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Industry News

  -The Tea Board prescribes a fix for beleaguered exports

  - Lankan tea outruns Indian in West Asia

  - Tea Board projects Rs 2,305-crore expenditure outlay for Tenth Plan

  - Tea auctioning system to be reviewed: ITA

  - TN planters blame free trade for decline in tea prices

  - Nepal planters petition Tea Board for Darjeeling logo

The Tea Board prescribes a fix for beleaguered exports

The Tea Board's Rs 2,305 crore outlay for the tenth plan for development of tea comes at a time when the traditional Indian brew is losing its flavour in the world market. Tea exports declined 6.8 per cent to $363.42 million in the 11-month period of 2000-01. The share of Indian tea in the world export has halved from around 22 per cent in 1990 to 11 per cent or so lately. The most disconcerting development relates to the emergence of Sri Lanka and Kenya as major competitors to Indian tea, at one time a world leader. Sri Lanka has nearly edged out Indian tea from the West Asian markets. In 1999 it exported 39 million kg to the West Asian countries, up from an extremely low level in the nineties. India exported 98 million kg in 1999, up from 81 million in 1995. India does retain a large chunk of the Russian market but that does not compensate for its declining share of other markets. Russia's troubles in the last decade robbed Indian tea of much of its market. Russia now prefers cheap tea and India must look beyond Russia, Iraq or Iran, with a careful monitoring of changing tastes in the global tea market.

Sri Lanka's emergence as a major tea exporter has to do with its careful planning of its tea economy, particularly a well-organised marketing network, government encouragement and a critical thrust on export. These contrast sharply with India's lackadaisical approach. Besides, the tea economy has been a consistent victim of inclement weather conditions that make production and acreage erratic. The biggest impediment to an export orientation, though, is an immense domestic market. The share of exports in tea production has declined from 40 per cent in 1980-81 to 28 in 1990-91 and 25 in 1998-99. The first priority must be to stabilise tea production to ensure uninterrupted supply of good quality tea for export. Also required is that production and export are built into a development plan underpinned by quality considerations. The Tea Board's draft approach paper seeks to do precisely that through development of plantation, quality upgradation, market promotion and research and development. The challenge is to translate this into action.

The Financial Express , June 8, 2001

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Lankan tea outruns Indian in West Asia

THE competitive position of Indian tea in the world market has weakened considerably, especially against produce from Sri Lanka, according to the Tea Board's draft approach paper on the 10th five-year Plan.

In major markets of West Asia like Dubai, Jordan, Iran and Iraq, tea exports from Sri Lanka, a nation of coffee drinkers, have either edged out Indian tea, or have grabbed India's market-share.

According to the approach paper, although Indian tea sales increased in Russia considered the single-most important market it lost market share to Sri Lanka.

The paper says that Sri Lankan tea sales increased from marginal levels in the early nineties to 39 million kg in 1999, while India's tea exports increased by a meagre 20 per cent to 98mkg in 1999 from 81 m kg in 1995. The success of Sri Lankan tea in West Asian markets during 1995-99 has been attributed to better, more organized marketing efforts, pro-active government and the criticality of tea exports to the economy and minimal domestic demand, says the draft approach to the 10th five-year plan.

In the Dubai market, while Sri Lanka more than doubled its share to 41 m kg from 17 m kg during the period between 1995 and 1999, Indian tea's share dropped to 15 m kg from 22 m kg in the same period.

Entry barriers being high in Egypt, Sri Lanka tea managed to hold on its market of 7 m kg while India's tea sales dipped to 1 m kg from 15 m kg during 1995-99. Indian tea sales dropped by more than half to 4.3 m kg from 11 m kg in Iran, while Sri Lanka managed to increase its share to 10 m kg in 1999 from 6.3 m kg in 1995.

The Financial Express , June 6, 2001

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Tea Board projects Rs 2,305-crore expenditure outlay for Tenth Plan

THE Tea Board of India has drawn up a Rs 2,305-crore expenditure outlay for the Tenth Five Year Plan (2002-07), against a proposed outlay of Rs 304 crore in the 9th Plan.

In its draft approach paper on the 10th Plan, the apex body under the commerce ministry has accorded

highest priority to the plantation development scheme, while the largest chunk of subsidy has been earmarked for market promotion schemes.

