India's domestic tea industry in under threat over fears of large influx of cheap, low quality tea into the country, following easing of import norms and also the recently signed free trade agreement with Asean, one of the largest tea producing regions in the world. According to a report in The Financial Express, traders and industry representatives attending the two-day annual conference of the United Planters Association of South India at Coonoor, fear that import of cheap, low quality tea into India will not only harm the domestic market, but will also tarnish India's export market, when these low-quality stuff is re-exported.
Imports during January-July 2009 is seen higher in volume by 28%, while the value and unit value of imports stand higher by 46% and 14% respectively. Imports from Vietnam during the first seven months of 2009 have increased 318%, while Sri Lankan tea imports are seen higher by 174%. Imports are expected to grow substantially in the coming days. The impact of the new Foreign Trade Policy 2009-14 will only be felt in the coming months.
The government recently launched a scheme under which the minimum value addition under advance authorisation scheme for export of tea has been reduced from the existing 100% to 50%. Though, the commerce ministry has maintained that India mostly imports tea for re-export to other countries and that the imported tea is not sold in the domestic market. But industry experts feel that largescale import of tea can also impact the quality of tea re-exported from India and tarnish the country's image. When the domestic prices are increasing, there is also the possibility of selling the cheap imported tea to the domestic consumers.
Experts feel that the tea industry could also be impacted by the recently signed Indo-Asean FTA. Under the accord that comes into force in January 1, 2010, the import tariff on tea will be reduced to 45% from 100% over the next 10 years. "This will have a catastrophic effect on the Indian plantation sector as it is not competitive, cost wise, and will be wiped out from the domestic market as well as the export market," says D P Maheshwari, outgoing president of the Upasi. "Plantation labour wages in South India are the highest in comparison to our competitors and the additional burden of social costs, which are normally the responsibility of the local government, have made Indian plantation commodities very costly compared to other producing countries and we are losing out on exports," he added.
Traders feel that India could end up being a net importer of teas if productivity does not improve in the coming years.
Source : fnbnews.com