MFN status may spur tea imports from India

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The Most Favoured Nation (MFN) status granted to India is going to increase Pakistan’s dependen on the neighbouring country for import of black tea. The highly consumed black tea which is imported mostly from African countries especially Kenya, the world’s biggest exporter of the black variety of leaves, would be available for Pakistan at more competitive rates if the same was allowed to be imported from India through normalised bilateral trade. The MFN status will not only facilitate the Indian product to enter Pakistani markets with little freight cost, but also avoid the middlemen and indirect exports besides other hindrances, an official of Tea Development Board Of India recently told Profit.
“The consumers of tea in Pakistan can buy a cheaper product once it enters into your country through the Wagah border, while reducing huge logistics costs,” the official added.
“Not only because of the freight cost, the Indian product is also the best choice for Pakistani importers in view of the draught in African countries especially Kenya production of which has been reduced drastically because of the climatic change,” he said adding that the entrance of Indian tea has already been increased in Pakistan through a third country.
In reply to a query, he said though there was a Preferential Trade Agreement between Pakistan and Kenya, the price of Indian product would be much cheaper because of the less freight cost.
According to sources, Pakistan, which buys more than 17 per cent of Kenya’s black tea, has imported at least 21.8 million kilograms of tea worth $27.2 million last year from India, compared to 8.3 million kilograms worth $15.5 million in 2010. However, the huge quantity of the product was being unofficially shipped or smuggled into Pakistan through third countries like Dubai and Afghanistan. The drop in Kenyan production was also helping Indian products to have more share in the Pakistani market.
The Indian official further informed that a high level trade delegation from Pakistan Tea Association (PTA) was also scheduled to visit India in April 2012 to make a long-term business deal in the tea sector. The Indian side, he claimed, was also trying to take Pakistani market as an alternative of the Iranian one after the payment issue dominated in the trade with Iran. Though India exports less quantity of tea as compared to other exporters of the product to Pakistan including Kenya, Sri Lanka, Vietnam and China, due to the domestic consumption of over 80 per cent of total production, the exports, however, could be increased if the borders of the neighbouring country were opened for trade. He claimed that Indian tea was qualitatively competitive in international markets.
The much debated MFN status to India, sources claimed would also help to reduce the quantity of smuggling tea via Afghan border as the development may facilitate to lower the import duty on tea. Pakistan currently charges 10 per cent import duty, alongside a 15 per cent sales tax and an additional 10 per cent value-added tax and another two per cent income tax on imported tea. However, the smugglers charge between 15-20 per cent overall duty on their consignments.