The 'goodwill' visit of the Indian Tea Association
and the signing of a memorandum of understanding with its Pakistani
counterpart to export a minimum 10 million kilogram of tea, subject to
'quality and price', during the current fiscal, is aimed at giving India
a deeper penetration of the local market. On the other hand, the local
tea blenders expect to substitute the costly Kenyan tea with
comparatively lower priced Indian product to enhance their
profitability. While businesses on both the sides expect to derive
mutual benefits from the deal what remains to be seen is that would the
arrangement benefit the consumers and discourage massive smuggling to
help improve governmental revenue?
While one can easily understand the interest of the
Indian tea producers in Pakistan, a tea-guzzling nation with a per
capita tea consumption of around one kilogram making it the world's top
third tea importer, it is also imperative to ensure that the interests
of the consumers are also protected. The benefits of significant
reduction in shipment costs and the competitive prices of tea imports
from India should be passed off to the consumers.
Before putting up the case for consumers, let us
first highlight the intricacies of the tea market in Pakistan and why
the Indian imports should offer price relief to the consumers. The
annual tea consumption in Pakistan stands around 140 million kilogram of
which about 102 million kilogram is imported into the country legally
while the remaining 38 million kilogram finds its way on the retail
shelves illegally. Of the 102 million kilogram legal imports, around 70
million kilogram is branded while the remaining is sold in loose form.
Multinational Unilever enjoys the biggest share of the branded market
followed by national Tapal Tea and the two companies collectively
sharing around 85 per cent of the branded market. A number of smaller
companies collectively share the remaining 15 per cent of the branded
On the other hand, around 38 million kilogram of the
product smuggled into the country, is primarily sold in loose form,
along with imported counterparts, thus making it easy for the
unscrupulous elements to push their products across thousands of retail
shops across the country.
Talking to PAGE, the former chairman of
Pakistan Tea Association Hanif Janoo said though Indian tea is already
being imported into the country it is a 'weak tea' grown in the southern
part of India. However, he added, the ITA delegation which signed the
MoU with Pakistan Tea Association comprised producers mainly
representing the northern tea plantations, Assam being the most notable,
which produce strong tea suitable for Pakistani taste.
He said that at present Kenya is the top tea supplier
to Pakistan contributing around 65 per cent of all legal imports, as
well as the bulk of quantity finding its way into the country illegally.
Indonesia, with 8 per cent share, is the second top exporter while
India's share is around 3 per cent while the rest of the demand is met
by a number of countries in Asia and Africa, he added.
He said that the MoU is not a business deal and the
PTA members are not bound to import tea from India unless it is
competitive in quality and price. "The rates need working as the
landed cost of stronger tea from Northern areas of Indian works about Rs
85-86 per kilogram (around 1.5) which is much higher than imports from
other sources in the region and only slightly lower than that of Kenyan
product — which has acquired the benchmark status for taste in the
Pakistani market. Unlike other countries, the proximity between India
and Pakistan, and the substantial savings thus offered in shipment
costs, should reflect in prices.
"The average landed cost of Kenyan tea works out
around $ 1.80 per kilogram C&F Karachi while that from Sri Lanka is
around $ 1.30 per kilogram. The average landed cost of 'weak' Indian tea
from the South is a low $ 0.90 per kilogram C&F Karachi. In
addition, tea imports from Sri Lanka, despite being comparatively lower
priced, is not even workable due primarily to its inferior quality.
While tea grown in the Northern areas of India is capable of satiating
the local taste buds, another problem is the availability of stocks as
India itself has a huge tea demand."
The general manager finance and corporate services of
Tapal Tea, Y.H. Thara, said that the local blenders expect to import tea
from India provided it is price competitive and meets the taste, aroma
and colour tests.
Kenyan tea not only finding its way into the country
in large quantities legally but it is also being smuggled into the
country in huge quantities. The bulk of the 38 million kilograms of tea
smuggled into the country is from Kenya. Both Hanif Janoo and Y.H. Thara
blamed high import tariff for the smuggling which has increased over the
Does the 5 per cent reduction in duty on tea imports
to 20 per cent in the latest Budget discourage the menace. Both Hanif
Janoo and Y.H. Thara said it would not as the reduction still allows the
unscrupulous elements to enjoy a menaingful edge over the legal
importers. "The duty should had been reduced by 15 per cent to 10
per cent to help discourage smuggling, if not fully than at least
partially", Hanif Janoo said. "It would have no great impact
on smuggling because the 15 per cent GST at the import stage has a heavy
impact to inflate the landed costs allowing smugglers to enjoy a clear
edge against imports. If the GST was reduced it may had a positive
impact", added Y.H. Thara.In principal, tea imports from India
should be comparatively cheap and to discourage smuggling on the one
hand and providing savings to the consumes on the other.