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Saturday, Aug 03, 2002

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Pak zero-duty offer to Lanka tea means little for India

Rabindra Nath Sinha


PAKISTAN'S recent move to allow zero duty entry of Sri Lankan tea is of little import to India which, for circumstances beyond its control, has to be content being a very minor player in the Pakistan tea market. Effective mid-June, Pakistan reduced its import duty on tea to 25 per cent from 30 per cent.

The Pakistani offer to Sri Lanka, it appears, is part of a composite free trade deal that the two countries are set to clinch in the near future. The offer was made by Pakistan in response to a plea by a Sri Lankan team during recent bilateral talks on trade.

The two countries are also to consider setting up joint ventures in Pakistan to blend and distribute teas imported from Sri Lanka. This is seen from the extract of a published news item carried a few days ago by Forbes & Walker Tea Brokers in its market report.

Sri Lanka is predominantly a producer of orthodox tea and the share of its CTC tea in the total annual output is just around six per cent at 17 million kg (mkg). Pakistan is predominantly a CTC market. Sri Lanka's tea exports to Pakistan in recent years have varied between four and five mkg. It is to be presumed that the entire quantity of Sri Lankan exports consists of CTC tea.

The zero duty offer, when formalised, may certainly help Sri Lanka push some more CTC tea to Pakistan. But the fact remains that it is a very minor player in the global CTC tea trade. The limited CTC tea production limits its scope. Pakistan imports more than 50 per cent of its tea requirements from Kenya. Indonesia is the second important supplier to Pakistan. It is doubtful whether the existing sourcing arrangement of Pakistan will see a radical change just because of the zero duty offer to Sri Lanka.

India, with its large CTC output, is ideally placed to service the Pakistani market because of not only the proximity factor but also the strong preference of Pakistani tea drinkers for strong liquoring Assam CTC teas. But, considerations other than commercial have stood in the way of effectively tapping the Pakistani market which has a per capita consumption of over 0.8 kg against India's 0.65 kg.

This is despite the fact that over the past 5-6 years teams comprising representatives of the Pakistani tea import trade visited India and there were reciprocal visits by the Indian team comprising representatives of the tea export trade. At one point of time, the feasibility of starting an auction centre at Karachi also figured in the discussions.

Despite expressions of goodwill and intention to expand India-Pakistan tea trade, a real breakthrough eludes both the countries. Consequently, India remains a minor supplier.

Against Pakistan's imports for consumption of an estimated 110-112 mkg, India's exports to that country were 3.3 mkg last year and 3.34 mkg in 2000. Before that, India's exports were not even one mkg.

This being the ground reality, Pakistan's offer of zero duty facility to Sri Lanka cannot be a cause for much concern for India.

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