Tea imports: smugglers going legit?

Tea brands in Pakistan don’t just compete among each other. For past many years, companies behind major tea brands in the country have been fuming over rampant smuggling of tea into the country over past many years.
But while the Pakistan Tea Association laments lack of government action to curb smuggling of tea, recent trade data suggest a higher proportion of brews coming into the country is now arriving through official channels.
Data maintained by the PBS shows that in FY13, about 122 million kg of tea were imported. But PTA insists that per capita consumption stands at one kg per annum; which would put actual tea consumption in the country at about 190 million tons, assuming a population of 190 million people. Association members contend smugglers thrive on this market of 70-80 million kg.
Ehsan Malik, CEO Unilever Pakistan has been one of the most vocal industry voices against smuggling of tea into the country. Talking to BR Research, he reiterated that cutting down import duties and taxes such as GST is the way to erode margins for smugglers.
But the import duty charged on tea has been static at 10 percent in recent years while in the Federal Budget FY14, GST was raised to 17 percent. Despite that, tea imports to the country have been rising over the past four years.
This trend suggests that smuggling of tea, though still rampant, has come down and been replaced by growing imports through official channels that yield revenues for the government. This assertion is also supported by the Tea Board of Kenya (TBoK).
In its FY11 annual review, TBoK has highlighted “unprecedented increase in tea export to Pakistan and subsequent drop of tea exports to Afghanistan” which it has attributed to “continued reduction of smuggling of commodities into the country through Afghanistan.”
Faiza Nasir is Secretary General of the Pak-Afghan Joint Chamber of Commerce and Industry (PAJCCI). She points out that scanners and trackers have been added to check posts in recent times while border posts such as Torkham have also been revamped. “Further improvements in terms of surveillance and oversight can mean serious problems for smugglers and those evading dues,” she said.
If such measures are implemented in a transparent and judicious manner, the government may benefit from a hefty boost in its revenues through Pakistanis’ undying love for a hot cup of tea.