The Hindu Business Line : Pak mulls removing import duty on Indian tea

Pakistan is the second largest tea importer after Russia
Pakistan is a CTC market and its demand is mostly catered by Kenya
Indian teas are subjected to a 10 per cent import duty

Kolkata , June 4

Several rounds of hectic lobbying, by the tea sectors on either side of the border, seem to be paying off with the Pakistan Government actively considering removal of import duty on the beverage.

Sources in the Pakistan tea industry told Business Line that senior officials in Islamabad had confided that the only way to tackle the "growing menace" of illegal trade was by rationalisation of the existing duty structure.

Officials feel that tea is an important drink in every Pakistani house and a formal proposal would soon be floated for a complete abolition of all duties on import of tea.

Smuggled quantity

Pakistan is the second largest tea importer after Russia. While Russia imports around 190 million kg, Pakistan imports 140 million kg. Another 20 million kg is smuggled into the country.

It is learnt that the Pakistani officials have conceded that due to the illegal trade the government is losing revenue worth crores of Pakistani rupee. This phenomenon is not specific to tea alone as other commodities are affected too. If import duties are removed then the Indian tea sector is likely to benefit a lot. At present, Indian teas are subjected to a 10 per cent import duty. Whereas its major competitors in this market — Sri Lanka, Bangladesh and Nepal — enjoy zero duty.

Pakistan is a CTC market and its demand is mostly catered by Kenya. Like India, Kenyan tea is also under the 10 per cent duty structure and this tea is also smuggled into Pakistan.

Advantage

However, in the current year the Kenyan tea sector is hit by drought and its price — which is otherwise extremely competitive against Indian teas — has increased sharply. As a result, the Indian tea sector is having a little advantage.

The Indian Tea Board has already identified Pakistan, along with Iran and Egypt, as one of its key export market for the next year and this was formally announced by Mr Jairam Ramesh, the Union Minister of State for Commerce.

In 2005, Indian tea exports to Pakistan was 9.3 million kg and it was mostly supplied by the south Indian producers. For 2006-07, the Tea Board has set a target of 20 million kg of tea exports to Pakistan.

The Union Government is trying to help exports in terms of logistics. The Government is considering a rail link between Karachi and Assam, a major CTC producing area.

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