Agri Business

Local tea industry on the boil as import of cheap varieties surges

| | | Updated on: Nov 10, 2021

Imports meant mainly for re-exports diverted to local market; shipments from Indonesia, Vietnam, Argentina cheap despite 100% duty

A surge in imports of cheaper teas, particularly when the domestic prices are ruling low year-on-year basis, is likely to hurt the tea producers. A majority of tea imported is for re-exports, but a fair chunk gets absorbed in the domestic market.

The imports have left the domestic industry upset. M P Cherian, President, UPASI, said higher imports are impacting auction sales as sourcing of teas are getting curtailed and the requirements are being met through cheap imports.

According to PK Bezboruah, Chairman, Tea Board of India, there has been an increase in imports of tea from Nepal that is blended with regular CTC (crush, tear, curl) and sold by packeteers here. Cheap teas from Vietnam, Indonesia and Argentina also are making their way into the domestic market.

Tea imports during January-August this year increased by 34 per cent to 16.97 million kg (mkg) against12.65 mkg during the same period a year ago, as per Tea Board of India data. Total imports last year were up by 50 per cent at 23.79 mkg against 15.85 mkg in 2019.

Teas from Vietnam and Indonesia are coming at prices as low as ₹80 a kg, while the average cost of production of Indian tea is ₹180-220. As result, the unit value of imported tea has slid by 19 per cent year-on-year.

Concerned over rising imports, the Tea Board last year said no one could distribute imported teas, pointing out that of the 60.73 mkg tea imported during 2017-2020 only 23.43 mkg had been shipped out.

The imports have resulted in the average price of India tea sold declining 18-20 per cent this year compared with the same period a year ago.

India, the second largest tea producer with an estimated annual production of over 1,300 mkg, imposes 100 per cent customs duty on imports from countries other than those with which it has a bilateral trade agreement or the South Asian Association for Regional Cooperation’s Free Trade Agreement (SAFTA). Imports for re-exports are, however, duty free.

“Rising imports are definitely a cause of concern for the tea industry and a fair chunk of it (imports) is getting pumped into the domestic market. Some of these teas which are coming from Vietnam, Indonesia and Argentina are much cheaper than domestic teas even after payment of 100 per cent duty. But as long as we are part of the WTO framework I don’t think the government can really do much to stop imports but they should see if the teas are compliant or not,” Bezboruah said.

The dip in tea prices has resulted tea companies such as Bombay Burmah, Dhunseri Tea, Goodricke, Harrisons Malayalam, James Warren, JayShree Tea and Industries, McLeod Rusell and Terai tea listed on the bourses ruling about 30 per cent lower than the 52-week highs.

“If an importer wants to hold the teas within the country by paying 100 per cent duty he can, but the Tea Board has to ensure that the teas are clean and compliant. What the Tea Board can also do is ensure that the teas which are coming for re-exports where duty is not paid or duty is claimed back, they are exported and not swapped with other teas. We are working on improving traceability,” the Tea Board Chairman said.

“Another area of concern is that the higher imports are happening at much lower unit value suggesting lower quality tea is getting imported into the country. This is happening at a time when the domestic tea sector has been struggling to survive due to the increasing cost of production on account of the high input cost and wage cost. This necessitates corrective measures as any higher intake of teas through import at lower unit value will have a telling effect on this sector which employs a large segment of population residing in the remote areas,” UPASI’s Cherian said.

As per Tea Board data, the unit price of imported tea was down at ₹146.38 a kg during January-August 2021, against ₹179.19 a kg same period last year. So higher imports would hurt the industry, which has been struggling for price realization, said Sujit Patra, Secretary, Indian Tea Association.

“Our teas are all subject to FSSAI quality norms so we expect their teas should also be adhering to quality parameters. It is also important to check how much of tea is coming into the country and whether it is getting re-exported or moving into domestic market,” he said.

It is also important to check the country of origin of all imported teas since teas coming from Nepal are at zero duty under FTA. This apart, ITA also wants the present inspection regime for imported teas to be strengthened to ensure transparency and integrity of the distribution chain.

Last year, Nepal made up 50 per cent of the tea imports, while Kenya accounted for 23 per cent.

Published on November 10, 2021

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