Tea importers seek governments help

Tea lovers can breathe a sigh of relief as tea prices are on a decline as weather conditions in the major tea-producing regions of Asia and Africa are returning to normal, according to FAO.
Although, tea at present is selling at $3.20 per kg in the international market, at a level 15 percent lower than the record prices touched in September last year, prices are still nearly 40 percent above the average tea prices during 2005-07.
Market participants believe that the smaller tea inventory level, which exhausted during price rally, will underpin tea prices for some time.
The weakening rupee has become a severe headache for the tea importers, as it is expected to remain under pressure owing to rising crude oil prices and would nullify the impact of the price reduction.
On top of that, as tea becomes expensive in local currency, it also increases the duty cost making it difficult for tea firms to compete with the smuggled tea being sold in the market.
Firms in tea business are paying an average 39 percent to the government in the form of taxes and custom duty, whereas illegal importers incur just about 10-12 percent in bringing tea to local market, thus, making branded tea products expensive, compared to unbranded loose tea.
"Tea prices, during 2005-2009 doubled in international market, trebled in local market on the back of rupee depreciation, but governments revenue from tea imports didn increase with a similar pace, a clear sign that tea smuggling has increased", shared the Chairman Pakistan Tea Association Hamid Saeed Khwaja with BR Research.
In essence, smuggling under ATTA not only damages level playing field among market participants but also promotes inefficient use of transportation and logistics resources.
Expenditures incurred to transport goods from southern sea ports to Afghan border and then back to Pakistan is a waste of the countrys resources. Moreover, smugglers also have to pay significant amount to their Afghan counterparts and kickbacks to government officials.
The affected industries have suggested the government to reduce the duty structure of items that are smuggled through ATTA. Moreover, it has been proposed to make it obligatory for Afghan importers to open LCs and set limitations on the import quantity in line with consumption in Afghanistan.