Cut in duty increased tea imports by over 10%

Importers said the last fiscal year’s tea imports cost around $200 million, which stood at $187.63 million during 2003-04. Kenya topped among the main suppliers of tea to Pakistan as the African country contributed 65 percent of total tea offloaded during 2004-05. “But the trend is not likely to continue this fiscal,” said Muhammad Altaf Borra, chairman of the Pakistan Tea Association. "Smuggling and illegitimate trade from neighbouring countries is increasing with each passing day, which affects the total import figures and bring losses to the exchequer.”

He said that during 2004-05, 130 million kilograms of tea was imported, which was 10.16 percent higher than the 118 million kilograms of tea imported during 2003-04, cushioned by a major duty cut in the last fiscal budget.

The federal government in the budget 2004-05 cut by 50 percent the import duty on tea, bringing it down from 20 percent to 10 percent to what it said protect the local industry and curb the menace of smuggling.

Pakistan, which on average imports around 120,000 kilograms of tea every year, is the third largest consumer of tea in the world. The country's tea market comprises 45 percent of loose tea and 55 percent of packaged product.

Importers for the budget 2005-06 proposed that tea imports be liberalised, so that the unbridled smuggling of the commodity mainly from Afghanistan could be checked, but the proposal was not considered.

“Only during the first 10 months of the last fiscal, tea smuggled into Pakistan through Afghanistan stood at 20 million kilograms, which was of African origin,” said Saeed Raza, a tea importer and a senior PTA member.

He said 10 million kilograms of tea was estimated to be smuggled into Pakistan from other origins like India, Indonesia, Vietnam and China. Mr Saeed said total arrival of tea under ATT, which ultimately landed in Pakistani markets, was estimated at 40 million kilograms annually, depriving the government of more than Rs 1 billion per year in respect of revenue.

A recent estimation compiled by the tea importers claims that the total cost of legal imports of tea comes to 34 percent as against 11 percent expenses being incurred by smugglers, who bring tea into Pakistani markets under the cover of ATT.

The smuggling trend, camouflaged under ATT, got a boost in late 2004 and since then unchecked imports in the name of a neighbouring country has been making its way and being dumped in local markets.

“The only way to check or curb the smuggling is to ease trader rules and cut duties,” said Khalid Elahi, another importer. “Tea is purely an imported commodity so it should be rated at zero percent.” He said that besides a cut in the import duty, a cut in the sales tax from 15 percent to 10 percent should also be considered, which could help eliminate the smuggling menace.

The importers believe a check on smuggling would not only increase the product’s prices at retail level but also pave the way for smuggling and illegitimate trade from neighbouring countries.

“We are still attempting to convince the authorities,” said PTA chief Borra. “We have made several presentations to CBR (Central Board of Revenue), which proves that smuggling is still continuing.”

He said the government should make a quick decision before the import figures came drastically down, increasing losses to the exchequer in terms of revenue. (mes)

Source : http://www.dailytimes.com.pk