Economy

“Tea hub” debate heats up; India shows concern over cheap tea re-export

03 Sep 2012 - {{hitsCtrl.values.hits}}

An Indian Parliamentary Standing Committee on Commerce has expressed concern over the issue of re-exports of lower quality tea from India under the brand of Indian origin tea at a time where Sri Lanka’s own resurfaced debate on a ‘tea hub’.

A report from the committee stated that it was “gravely concerned” at the Indian Commerce Ministry’s “unpreparedness” to deal with exporters who imported cheaper quality tea into the country only to blend it and re-export it without any significant value addition under false certificates as tea of Indian origin.

The tea hub concept of lowering of import duties in order to facilitate the importation of teas of other origins to blend with Ceylon tea for sale in export markets, had been advocated more recently by organizations such as the Tea Exporters Association (TEA), who argued that such a process of blending was inevitable in many cases where Ceylon tea is bought wholesale and blended in export markets before being packaged as Pure Ceylon Tea, all at a lower price point. Tea hub advocates asserted that since such processes were going on, the local industry would be better served by taking control of the process in Sri Lanka itself.

Whilst no official policy direction from related Ministries has been forthcoming on the issue, Secretary to the Treasury, Dr PB Jayasundara, was outspoken in his criticism against idea of a tea hub, instead advocating the sale of Ceylon Tea at a premium through greater value addition and marketing efforts.

Speaking at the last Annual General Meeting of the Ceylon Tea Traders’ Association, Dr Jayasundara said “On average, we sell our tea at approximately US$ 4.50 per kilo but this is not right. We have to work towards increasing our prices into the range of US$ 15 per kilo and not on average but in absolute terms.” “A threefold price increase will mean that the industry will have to get more skilled labour, draft collective agreements or have no agreements at all or maybe the industry needs to develop on a different model all together. However, it cannot be done by importing tea,” he asserted.

However the consensus amongst analysts and local tea industry stakeholders appears to be that replanting of Sri Lanka’s aging tea bushes is the more pressing need of the day, with many plantations waiting on government assistance to carry out replanting programmes which would be prohibitively expensive for regional plantation companies to carry out by themselves.

The issue of replanting was also brought up by the Indian Parliamentary Standing Committee, which noted with some concern that approximately 63% of Indian tea bushes are less than 50 years old, as compared with 68% in Sri Lanka and 70% in Kenya.

The committee expressed further concern as to the impact on the Indian tea industry following the reduction or removal of tariffs as a result of allowing Sri Lanka most favored nation status and the signing of free trade agreements with countries in the Association of Southeast Asian Nations.

(CF)

Economy

“Tea hub” debate heats up; India shows concern over cheap tea re-export

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