Kochi: India has ruled out any reduction in import tariff on plantation crops for the time being under the proposed India-Asean (Association of South-East Asian Nations) free trade agreement (FTA), although it has been under pressure to bring down the duty, especially on tea.
Kamal Nath, minister for commerce and industry, clarified during the India International Tea Convention in Guwahati last week that the 100% duty on tea and coffee and the 70% on pepper and cardamom will remain in effect for the next three to four years. There is mounting pressure from advocates of the FTA to bring down the duty, but the government has not budged because a tariff reduction now could potentially hit the sector hard, he added.
“In a globalized world, and in an age of regional cooperation and free trade agreements, the plantation sector—especially the tea industry—should be prepared to face competition without the benefit of higher import tariff,” Nath said. “The industry has to come out of this duty-protection syndrome.”
Stating that there have been strong moves to decrease the tariff on tea by at least 50% at the recent talks on FTA among Asean members, Nath said India has stood its ground. “The duty will remain at 100% for the time being, and can be tapered down after a few years,” he added. India’s competition in tea comes from some of the Asean members such as Indonesia and Vietnam. It also faces stiff competition in pepper from Vietnam.
Nath admitted the appreciation of the rupee was adversely affecting plantation exports and the Union government plans to look into the issue. While spice exports have shown a substantial upward swing, tea and coffee exports have fallen dramatically during the first half of fiscal 2008. Spice exports amounting to 219,640 tonnes earned Rs2,100.34 crore during April-September, compared with 1,80,500 tonnes of exports worth Rs1,627.52 crore during the year-ago period.
Coffee and tea have had to bear the brunt of the appreciating rupee. Spice exports rode on a near-monopoly environment with exports of crops down in competitors such as China, Turkey and East European countries.
For coffee, in the first half of the fiscal year, exports fell to 96,964 tonnes at about Rs855 crore, with the unit cost at Rs88.15 per kg, compared with 126,198 tonnes of coffee at about Rs955 crore, at Rs75.63 crore unit cost, in the year-ago period. Tea exports were down at about 74 million kg worth Rs754 crore, compared with about 111 million kg worth Rs1,050 crore during the same period last year.
Alexi Shetsov, director of a leading Russian tea trade company Orimi Trade Ltd, says: “Unless India produces more orthodox teas, which is just around 80 million kg now, it will not make it to the Russian market.”