KARACHI, June 21: Smuggling of tea will surge to 90 million kg in 2007 as compared to 70 million kg in 2006 as the government has further made legal imports costlier by levying one per cent surcharge in the budget 2007-08.

Pakistanis sipped 100 million kg of tea in 2006, which arrived through official channel as against the annual consumption of 170 million kg. The rest found the way through Afghan transit trade under ATTS. Legal imports are likely to decline to 80 million kg this year.

If an average price of $2.20 per kg is assumed for 70 million kg of tea smuggled into the country then the government’s kitty suffered a revenue loss of Rs3.05 billion in terms of duty and taxes in 2006. The loss to the exchequer will increase this year with the rise in volume of smuggling.

The cumulative incidence of duty and taxes on official imports has now jumped to 34 per cent from 33 per cent following imposition of one per cent additional federal excise duty on all imports.Pakistan meets 65 per cent of its annual tea requirement mainly from Kenya. The per capita tea consumption in the country is one kg.

Blenders and packers imported 75 million kg of black tea out of 100 million kg official imports in 2006 while 25 million kg was brought by market traders.

Chairman Pakistan Tea Association (PTA) Hamid Saeed Khawaja told Dawn that smuggled tea was now being sold all over the country. If tea price is consi-dered at $2.20 per kg then its landed cost comes to Rs176 per kg after paying all taxes and duty while the price of smuggled tea comes to only Rs135 per kg.

He said that the budget had disappointed the tea traders as it has no incentives for the tea sector despite repeated representations to the CBR to lower duty and taxes in order to control the tea smuggling. The association had also provided documentary evidences relating to thriving tea smuggling in Pakistan under ATTS.

An average 7.1 million kg of black tea is arriving per month these days through the ATTS, while the legal imports stand at 6.8 million kg per month.

He said that genuine importers could not survive in future if smuggling continued to increase. The government should reduce taxes and duties in order to discourage rampant smuggling. Tea was allowed under Afghan transit trade in 2004 when the government included the commodity in the ATTS list.