The Hindu Business Line : VAT effect: Tea manufacturers may raise prices in AP

ORGANISED players in the tea industry, who generally have a uniform pricing pattern across the country, are contemplating to increase packet prices in Andhra Pradesh, if the State refuses to reduce the VAT (Value Added Tax) rate from 12.5 per cent to 4 per cent.

Echoing the views of the sector, Mr Pankaj Dant, General Manager (Marketing and Sales) of Tata Tea Ltd, said the sector had been restrained not to increase the prices in Andhra Pradesh in the last four months despite the hike in the rate.

Andhra Pradesh is the only State in the country that had kept tea in the 12.5 per cent bracket whereas all other VAT-implementing States charged 4 per cent.

"The industry as a whole has been asking the Government to make it 4 per cent. We will wait for some more time before taking a decision. Packet tea price has not gone up despite the raise in tax rate. But if this continues, there might be differential pricing for Andhra Pradesh," Mr Pankaj told a press conference organised by Federation of All India Tea Traders' Associations (FAITTA) here on Monday. Andhra Pradesh comprised about 10 per cent of the total industry size of Rs 3,600 crore. "It is a key market for us," he said.

Loss to the organised sector in Andhra Pradesh in the post-VAT scenario had been significant.

It was estimated that there was a dent to the tune of Rs 15-20 on sales of one kilogram of tea. On the whole, tea industry in Andhra Pradesh was facing problems with the disadvantageous tax rate.

Voicing the concern of the industry, he said the State always had higher rates. In the pre-VAT scenario the State had a higher rate of 10 per cent as against 8 per cent in other States. "Now the difference has increased so much," he said.

The Rs 360-crore tea market faced threat with traders, who paid less tax in neighbouring States, taking away business from the unorganised sector. This sector had a share of 40 per cent.

Mr Darvesh Ghiyasuddin, Chairman of FAITTA, said the unorganised sector would lose all of its business if the Government decided to continue with the 12.5 per cent rate.

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