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Large scale import of tea causing drain on foreign exchange

Published on 15th Apr, Edition 16, 2013

 

Tea was discovered around 5,000 years back and is considered to be the oldest prepared beverage. The tea plant originated from South East China and slowly spread to Indo-Pak subcontinent, Sri Lanka and further into tropical and sub tropical countries.

Tea is available in black, green, yellow and in white colors. The tea tree, under raw conditions, can reach up to 10 to 15 meters. Tea trees are grown mainly in tropical and subtropical regions with humidity of 70 to 90 percent. Rainfalls must needed with a yearly average of 1,500 to 2,500 millimeters. One plant produces about 70 kg of black tea in a year. Tea takes six years to mature and crop life is between 80 to 100 years. It is a high return per acre crop that is higher than other agronomic crops. It is a highly remunerative crop.

Tea is the second most drank beverage after water. It makes the body alive; heal headache, dizziness and weariness. It eases respiration, gives rest to the brain and helps in strengthening the memory. A research study of IC indicates that tea helps in preventing cancer and filling of teeth cavities.

More than 45 countries grow tea in large number for exports as well as local usage. Among all these, Asian countries are the major ones producing more than 91 percent of the tea.

China tops the list as it produces 1,257,384 tons of tea every year and has gain noticeable outstanding in field of agriculture. 15 percent of its total land area is under cultivation and surprisingly tea production is piling up day by day.

India is the second largest producer of tea in the world and produces about 805,180 tons comprising 23.6 percent of world’s total production. There are multiplicity of tea leaves in the country with great taste and delightful aroma.

Kenya produces more than 345,800 tons of tea each year and is well known to be one of the foundations of the world’s tea plants. Although it is the third largest producer but maintaining as the world’s largest tea exporter as it contributes about 9.6 percent of the total tea of the world.

Tea production in Sri Lanka is a significant part of its economy as majority of labor force works in the agricultural sector. It produces 318,470 tons of tea in a year and contributes nearly 9.1 percent of the world’s total tea production.

Turkey produces 198,046 tons of tea in different exotic varieties that satisfies distributors and tea lovers across the globe. Offering tea to the guests and visitors signifies an important aspect of Turkish culture and exhibits hospitality of the country people as well.

With an agricultural area of 17,800,000 acres, Vietnam is prominent in premium quality of rice and tea production. Its tea estate yields approximately 174,900 tons of tea on commercial as well as on industrial scale every year. Vietnam contributes 27 percent of the total tea output.

Indonesia has an established agricultural sector. Highest in tea, cocoa and rice production, it produces more than 150,851 tons of tea yearly. Interestingly, it is the third largest producer of rice but when it comes to tea production it scores 7th rank in the list. Tea has been important part of Indonesian lifestyle from more than two centuries and iced tea is the most favored beverage even at the big restaurants.

Japan annually produces 110,000 tons of tea and the legendary green tea tempts people from across the globe to this land. Tea taste has always been a great symbol of love and friendship as well as signifies magnificent culture of Japan.

In the aftermath of high growth in population the demand for tea is growing at an accelerating rate. Total tea consumption in Pakistan ranges between 200,000 and 225,000 tons and the average annual consumption is estimated to be 1.3 kilogram per person. The annual per capita consumption in the world is 0.75 kg. The average consumption in the United States is 0.35 kg, Australia 2.7 kg, Iran 2.4 kg, Sri Lanka 1.45 kg, India 0.52 kg, China 0.3 kg and Japan 0.94 kg and in Turkey it is 2.15 kg.

Pakistan is a small producer but have a high per capita consumer. Pakistan is perhaps the few countries where tea has attained the status of basic food among the poor masses. In the urban areas of Pakistan, tea has become an essential requirement at the breakfast time. Tea is vastly used in Pakistani offices. Among the top ten tea importing and consuming nation, Pakistan position is third and fifth respectively.

Even before the separation of East Pakistan, desperate attempt was made to cultivate tea in early 1958s but could not prove successful, which lead to some sort of understanding that tea may not become a commercially viable crop in the country. After having witnessed huge import bill on tea after the separation of East Pakistan the PARC (Pakistan Agriculture Research Council) initiated its efforts in 1976-77 to grow tea and after seeing some favorable signs of the growth of tea it invited Chinese experts in 1982 and 1987-88 who discovered the potential area for tea cultivation and identified about 64,000 hectares of land feasible for tea cultivation.

Seeing heartening sign of tea growth in the country, PARC established a National Tea Research Station and later on upgraded to the level of Institute. In 1992, more than 600 acres of land — in Mansehra, Balakot, Battagram and Swat — were planted with tea. In Swat now, only 50 to 60 acres suitable for plantation after war and flooding.

Many efforts have been made to cultivate it in the mountainous areas and this could not succeed substantially. However, three private companies have planned to grow tea over an area of 17,000 acres in Khyber Pakhtunkhwa and Azad Jammu and Kashmir, which would be given on lease for a period of 30 to 40 years to the investors who intended to invest Rs4.5 billion. Out of the three tea importing companies, two companies have managed to acquire 1,000 acres each in Azad Jammu and Kashmir at lease for 30 years.

