MFN status will spur Indian tea exports to Pakistan

October 25th, 2011 - 4:37 pm ICT by IANS  

Coonoor (Tamil Nadu), Oct 25 (IANS) Reeling under the onslaught of fierce competition from Kenya and Sri Lanka, Indian tea planters are waiting for Pakistan to grant most favoured nation (MFN) status to boost exports across the border.

“We are keenly waiting for Pakistan to grant the MFN status to boost exports across the Wagah border as our tea will have a price advantage over competitors with zero import tariff and lower overheads,” state-run Tea Board executive director R. Ambalavanan told IANS here.

Pakistani Foreign Minister Hina Rabbani Khar declared in Islamabad Oct 13 that her country had in principle decided to grant MFN status to India, which had bestowed this on its once arch rival in 2010.

Though Indian exports to Pakistan more than doubled to 18.9 million kg in 2010 from 7.5 million kg in 2009 and to 10.6 million kg in the first six months (Jan-June) of 2011 from 9.5 million kg in the same period in 2010, a substantial quantity of the beverage is unofficially shipped or smuggled into the neighbourhood through third countries (Dubai and Afghanistan).

“The MFN status will immensely benefit growers as well as exporters by avoiding middlemen and availing of the 10 percent tariff exemption Pakistan levies on tea imports. Shipments through the Wagah border will also reduce logistics costs,” the official said.

As the third largest importer after Russia/CIS, Britain and the US in 2010, Pakistan buys more tea from Kenya and Sri Lanka than from India, which is the second largest producer and consumer after China of the aromatic beverage.

China, however, produces (1,475 million kg in 2010) and consumes green tea, while India (966 million kg) and other leading producers like Kenya (399 million kg), Sri Lanka (331 million kg) and Vietnam (157 million kg) grow crush-tear-curl (CTC) tea and orthodox tea.

In spite of the unit price declining to Rs.63 per kg from Rs.89 per kg, Indian exports to Pakistan nearly doubled to Rs.120 crore in 2010 from Rs.67 crore in 2009. Similarly, in the first six months of 2011, export realization from Pakistan was Rs.68 crore as against Rs.63 crore in same period of 2010 despite lower unit price value.

“Though India has accorded MFN status to Pakistan, non-tariff barriers continue, affecting bilateral trade between the two countries. Unless these are resolved, merely granting the status will not benefit us much in terms of trade or volumes,” a tea exporter said on the margins of the planters’ annual conference that concluded here Sunday.

Catering to a large domestic market with growing consumption, the quantity for exports is limited, though Indian teas are qualitatively competitive in international auctions.

“Unlike our fierce competitors (Kenya, Sri Lanka and Vietnam), which export nearly 90 percent of their production, about 80-85 percent of what we produce is consumed domestically leaving less for exports in value terms despite the huge potential for our tea in traditional and emerging markets,” Ambalavanan asserted.

Of the 960 million kg produced in 2010 as against 979 million kg in 2009, India exported only 193 million kg last year compared to 198 million kg in 2009. Likewise, in the first eight months (Jan-Aug) of 2011, of the 619 million kg produced, only 109 million kg was exported, which is 12 percent lower than in the same period of 2010 at 124 million kg out of 585 million kg produced.

In contrast, Kenya’s exports were up by 29 percent to 441 million kg in 2010 from 343 million kg in 2009. Even production-wise, Kenya posted 27 percent growth in 2010 with 399 million kg against 314 million kg in 2009.

Similarly, Sri Lanka’s exports were up by seven percent to 299 million kg in 2010 from 280 million kg, while productivity was 14 percent higher at 331 million kg from 290 million kg in the same period.

“In value terms too, Indian export realization declined 6.8 percent to Rs.2,595 crore in 2010 from Rs.2,786 crore in 2009 as unit price value dipped 4.6 percent to Rs.134 per kg from Rs.141/kg,” Ambalavanan noted.

In the first eight months (Jan-Aug) of 2011, despite aggregate sourcing by Pakistan, the US, the UAE and Egypt, India’s export value declined by 2.4 percent to Rs.1,582 crore from Rs.1,627 crore though unit value had increased by 11 percent to Rs.145 per kg from Rs.131/kg in same period of 2010.

“The latest trends in Indian exports indicate that the dismal scenario will continue in the remaining quarter of this year and may spill over to 2012 unless proactive measures are taken by planters, exporters and the Tea Board,” opined Peter Mathias, chairman of the United Planters’ Association of Southern India (Upasi) tea committee.

(Fakir Balaji can be contacted at fakir.b@ians.in)

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