Ceylon tea exports to India under the India-Sri Lanka Free Trade Agreement are likely to continue to enjoy a concessionary import duty, Forbes and Walker Tea Brokers said, quoting a Tea Board communique.

It is projected that Ceylon tea exports to India under the free trade pact will enjoy a concessionary import duty of 7.5 per cent for the allocated quota of 15 million kilos a year, they said. The Government of India has increased the import duty on tea from 35 per cent to 70 per cent in the budget proposals for 2000/2001 presented to the Indian parliament last month.

Accordingly the Finance Ministry in India announced on March 1 that the import duty on tea among some other items have been hiked from 35 per cent to 70 per cent with immediate effect.

Moreover the Finance Minister of India also announced the raising of the investment limit qualifying for tax exemptions for the tea industry (development allowance on profits) from 20 per cent to 40 per cent. This additional allowance will be used only for re-plantation, rejuvenation and modernisation of tea plantations as well as processing facilities.

According to the agreement with the World Trade Organisation (WTO) India was compelled to lift the restrictions of tea imports to its domestic market from March 1. Therefore the Finance Minister of India Yaswant Singha has formulated a protective measure to domestic tea producers by raising the import duty on tea from 35% to 70%.

09/03/2001 The Daily News

The budget proposal of raising tea import duty from 35percent to 70percent is likely to generate negligible revenues for the government. This is because the volume of tea imported on which duty is payable is negligible, and because of the loophole regarding customs on Sri Lankan tea, top tea industry sources said. Industry sources pointed out that in 1999, imports stood at 10 million Kg., which was one million Kg. higher than the 1998, imports. The volume of imports was insignificant as production was 805 million Kg. in that year. Naturally, the revenue generated would also be insignificant.

Besides major importers like Tata Tea and Hindustan Lever have been importing most of their tea for re-export and these teas would continue to be outside the tax net.

The tea industry finds the relevance of most of the provisions in this year’s Budget unclear. Industry sources said it was more important to improve the quality of Indian tea.

Moreover, Sri Lankan tea continued to enjoy 7.5percent preferential tariff under the Indo-Sri Lankan Free Trade Agreement. Sri Lanka imports have had a severe adverse effect on South Indian tea because it was similar in nature to south teas but much cheaper. Most gardens in the south had slumped into sickness as a result of such imports.

Last year, rumors of large imports created a flutter in the local market and prices began to fall sharply. The hardest hit were the South India tea producers and large sections of small tea growers in North India. However, the proposals would improve tea sentiments to large extent. The industry had been lobbying for raising the import duty to the bound rate of 150 percent.

(08/03/2001 Business Standard

The Indian government and tea industry officials are working overtime to chart out an effective strategy for the Russian market.

Anxious to improve the its sagging image and depleting sales in the largest export market, officials of the Indian Tea Board, Union commerce ministry and Indian Tea Association met in a brainstorming session in the city on Friday.

At the meeting, additional commerce secretary LV Saptarishi urged the industry to prepare a growth plan independent of assurances in the form of agreements and MoUs. This line of thought follows the bitter experience from a MoU signed earlier with the Russian government, with the 100 million kg per annum purchase promise still a far cry.

"With just three years left for the escrow account to expire, Indian tea exporters have to prepare for the time beyond 2004 when they will not have the rupee debt trade cushion. Hence, Russia has to be viewed upon as any other dollar-denominated export market," an industry official said.

Moreover, India's advantage in terms of VAT deferment is set to vanish with talks of VAT at the point of import.

Tea exports to Russia declined from 93 million kg in 1999 to 86 million kg in 2000. Revenue too nosedived from Rs. 822 crore in 1999 to Rs 603 crore in 2000. The average price of Indian tea bought by Russian importers has also slumped from Rs 70 per kg a couple of years ago to Rs.50 per kg now. Though sales have shown a marginal increase in Khazakhstan, it is 7-8 million kg down in Russia.

Industry officials largely agree that India is yet to tailor its marketing efforts to a changed reality. Most exporters continue to woo the market in the same manner they did in the '80s when Russia was part of the soviet Union, in the last decade, the market has changed a lot. Orthodox tea exports have been reduced to a trickle as the market has taken to CTC tea in a big way.

"Following bulk imports of low priced tea from the south, Indian tea has been labeled 'cheap'. We have to change this perception Sri Lanka is already showing the way by exporting more orthodox and value-added tea. We have to position our value-added tea and improve the image," tea industry officials said.

The challenge is two fold - alter the perception of Indian tea and consolidate its presence in the market. To change the image, the parties will work on a two pronged approach - promotion of Indian tea and promotion of individual brands. While the latter is an exercise to be launched by each individual company, government has expressed its willingness to help out with the latter.

While various strategies are under being worked out, all agree that Russia is a vital market that cannot be ignored. Without Russia, the industry will be burdened with nearly 90 million kg of low-quality tea in excess that will depress the domestic market. Russia imports about 160 million kg of tea annually, with India being the primary source.

06/03/2001 The Times of India

With the demand for world green tea on the increase, Sri Lankan companies are said to be gearing up to better exploit particularly market opportunities in Japan.

Lankem Comany Green Teas (Pvt) Ltd., a joint venture between Lankem Ceylon Ltd and the Comany Group, is one such company focusing on expanding its market share for green tea.

V. Caldera, Managing Director of Ceylon Plantation Management Company (of Comany Group) said their factory, set up at a cost of Rs. 80 million, would be further upgraded (with additional machinery) to meet specific requirements of this Japanese niche market, under their new management.

He also said that a team of Japanese tea industry officials are now in the island to examine the standards maintained by local companies when producing green tea.

Japan has a very high green tea consumption compared to other countries. Constraints such as limited land for cultivation and a low frequency in annual harvesting have made it impossible for them to fully satisfy domestic demand.

04.03.2001 Sunday Observer