Tea import under Afghan Transit Trade Agreement (ATTA) has increased by 10 million kg, as 27.66 million kg black tea was imported under ATTA in nine month of the current fiscal ear, against 17.64 million kg imported in the corresponding period of last year, only from Kenya.
Pakistan Tea Association (PTA) in a letter written to the Chairman, Central Board of Revenue (CBR), said that the loss of revenue to the exchequer amounts Rs 1,080 million in first nine months of fiscal year 2005-06.
On the other hand, the PTA said that the import of black tea from July 2005 to March 2006 amounted to 83.67 million kg as compared to 100.5 million kg for the same period in 2004 and that was around 17 million kg less than last year's tea import.
The PTA said that still there was time to correct the situation by taking fiscal measures, otherwise legal imports might drop at a rapid pace in the coming time. The PTA has urged to reduce import duty from 10 percent to Zero percent and Sales Tax from 15 percent to 12 percent and said that it would not only ensure strengthening of legal imports and documented trade but would also help to generate more revenue as smuggled teas will come through legal channel.
The letter said that Pakistan tea industry is currently facing a crisis situation due to the draught in Kenya, which has resulted in over a 10 percent loss in the country's overall tea production. Kenya has lost over 35 million kg of its black tea production, resulting in a rapid shortage situation and substantial price increase from $1.90 to $2.80 per kg.
It said that Pakistan's tea consumers are extremely fond of Kenyan tea, which comprises over 65 percent of overall tea consumption in the Pakistan. Despite all attempts by the Pakistan tea industry, no other tea has been accepted by the local consumers, who prefer their tea to have a strong flavour and colour, which only Kenyan tea provides. In addition, Kenya has always been the most economical source for good quality tea, unlike Sri Lanka, India etc. Tea price per kg from different countries remained $1.65 per kg from Kenya, $1.94 per kg from India and $2.43 per kg from Sri Lanka.
The letter said that over the last few years, the government's decision to rapidly reduce import duty on tea had resulted in a growth of the documented tea industry, despite the restart of the ATTA and its impact on smuggling.
Given the crisis situation facing the Pakistan tea industry and the local consumer, it is imperative that the government removes the 10 percent import duty on tea in order to avoid a rapid escalation in local tea prices. Government will get compensated for her abolish of import duty through Sales Tax, as all the smuggled tea in disguise of ATTA will come officially and hence collection of more Sales Tax/revenue, PTA added.
The letter said that Pakistan tea industry is taking urgent and pre-emptive action to secure tea supplies from Kenya, but unfortunately the situation is beyond its control. "We now fear not only a rapid escalation in tea prices if the duty remains the same, but can also create shortage like situation", PTA said.
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