For the love of tea

Given that mornings across the country and across social cadres start with a cup of tea, it is not surprising that Pakistan is one of the top tea-consuming countries in the world. At about 1kg consumption of tea per capita, Pakistan is ranked third globally for overall tea consumption. Since tea is a poor man’s beverage as much as for the rich, the love of tea generates demand for imports as well as smuggled goods.

Resultantly, tea is one of the top food imports and it has clocked in at $524 million for 11MFY18, the highest ever level recorded. The higher import bill was driven by prices which rose by 12 percent per unit, from about $2,700 per ton to nearly $3,000.

Pakistan was a bulk producer and exporter of tea till 1970, but after the loss of its eastern wing, aka Bangladesh, it turned into an importing country. Despite several bouts of research undertaken, and districts of Manshera, Battagram and Swat identified as having areas suitable for tea cultivation, Pakistan’s tea production remains non-existent.

A 2012 study published by the National Agriculture Research Centre indicates that tea is a high value crop, with a gross margin of Rs21,340 per acre as compared to wheat or maize which earn a gross margin or Rs6,675 acre. But farmers are not interested firstly due to high initial investment and secondly because tea plants take 3 to 4 years before they can start producing the required leaves.

Thus, Pakistan’s tea manufacturing sector is dependent on blending imports and packaging them for the consumers. The local sector is divided roughly 50/50 into big formal players such as Lipton and Tapal and unorganized and unbranded tea sales. The formal sector in particular faces competition from smuggled tea.

By some estimates, more than 20 percent of annual tea consumption is sourced through smuggling. However, it is possible that this figure is understated. Keep in mind that Afghanistan is not a country of black tea drinkers, green tea is preferred there. Yet, in 2013, nearly 150,000 tons of tea was imported by Afghanistan via Afghanistan Pakistan Transit Trade Agreement (APTTA) of which nearly 80 percent was black tea. To put it in context, consider that the amount of black tea imported by green tea drinking Afghanistan was almost equal to the amount of blended tea manufactured by black tea loving Pakistan.

Even more telling is that Afghanistan’s total official black tea imports were 25,000 tons as per trade maps, i.e. less than 20 percent of the volume reported by APTTA records. This begs the question as to how much black tea was officially imported by Afghanistan as compared to the amount of black tea that gets smuggled into Pakistan.