The Tea Board's draft approach paper has divided the fund requirement under five broad heads plantation development, quality upgradation, market promotion, research & development and human resource development.

The board expects India's tea production to touch 1,044 million kg by 2006, against the anticipated production of 900 m kg in the 5th year of the 9th Plan.

Part of the expenditure will be funded through loans and subsidies, while some will come from the industry's own resources and funds available under the Tea Development Account schemes. In some cases, bank loans will be sought for meeting a shortfall, estimated to be around Rs 622 crore.

According to the draft approach paper, available with The Financial Express, the government will provide a subsidy of Rs 535 crore, the Tea Development Account corpus Rs 655 crore and the Tea Board will extend a Rs 53-crore loan.

The industry will provide Rs 440 crore from its own resources and the balance Rs 622 crore will be financed by banks and financial institutions.

The proposed Rs 939-crore expenditure under the plantation development scheme is expected to increase production by 75 m kg. According to the plan, 120,000 hectares will be developed under this plan for aspects like replantation, rejuvenation, irrigation and improvement of drainage.

Of the Rs 939-crore expenditure plan under the plantation development scheme, the Tea Board will provide Rs 29 crore as loan and Rs 130 crore as subsidy. The Tea Development Account will yield Rs 405 crore, the industry will chip in with Rs 81 crore and banks Rs 294 crore.

The second largest chunk of expenditure has been proposed for quality upgradation and product diversification.

The Financial Express , June 6, 2001

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Tea auctioning system to be reviewed: ITA

The entire gamut of the tea auctioning system would be reviewed at the behest of the Union commerce ministry, an official of the Indian Tea Association (ITA) said.

The official said that at the last meeting convened by the Commerce Secretary, in which the Tea Board Chairman. Additional Secretary of Commerce department and Tea industry representatives were present, the government was of the view that a comprehensive study should be carried out by engaging a competent consultant.

The official said that the outcome of the study would greatly help the government, as well as the industry to frame policy and strategies for the promotion of the trade within the country and overseas.

According to the official, the study would comment on the various reasons for the wide divergence between prevailing auction and retail prices, besides understanding the rigidities and imperfections in the auctioning system.

On the production front, the study would also emphasise upon the need to increase the production of the Orthodox variety, both in north and south India, the official said.

To increase the level of exports, the commerce ministry flavoured country-specific strategies should be devised, besides adequate promotion of the ?India Brand; in the key markets.

In the calendar year 2000, the country exported 201 million kilograms of tea.

The ITA official said that the commerce ministry was examining various schemes for funding export promotion activities for the industry.

With regard to imports, the government had already issued a notification issued by DFGT, that tea imported into the country should conform to PEA standards.

To strengthen the mechanism, the commerce ministry would soon write to the DGFT to put in place an inspection mechanism at the port of entry.

Meanwhile, the ITA had been pressing for introduction of preferential bilateral trade arrangements with Egypt and Pakistan.

In addition, ITA the apex trade body of the tea industry had been asking for scrapping of preferential arrangement with Sri Lanka, which according to it, was unilateral and not in India?s interest.

The Economic Times , June 4, 2001

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TN planters blame free trade for decline in tea prices

THE Planters' Association of Tamilnadu (PAT) has alleged that the steep decline in bulk tea prices was due to trade liberalisation policies, committed trade agreements and the imports permitted under the `import for export policy'.

The industry, according to Mr C. Sankaranaryanan, Adviser, PAT, was heading for a total collapse.

He explained that the country had an average surplus of 200 mkg of tea for export, but a like quantity was being allowed to be imported for re-export after purported value addition, replacing and reducing the net volume of exports of Indian tea.

Further, the specially favoured low import duty on Sri Lankan tea, the bound rates not raised to the maximum permissible levels, low priced imported varieties etc. favoured the traders and merchant importers.

Except for a couple of companies, a majority of the plantations failed to make a profit in the last fiscal. Profits, if any, shown in the published accounts were derived from non-plantation activities, including investment income, the PAT Adviser told Business Line.

He said a number of companies had started cutting down their overheads by doing away with the managerial heads in the smaller estates. ``The industry is gasping for breath because of the wide disparity between the selling price and the cost of production,'' he said and pointed out that the tea auction prices had dipped to below Rs 45 per kg in 2000 compared to the annual average price of Rs 69 in 1998 and Rs 57 the following year. The cost of production had shot up from Rs 53 in 1998 to around Rs 62 in 2000. The current trend indicate that the selling price would dip further during the current fiscal, he added.