Since there is a four to five-year waiting period, farmers were unwilling to dedicate land to tea production. Tea can only be grown in places like Mansehra, Battagram and Azad and Jammu Kashmir while land holdings there are small, 10 to 12 kanals per farmer. Farmers mostly prefer safer growing plants like wheat, which guarantee a return within three to five months.

There are several hurdles in tea cultivation such as climate and required large rainfall, type of land, level of slope of land, availability of inputs like seed and fertilizers and the skilled labors. Tea cultivation is not possible in Punjab and Sindh due to the above reasons.

Pakistan imports around 65 percent tea from Kenya, while it is also importing from Bangladesh, Brazil, India, Uganda and some other African countries. In addition, tea is smuggled via the borders of Khyber Pakhtunkhwa and Balochistan.

The Indian Tea Board (ITB) is considering opening up an Indian Tea Promotion Center in Pakistan and Egypt to increase market share of its tea in both the countries. Indian tea producers are even looking for alternate markets such as Egypt, Pakistan and Iran besides UK.

The Pakistani consumers had rejected the Indian CTC tea due to its poor quality and the majority of Pakistanis have developed a taste for strong Kenyan CTC tea. Indian tea is not only poor in quality but also has little or no aroma at all. Indian tea is cheaper for Pakistan while it has freight advantages as both are nearer to each others. In fact, major tea blenders in Pakistan are already using cheap Indian tea for blending purposes.

The tea output from Kenya doubles amid poor international market demand but it is currently dragged in a serious trade dispute with Pakistan. Pakistani officials in Mombasa, have imposed an unofficial ban on Kenyan tea and as Pakistan is the leading tea importer the ban is causing losses to the tune of millions. Pakistan buys about a third of Kenya’s total annual tea sales.

Kenya increased the tariff on tea imports from 35 percent to 75 percent, in line with a new East African Community (EAC) customs union launched in early January. Kenyan tea traders are finding it difficult to ship tea to Karachi due to serious delays by Pakistan embassy officials to authorize relevant export documents.

Kenya’s Mombasa tea auction has recorded substantial growth and is rated as the second largest auction for black tea in the world. Tea from other African countries including Burundi, Democratic Republic of Congo, Madagascar, Malawi, Rwanda, Tanzania, Uganda, Zambia and Zimbabwe are also sold at the auction.

Branded tea imports and consumption in Pakistan is rising. The high rate of taxes have made it hard for the branded companies to keep tea prices at controlled level especially in the current state of affairs and rising cost of operation. Over a period of many years, the different prohibited channels through smuggling have been utilized importantly to supply tea to consumers in local markets. As a result of this, the branded tea producers are failing to gain their share in the local market especially in the small cities.

Also, the branded tea producers are not likely to keep control on the prices because the prices of tea in the international market are on the rise. The dollar appreciation against rupee has also accelerated the cost of imports by branded companies who are trying to absorb its pressure to retain black tea prices on their brands.

The market of imported black tea is set to expand, as consumers are fast developing the taste for the low-priced commodity. Black tea, as a result registered an increase of Rs30-50 per kg on the retail market. Black tea is now selling between Rs370 and Rs413 per kg, depending on its quality.

Black tea varieties, usually considered to be of low quality, are capturing a significant share in the retail market because of surging prices of high-quality tea, widening the demand and supply gap of low-priced tea varieties, pushing up the commodity’s prices.

The smuggling of tea will be increased due to imposition of standard rate of 16 percent sales tax on the import of tea by the Federal Board of Revenue (FBR).

The FBR has withdrawn the concessionary rate of 5 percent sales tax on tea and imposed a standard rate of 16 percent sales on the commodity. Tea manufactures failed to pass on the benefit of major reduction in sales tax.

If government is honest and sincere in boosting tea cultivation, it should introduce attractive incentives for private companies and individuals. The tea research institutes should provide technical know-how to private sectors for plantation. The loan amount should be increased and the repayment should be extended.

Likewise the loan procedure for black tea cultivation should be simplified and the limitation should be increased beyond two acres so that its plantation could be encouraged on ordinary farmer’s fields. Tea production can be heightened either by increasing the acreage or by boosting yields through management practices. The acreage can only be increased if farmers know better techniques and have credibility that their harvest would be lifted without difficulty. There is no doubt in it that the government needs heavy revenue to run its affairs but it should focus on expansion of tax-net instead of raising the rate of existing taxes.

Tea worth more than US$220 million annually is imported to meet domestic needs despite huge indigenous production potential. Under this circumstances of huge import tea bill annually and large scale of constant smuggling of tea from Afghanistan to Pakistan, the country has no better alternative but to grow tea, which has all the environment and the commercial feasibility of growing the best kind of both black and green tea.

It is now the time for the government to wake up and initiate all concrete measures in earnestness to actually implement the exercise, which it had been doing in the past several years for cultivating tea in Pakistan. This will not require a large begging bowl for help from friendly countries.

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