

1997

1998

1999

2000

(tons)

(tons)

(tons)

(tons)

(tons)

(tons)

116,000

111,000

87,000

112,000

108,000

105,000