Stating that there was no short term solution to reduce costs, he said ``there is no level playing field. We are competing with producing countries which are far less developed than India. Their costs, wages, taxes etc are much less. Welfare and social security benefits to workers are non-existent or provided by the Government. Labour productivity is also high compared to India''.

Steep reduction in cost is the `only' long term solution, through extensive mechanisation and right sizing the workforce.

While conceding that this would be an extremely slow process because tea bushes were perennial, where overnight modernisation would not be possible, he said `the law of diminishing returns has already set in so far as the existing stands of tea are concerned. Besides high yielding planting material combined with high quality traits are slow in being developed in tea research stations'.

The Hindu Businessline, June4, 2001

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Nepal planters petition Tea Board for Darjeeling logo

NEPAL'S tea planters have urged the Tea Board to allow them to sell their leaves under the Darjeeling logo, claiming that they are losing out to some unscrupulous Indian traders, who are selling pilfered Nepal tea under the world-famous brand.

With no difference in character, quality and aromatic taste between the tea grown in Nepal and that in the nearby Indian district of Darjeeling, the planters many of them Indian businessmen are lobbying the Tea Board via an industry body.

The secretary general of the Eastern Chamber of Commerce & Industry at Biratnagar, Mr Kishore Pradhan, has sought the terms for royalty payments so that tea planters in Nepal can legally sell their produce as Darjeeling tea.

Without the benefit of the logo, which is protected under the Certification of Trademark Scheme (CTM), the Nepal tea does not fetch high prices.

Mr Pradhan has said that Indian traders and gardens are buying leaf pilfered from Nepalese gardens along the border with Mirik region, and then processing it and selling the produce as pure Darjeeling teas complete with the CTM reserved for unblended teas, produced within the political boundary of Darjeeling district.

The EC&ICC formed this year wrote to the Tea Board chairman as well as the chairman of the Darjeeling Tea Planters Association on May 14, stating that green tea leaves are being carried unofficially to India and they are bought by the nearby tea factories in Mirik.

These tea leaves are collected from Sriantu village in Nepal and are carried up to the Indian exit point Chhaibise..., the letter states. The EC&ICC has even named some of the Indian gardens that are involved in this malpractice.

According to Mr Pradhan, officially there is no bar in exporting green leaves from Nepal. But the whole business is done in an unethical way, with the tea being carried out under the names of Mirik residents, who claim it is for their personal use.

The Tea Board's chairman, Mr N Das, confirmed that he had received a request from the Nepalese chamber for the use of the Darjeeling logo. We have just received the complaint along with the request for the logo, but have not taken a decision. We have to cross-check the allegation and only then can we make any comment on it, he said.

A DPA official said also confirmed that a request had been received. We have received the complaints and warned the gardens, but to no avail, he said. The DPA chairman is out of Kolkata now, so no decision has been taken.

A director of Antuvalley Tea Eastae in Nepal, Mr Ashoke Morarka, said about 4000-5,000 kg of green leaf is crossing into India every day via the Pashupatinagar Phatak-Mirik border and are being sold under the Darjeeling logo. This has rendered the CTM meaningless, Mr. Morarka observed. Simultaneously, our efforts to establish Nepal teas in the world market are being hurt.

In Kolkata markets, high quality Darjeeling whole leaf tea from Antuvalley is being sold at Rs 250-275 per kg, while the same type of Darjeeling teas is fetching Rs 350 per kg, said a tea broker.

His statement was supported by a buyer, who said Antuvalley broken grade tea, which is being sold at Rs 130-135 a kg, is better than the Darjeeling brokens being sold at Rs 170-175 a kg. The Darjeeling variety is costlier merely because of the brand name, the buyer said.

The CTM rules are very strict about political boundaries Sikkim teas are now excluded from the Darjeeling category. Temi Tea Estate in Sikkim sold its produce as Darjeeling teas up to 1999, as the geophysical and climatic conditions and plant varieties were common. But, since the CTM came into force, the Temi teas are being treated and listed in the Orthodox category from last year.

The Financial Express , June 1, 2001

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