P.S. Sundar

INDICATIONS are that the biggest apprehension of the tea industry that the post-WTO era would see a surfeit of imported teas upsetting the returns has been, by and large, belied thanks to the industry learning to manage the impact of the WTO.

Although imports are a competitor to the indigenous supplies, the Indian industry is able to face the challenge with its quality teas getting absorbed in the home market. So, even as the industry is representing to the Government against imports, progressive units within the industry are not obsessed with complaining, but devising strategies to position their teas against the imported ones in the market. The result is that quality Indian teas are absorbed at far higher a price than the imported teas.

Last year, imports hit a record 30.52 million kgs, against 9.86 million kgs in 2003. However, in the seven months (April-October) so far this year,, only 9.78 million kgs had been imported against 15.02 million kgs in the same period of last year. . The industry is upset that the imports are resorted to without sticking to quality norms; cheap teas rather than low-priced ones are imported; more teas are being sold as Indian although the imported teas distort the Indian tea's characteristics etc. To address this problem the Tea Board issued a new order this fiscal called Tea (Distribution and Export) Control Order, 2005. The legislation aims at maintaining quality and retaining the brand equity of the Indian teas all over the world. It proposes to standardise the quality norms of the tea imported for re-exports and deals with the certification of origin and value addition. India has stopped import of teas this year from a few sources. Still, the country has imported teas from as many as 16 countries, quite a few of which do not even produce tea. But, the prices of the teas imported are higher than last year for almost every origin. The highest price of Rs 119 a kg has been paid for South African teas. Sri Lankan teas have come with the second highest price tag of Rs 96. Only 1.34 lakh kgs had been imported from the Island. The concessional duty of 7.5 per cent applicable for Sri Lanka under the Free Trade Agreement of the SAARC umbrella has not upset the domestic market.

The lowest price of Rs 23.56 a kg was paid for teas from Turkey, but of general concern is the new supplier - Vietnam. Its teas are available in India for around Rs 37 a kg - some Rs 8 more than last year. But imports are only one-fourth of last year's volume.

The domestic industry is focusing on the home market, realising that exports are becoming increasingly unreliable in the context of the cut-throat competition. This is more so in the South and at the micro-level in the Nilgiris catered to by the Coonoor tea auctions because of the over-dependence on exports. Russia, the largest importer, is insisting on quality supplies but sticking to a price of around Rs 26 a kg. Iraq wants to buy at Rs 25. Pakistan is playing its cards for a wide range from Rs 28-38, but mostly around Rs 32. On the contrary, quality teas even from the small-scale factories belonging to the private sector are being bought by domestic traders for more than Rs 40. There are some lines low-volume-high-value teas which are bought for more than Rs 60 a kg for the home market.

Also, the Government has come up with several subsidies to help the growers. A subsidy of Rs 28 crore has been offered to the small growers of the Nilgiris. There is a subsidy to promote the production of orthodox teas. There are the well-known subsidies relating to replantation, rejuvenation, infilling, factory and field upgradation etc.

The import duty on tea is now 100 per cent , but the bound duty as per WTO norms is 150 per cent. So, there is scope for the country to raise this duty in case WTO-induced imports pose a problem.

(This article was published in the Business Line print edition dated November 22, 2005)
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