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Pakistan to join the club of tea producers
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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.
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Legal tea import statistics for the last five years
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1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
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(tons) |
(tons) |
(tons) |
(tons) |
(tons) |
(tons) |
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116,000 |
111,000 |
87,000 |
112,000 |
108,000 |
105,000 |
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