Agri Business

Tea industry fumes as imports surge sharply

V Sajeev Kumar Kochi | Updated on July 06, 2021

Most of these tea imports are for re-exports   -  The Hindu

Shipments – mainly from Nepal, Kenya, Vietnam – up 139% in January-March

The tea industry is worried over rising imports of the beverage but the “alarming development” is something that cannot be wished away since most of the imports are being done for re-exports.

The latest cause for the alarm is the 139 per cent increase in imports of tea at 5.96 million kgs (mkg) during the January-March period this year compared with the same period a year ago. Led by the United Planters Association of South India (UPASI), the apex trade body for the plantation industry in the South, the industry has voiced its concern.

Rising imports of tea imports are detrimental to the domestic tea sector, UPASI said.

Interestingly, even as tea imports surged, exports from the country have been affected. Higher domestic prices triggered by supply shortages could be a reason for the rise in imports, while higher freight costs have resulted in lower exports.

‘Alarming factor’

UPASI President Prashant Bhansali said that tea imports during 2020 were estimated at 23.40 mkg against 15.85 mkg the previous year. This is a 47.63 per cent increase year-on-year. These imports have been reported from Kenya, Nepal and Vietnam, he said.

“Tea import is an alarming factor but these shipments cannot be stopped. Most of these imports are for re-exports,” said a tea trader source.

However, data relating to the break-up of imports for re-exports of tea are not available. The cost of production has been increasing in the domestic tea sector due to high input prices and wage costs. Any higher intake of teas through import will have a telling effect on the sector, which caters to a large segment of the population residing in remote areas.

According to UPASI, plantation commodities, including tea, have been exposed to international competition since April 2001, when quantitative restrictions were lifted as per the commitments under WTO. The signing of the ASEAN Agreement in 2009 had further opened up the Indian tea market to tea-producing countries like Indonesia and Vietnam. 

 

ASEAN pact

Under the ASEAN Agreement, import duties were gradually reduced since 2009 for tea and the current import tariff for ASEAN member countries such as Indonesia and Vietnam is 45 per cent. Import of tea from Nepal under SAFTA is at zero duty.

“There is no guarantee that the imported tea is sold in the domestic market with the GST component added to it. The tea produced in the domestic market is perhaps exported instead of the imported tea that has to be re-exported,” said the source.

Nepal tea is imported and sold at Darjeeling tea by some traders, while Kenyan and Vietnam teas are blended with South Indian tea and sold abroad to countries such as Tunisia.

The source said that tea was primarily being imported for re-exports. “Imports for sale in the domestic market is not possible since such shipments attract 100 per duty,” the source said.

Cost of imported tea

For example, Kenyan tea is priced $1.20 a kg. After import duty is paid, it will be priced ₹180 a kg in the domestic market with GST adding to the cost further, the source said, pointing out the possibility of imported tea being sold as domestically produced.

On September 10 last year, the Tea Board tightened the Tea Marketing (Control) Order 2005, issuing a notification that all teas sold in the country should comply with the Food Safety Standard (Packaging & Labelling) Regulations, 2011. This was done mainly to check tea imports.

Then, the board pointed out paragraph 3 of the order that says “no distributor shall carry out the business of distributing imported tea and no exporters shall export teas or export imported tea except under a business licence obtained in accordance with the provisions of this order”.

The notification pointed out that 60.35 million kg of tea had been imported during 2017-20 for re-exports but only 23.43 million kg had been shipped out. Industry sources said not all the teas imported for re-exports were shipped out and the Tea Board notification was issued to tackle any irregularity that might have taken place.

Lower duty proposal

Last year, when tea production dropped due to the Coronavirus outbreak and auction prices increased, a proposal was made to allow the beverage’s import at a lower duty but the Indian Tea Board rejected it.

Last year, imports from Nepal made up 50 per cent of the imports during January-September, while shipments from Kenya made up 23 per cent.

UPASI also urged the Government to closely monitor the import of tea. It said provisions of the Tea Distribution & Export Control Order 2005, should be implemented, if necessary.

Exports dip

On the other hand, tea exports have had taken a hit with the volume and value being affected. During 2020, tea exports declined by 42.43 mkg million kgs and the declining trend has continued during the first four months of this year. Though there was some recovery on the export front, the shortage of containers, especially of foodgrade, containers and increased freight charges have turned out to be a big problem for exports. This has resulted in an increase in the transaction time and cost, leading to a considerable delay in completing the export formalities. This could damage the green shoots of recovery seen on the export front, UPASI said.

Published on July 05, 2021

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