Govt must revisit Afghan Transit Trade Agreement to curb tea smuggling: CCP

Updated July 23, 2019

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IN this file photo, a tea trader in Empress Market awaits customers.
IN this file photo, a tea trader in Empress Market awaits customers.

ISLAMABAD: The Competi­tion Commission of Pakistan (CCP) on Monday urged the government to revisit the Afghan Transit Trade Agreement (ATTA) to reduce smuggling of the product.

The CCP shared this recommendation at the launched of study on tea marketing in the country. The preliminary study highlights that competition in the branded tea market has remained fierce as consumers have a choice to switch to unbranded and unpackaged loose tea over branded packaged tea.

However, there should be well-justified explanations for prices increases, the study said. Competition can be enhanced by market development and eliminating the chances for ‘deceptive marketing’, when fake tea is packaged as branded tea, it added.

The CCP has suggested that at the local level, information about deceptive marketing can be gathered from the district food officers, district administration and the food authorities which are responsible to monitor quality and price of commodities in the open market.

The CCP has also highlighted that Khyber Pakhtunkhwa and Azad Jammu and Kashmir governments may tap the immense potential for employment and income generation through tea cultivation, commercialisation of tea project through public-private partnership should be considered by federal and provincial governments.

Ensuring long-term availability of land to potential investors is inevitable for success of tea growing initiative, the study noted.

The report suggests that there is a need to control selling of Afghanistan-bound tea in Pakistani market as it causes loss to the legal tea industry in Pakistan apart from causing revenue loss to the country.

“A combination of tax and enforcement tools can help control smuggling, by decreasing the cost of legal imports, the smuggling trade can be made less attractive,” the CCP said.

Pakistan has a tradition of tea consumption which is closely associated with hospitality in the society and it was the second largest importer of tea, after the Russian Federation, the study highlights.

Black tea accounts for around 75 per cent of global tea production. Pakistan imports black tea from 17countries which is then blended to produce various varieties that are either packaged or sold in loose form for consumption.

The cost of imported tea is estimated to be around 32pc higher than tea smuggled into Pakistan under the ATTA. Due to the cost difference, legally imported tea cannot effectively compete with smuggled tea, the study notes.

Regarding global tea trade the CCP has highlighted that there was no single world price for tea and rates differ at different auctions, reflecting quality and specialisation.

Several factors affect tea consumption though the hot brew is a beneficiary when sales of beverages declines. Tea consumption in Pakistan was 223,000 tonnes in 2017, which shows an increase of about 14pc over the last five years.

The CCP has said that tea sales are expected to grow by 10-12pc and the demand for tea bags are expected to grow by more than 15pc. It stressed that presence of a parallel informal market of cheaper smuggled tea will discourage investments in the formal market.

CCP has also invited the comments from general public and stakeholders over the study.

Published in Dawn, July 23rd, 2019