June 10, 2003	Tuesday	Rabi-us-Sani 9, 1424

KARACHI, June 9: Pakistan Tea Association (PTA) has ruled out possibility of any drastic erosion in smuggling in view of five per cent cut in import duty on tea to 20 from 25 per cent in the budget 2003-04.

However, reduction may bring some relief to the consumers in shape of price decline of both loose and branded tea.

“Our members are disappointed with the government’s budgetary measure as we have proposed cut in import duty to 10 per cent from 25 per cent,” PTA chairman Saeed Ahmed Khawaja told Dawn on Monday. “Five per cent cut in duty will hardly discourage smuggling.”

“We have projected ahead of the budget that tea smuggling in 2003 will reach to over 40,000 tons. Despite five per cent cut in import duty — our prediction is still intact,” the PTA chief said.

He said PTA had repeatedly asked the government at various forums that tea imported by Afghanistan had been finding its way into Pakistan with a greater pace as compared to 2002, and the only way to curb illegal arrival of tea is to bring the import duty at 10 per cent. “Our hopes are dashed as five per cent cut will hardly make a big impact to restrain smuggling,” Mr Saeed said.

He pointed out that in 2002, Afghanistan’s total tea imports totalled 34,000 tons. Kenya alone accounted for 24,000 tons, Bangladesh 3,800 tons and Indonesia 2,000 tons. All the tea imported by Afghanistan, being an essentially green tea consuming country, found its way into Pakistani markets through illegal channels.

During January-March 2003, Afghanistan’s imports from Kenya almost doubled — from 5.5 million kgs in 2002 to 10.25 million kgs in 2003. As 80 per cent of Afghanistan found teas originate from Kenya — tea smuggling into Pakistan would reach to over 40,000 tons this year.

He said in the budget 2003-04, the government should have launched curb against the smuggling, which was destroying the fabric of the legal tea trade and industry. Dry ports all over the country have contributed to this malice as this facility created to diversify the economy is being misused. The issue of smuggling is not a new phenomenon as it was raised six years ago, when import duty and taxes stood at a record 110 per cent, and 40,000 tons out of total 130,000 tons were imported via Afghanistan route into Pakistan. Smuggling dramatically declined to 25,000 tons in 1999-2000 when import duty was reduced to 60 per cent, the PTA chief added.

In 2002, Pakistan’s total tea consumption stood at 138,000 tons, out of which 95,000 tons came through legal imports, while 43,000 tons found their way into the markets through smuggling. The government collected revenue of Rs4.926 billion.

On the assumption that the import duty in the budget 2003-04 would be cut to 10 per cent — PTA had expected that only 5,000 tons would arrive through illegal channels, out of total estimated consumption of 140,000 tons in 2003, Mr Saeed said. As far as prices are concerned, the PTA chief said that prices would definitely come down by 5pc.

An executive in a leading tea company said branded packers would pass on the impact of duty cut to the consumers.

“We have worked out Rs5-6 cut in prices of one kg tea,” the executive said. To a query whether five per cent cut in import duty would discourage smuggling, he said no major impact was in sight. “I think 1000-2000 tons would switch over to legal trade from smuggling and the illegal arrivals would continue to thrive in the country,” he added.