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Tea planters seek financial cover against FTA ‘sting’

Economic Times, India

Tea planters seek financial cover against FTA ‘sting’

22 September 2009

By Sutanuka Ghosal, ET Bureau

KOLKATA: Tea planters have sought financial support from the government to counter cheaper imports under the Free Trade Agreement (FTA) that India has signed with the Association of South-East Asian Nations (Asean). According to FTA, which comes into force from January 1, 2010, import duty on tea will reduce to 45% from 100% over the next 10 years.

DP Maheshwari, MD of Jay Shree Tea & Industries told ET: “Though the reduction in import duty will be spread over 10 years, we will be unable to compete in the domestic market with cheaper tea imports from Asean region where production cost and taxes are lower. The industry has just turned around after a gap of eight years. It has to sustain this growth for the next few years.” Incidentally, in India the cost of production has gone up in a spiralling manner, but the prices of tea have dwindled in last eight years.

Planters now want the government to implement an inter-ministerial committee (IMC) recommendation on social cost. The IMC, in its report, estimated the social costs, which include medical benefits for tea estate workers, housing, and welfare activities such as schooling, to be around Rs 7 per kg of tea produced. The IMC had suggested that the Union and state governments intervene and share some of the social costs. According to the proposal, the Union government would bear 40% of the costs, state governments would fund 10% of the expenses, and the rest would be borne by the tea estate owners.

Total area under tea cultivation currently is around 5.2 lakh hectares and production is around 980 million kg. While Assam accounts for nearly 50% of the country’s tea production, West Bengal and the south, comprising Tamil Nadu, Kerala and Karnataka account for 25% each in output.

“India’s domestic consumption is increasing at a rate of 3.5% to 4%. This is an added attraction to tea-producing nations like Sri Lanka, Kenya, Thailand, Vietnam and Indonesia, who are sole exporters of tea,” said a senior official of Tea Board.