Brewing uncertainties

The apex bodies of tea associations in India have urged the Ministry of Commerce to maintain the status quo in import duty on tea. The move follows the Federation of All India Tea Traders Association (FAITTA) pushing for importing tea for domestic market in India after prices of tea produced in the country have gone up due to shortage in supply. Impact of reduction of duty to facilitate import of tea for domestic market will prove catastrophic for the country's tea industry which is trying cope with new market realities of rising production cost. Assam accounts for more than half of the country's total tea production and therefore such a move will prove to be a death knell for the large as well as small tea gardens and jeopardize the lives of over a million tea garden workers and their families in the state. Import of tea to India attracts 100 per cent duty which holds a protective shield for the Indian tea growers against competition in the domestic market from growers in other countries. Domestic consumption accounts for about 80 per cent of the total tea production while exports account for the rest 20 per cent. In 2019, the country produced 1389.70 million kilograms, the highest ever quantity. The total production in 2018 was 1338.63 million kilograms. Records of Tea Board of India show that 60.35 million kilograms of teas have been imported to India over the last three years and only 23.43 million kilograms have been re-exported. This means the rest 36.92 million kilograms of imported tea have been sold in the domestic market. Such leakage of imported tea in the domestic market is enough reason for the tea associations like Indian Tea Association, Consultative Committee of Plantation Associations, and the United Planters' Association of Southern India to press the alarm bell. Some tea traders affiliated to FAITTA pushed the idea in the public domain that while the prices of domestic tea have soared after COVID-19 pandemic disruption resulted in decline in production and shortage in supply they were unable to pass it on to the consumers because of their economic hardship in the prevailing pandemic situation.

Even though the FAITTA traders suggest import duty reduction only for this year, the apex tea associations have warned that any such move would offset the demand-supply equilibrium, make the industry unviable, and affected about 1.2 million workers employed by the industry in the country as it would allow cheaper teas from countries like Kenya, Vietnam flooding the domestic tea market. Tea prices in Kenya and Vietnam have crashed due to rise in production. Indian industry has estimated a fall of about 120 to 140 million kilograms due to lockdown and heavy rains and floods in Assam. Shortage in supply pushed buyers' demands due to which the industry has witnessed a quantum jump in average prices of tea in the domestic market. Average price of all teas at Indian auctions in July was Rs 227.83 against Rs. 151.15 in the corresponding month in 2019. The tea prices have risen after stagnating for about eight years but the challenges of sustaining it when the production goes up remains. Average monthly consumption of tea in the country is estimated at 90 million kilograms. The out-of-home roadside tea stalls, restaurants, hotels, tea kiosks, industrial worksites account for nearly 40 per cent of domestic tea consumption which declined significantly in the prevailing pandemic situation and lockdown restrictions. On the other hand, country's tea exports have also declined by about 27 million kilograms between January and May and the same quantity is now available in the domestic market. On August 10, the Tea Board of India issued a notification reminding the traders that the Tea (Distribution and Export) Control Order, 2005 prohibits a distributor from carrying out the business of distributing imported tea and no exporter shall exportteas or export imported tea except under a business license obtained in accordance withthe provisions of this Order.Besides, the Food Safety Standard (Packaging &Labelling) Regulations, 2011, requires that where an article of food is imported into India, the package of foodshall also carry the name and complete address of the importer in India and where anyfood article manufactured outside India is packed or bottled in India, the packagecontaining such food article shall also bear on the label, the name of the country oforigin of the food article and the name and complete address of the importer and thepremises of packing or bottling in India. The tea bodies have insisted on strict enforcementthis inspection regime to ensure strict vigil against leakage of tea imported for re-export in the domestic market. A clarification by the Ministry of Commerce will put at rest the speculations over reduction in import duty on tea.