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Planters seek relief from free trade pact with ASEAN

Planters seek relief from free trade pact with ASEAN

14 September 2009

By Fakir Balaji

Coonoor (Tamil Nadu), Sep 14 (IANS) Planters of tea, coffee and spices in southern India are seeking financial support from the government to counter cheaper imports under the Free Trade Agreement (FTA) India signed Aug 13 with the Association of South-East Asian Nations (ASEAN).

Under the pact that comes into force Jan 1, import tariff on tea and coffee will be reduced to 45 percent from 100 percent, and to 50 percent from 70 percent on pepper over the next 10 years.

Planters say this will pose a threat to them because they have higher production and social costs.

“The FTA will have disastrous consequences,” said United Planters Association of Southern India (UPASI) outgoing president D.P. Maheshwari.

“We will not be able to compete in the domestic market with cheaper imports from the ASEAN region, where production cost and taxes are lower,” Maheshwari told IANS.

Planters now want the government to implement an inter-ministerial committee report that recommended a social security scheme, with 50 percent state support.

The report said to make the plantation sector competitive in face of imports, the central government would have to meet 40 percent and state governments 10 percent of the social costs, with planters bearing the remaining 50 percent.

“Social costs include housing, healthcare, education fee and providing crèches for children of women workers. With very low productivity in the age-old plantations, we are at a disadvantage vis-a-vis the ASEAN planters, whose productivity is higher due to fertile soil, high yielding clones and younger age of their plantations,” Maheshwari said.

A huge Indian market, with growing consumption of tea, coffee and spices in a buoyant economy, is an added attraction for ASEAN planters to flood India with products that will be cheaper with phased reduction of import tariff.

“Like Sri Lanka and Kenya, countries such as Vietnam, Malaysia, Thailand and Indonesia in ASEAN have taken to plantation commodities like tea and coffee during the last decade solely to export worldwide,” said UPASI commodities head R. Sanjith.

Though the FTA eliminates tariff on about 4,000 products, including electronic gadgets, chemicals, capital goods and textiles, about 480 items comprising mostly farm products have been excluded from reducing import tariff.

“In addition, natural rubber, cardamom and a few varieties of coffee have been put on the exclusive list, which is reviewed every year. There is no guarantee that they will remain in the list for ever,” Sanjith said.

Unlike the farm sector, the plantation sector is subjected to 50 percent agriculture income tax in Kerala and 30 percent in Karnataka, though Tamil Nadu has abolished the tax.

Indonesia and Vietnam rank sixth and seventh in world tea production with 148 million kilograms and 144 million kilograms per year respectively, while India is the second largest producer (981 million kilograms) after China, which produced 1,160 kilograms in 2008.