Speaking to The Financial Express, Tata Tea executive director and Upasi's new president MH Ashraff said that the tea industry was passing through a difficult phase as the cost of production was going up and the price realisation at the auctions was below expectations.

Besides, the export market has also failed to pick up and the prices are witnessing a continuous downtrend.

Ashraff assumed charge as the new Upasi president on Tuesday.

It is significant to note here that the tea exports from India during April to July of the current financial year have suffered a setback of 19.45 million kg in quantum and Rs 295.35 crore in value realisation over the corresponding period of the previous financial year (as per the latest Tea Board figures).

Reacting to this,Ashraff said that new exports markets need to be identified and tea exporters must look beyond traditional markets such as Russia where Indian exports have declined due to the economic crisis there.

Especially as regards the South Indian tea industry, which is heavily dependent on exports as out of its 210 million kg of tea produce every year around 50 per cent of this is exported and this is what sustains this industry to keep its prices at a certain level.

But this year so far due to absence of Russian enquiries, the prices have been very depressed this year. Once again, the market optimism has gained little momentum with fresh enquiries coming in from Russia. Although Indian exports are heavily dependent on Russia, we must also at the same time start exploring new markets such as Europe, the US, Middle East and East European countries.

Ashraff disclosed that a tea delegation from India would visit Middle East, Poland besides some of the other east European countries this year to study the possibilityof exports from India. Besides, industry representatives from all over India, this delegation would also have senior officials from the Tea Board.

On the duty front, Ashraff said that whereas, following repeated representations from the industry, the government was kind enough to remove the excise duty on packaged tea, a high level of duty at the rate of Rs 2 per kg was slapped on bulk tea at the point of production in the estate. This has put an annual burden to the tune of Rs 130 crore a year on the tea industry.

``It will be our foremost priority to get this excise duty of Rs 2 per kg on bulk tea removed. We have been taking up this issue with senior officials in the government and we have been assured that this aspect would be re-examined,'' Ashraff added.

Ashraff said that even earlier there has been an excise duty on tea, however, the government has always taken note of the fact that different tea growing regions in the country received fair and equitable treatment.

The duty rate was never auniform rate for all tea producing regions and the duty was levied in slabs for different regions, taking into account their cost of production, price, profile, etc.

For instance, Ashraff explained that the Assam teas are selling at a Rs 20 premium than the South Indian teas and the Darjeeling tea fetches a different price. So there were differential rates of duties based on zonal classification.

South India had a duty of fifty paise per kg as the cost of production of tea is the highest in South India due to higher labour wages.

``What we are trying to tell the government is that it is fine if you want to put a duty on tea, its your prerogative to do so but we would appeal to them not do so. Because on one hand you say that tea is a common man's drink, it is in the restricted category and when the prices go up, the government steps in. But then, on the other hand, due to this prevailing duty, the cost of production has gone up by two rupees,'' he added.

Ashraff said that already the cost ofproduction in India is very high especially in South India, where the cost of production is highest in the world. So the issue of duty on tea needs to be tackled immediately by the government.

During my tenure as the president, Upasi, I would request the government to completely abolish this duty, however, if they can't do so because of revenue considerations then at least they should go back to the old system of differential rate of duty for different regions.

In addition to tea, Upasi would be taking up the issue of high agricultural income tax prevailing in the plantations industry, he added.