The Hindu Business Line : Pak Budget cheers Indian tea sector

GONE are the days of nuke ka badla nuke. Now the Pakistani Finance Minister makes announcements in his Union Budget and the Indian industry jumps up to rejoice.

It happened on Monday when Pakistan's Finance Minister decided to slash the import duty on several commodities including tea from 20 per cent to 10 per cent. The move was immediately welcomed by all in the Indian tea sector.

According to Mr C.K. Dhanuka, President of India Tea Association (ITA), Pakistan Government's decision would help the Indian tea industry a lot in competing with other tea producing nations.

It may be noted that though Pakistan is the third largest drinking nation with an annual consumption of approximately 140 million kg, it hardly produces any domestic tea. During the last one year, ITA has successfully opened trade channels.

Discussions between the Indian tea exporters and the Pakistani importers are regularly on. During the last year or so, at least two MoUs were signed between ITA and its counterpart, Pakistan Tea Association.

The sole aim behind all these dialogues and agreements is to increase tea trade between the two countries up to the targeted level of 20 million kg.

Pakistan Government announced that it would reduce import duty on tea by 10 percentage points. In effect, the total incidence on imported tea from India into Pakistan would come down from 52 per cent to 28 per cent.

Out of 140 million kg of Pakistan's annual requirement of tea, approximately 40 million kg is reportedly smuggled into the country. These teas are mostly produced by the Kenyans.

``If the effective import duty falls, then it would certainly help the Indian importers as smuggling tea into Pakistan becomes unattractive. This would help us because more queries for the Indian tea is likely to be generated,'' Mr Dhanuka told Business Line.

During 2003, Indian tea industry exported around 7 million kg to Pakistan against 3.5 million kg in 2002. During the current year, exports to Pakistan are said to be on the upswing.

Indian tea industry is likely to enjoy another advantage on the price front. Tea prices in the Indian auction houses have stabilised during the last few months. On the other hands, Kenyan tea prices at the Mombasa auction, is reported to be on an upswing.

For the Pakistani market, India is also competing with teas from Vietnam, China and African countries. Its greatest disadvantage is its high production cost but the advantage is on freight. Transportation cost of tea from India to Pakistan is almost negligible.