Calcutta, Mar 19: Hindustan Lever Ltd, a key player in the tea industry, has seen the partial fulfilment of its long-standing demand of being allowed to import tea for sale in the domestic market. But tea majors like the Tatas, Magors, Warren, Goodricke, Assam Company and AFT have been caught completely off-guard by the government's recent decision to allow export-oriented units (EOUs) in tea to sell 25 per cent of their production in the domestic tariff area.Although the commerce ministry took the decision in consultations with the Tea Board, the industry was in the dark till they got the notification.
The decision is expected to create a furore in the industry. So far, tea had been kept out of the general permission given to EOUs and units in export-promotion zones for domestic tariff area sales.
Top industry sources told The Financial Express that this relaxation comes at a time when both exports and production levels in tea are at their highest. The industry is yet to figure out why thegovernment took the decision.
Hindustan Lever, according to industry watchers, will be a major beneficiary as it has at least two EOUs that import tea for re-export. The obvious gain will be the 25 per cent domestic tariff area sales. It can also sell 5 per cent export rejects as well, which could be increased to a higher amount on a case-to-case basis under the recent relaxations.
Second, Hindustan Lever, which is the top producer of packet tea, will find it easier to sell imported teas in the domestic market through its packets only, as sale of tea in bulk form in domestic tariff area will not be allowed.
Third, Hindustan Lever can ride on the international presence of the Lever brand to offer local tea consumers an Indian tea with a foreign mix, which may prove genuinely attractive to domestic consumers.
Tea is a restricted item under Part II of the negative list of imports. The existing rules guiding EOUs dealing in tea specify four main conditions under which tea can be imported for export. Theyare:
Teas can be re-exported only with a total value addition of 40 per cent.pTeas have to be re-exported only in packet form. Imported teas have to be blended with Indian teas. No domestic tariff area sales are allowed.The commerce ministry has changed the fourth clause, and now EOUs satisfying the other three conditions can offload 25 per cent of their production in terms of value and 5 per cent of rejects under para 9.9 (b) and para 9.9 (a) of the Exim policy.
Indian Tea Association (ITA) chairman Vinay Goenka declined to comment and said that the body was studying the issue. "We are studying the pros and cons of the present relaxation at the moment," he said.
Top tea companies contended that such a decision would pave the way for further relaxations in the future. "A 30 per cent offloading at present may increase in future. It is true that imports deliver higher trading volumes but is this really required in the country at present when tea exports have earned the maximumrevenue in the portfolio of exports?," said a producer on condition of anonymity.
"We are not averse to global competition at all, but provision of softer options to increase trading volumes without the industry consensus is appalling," added a top producer-exporter.
An industry watcher said it was difficult to monitor the exact number of EOUs and EPZ dealing in tea re-exports. And, apart from very large groups, it would be a difficult proposition for a small-size operation to go in for 40 per cent value-addition.
The relaxation will be applicable `on a trial run' basis for six months.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
