Indian Tea Industry Seeks Protection against Tariff Cuts

The Indian tea industry has sought protection against tariff cuts under the Regional Comprehensive Economic Partnership (RCEP) pact being negotiated by India with 15 countries, including China in order to protect the country’s tea Industry. 

Tea Production in India in a surplus mode 

Sujit Patra, Secretary of Indian Tea Association (ITA), spoke to media and said, “When the Indian tea industry is trying its best to absorb surplus tea production through boosting exports and generic promotion, it would be foolish to allow other countries to enter our market. Tea should be put in the negative list of the RCEP pact to protect the interests of the Indian tea industry and millions of people associated with it.” 

ITA is one of the oldest and prominent tea producers and exporters body in India including 425 tea gardens as members providing direct employment to more than 4 lakh people. 

Vast scope 

The Regional Comprehensive Economic Partnership is a proposed free trade agreement between the ten member states of the Association of Southeast Asian Nations and the six Indo-Pacific states with which ASEAN has existing free trade agreements. Here, most members are pushing for tariff elimination on more than 90 percent of traded goods. This means that tariffs would need to be eliminated not just for industrial goods, but also agriculture produce as very few items will be allowed to be shielded. In India, tea producers are not only struggling for the market but even struggles to deal with surplus production which is driving down prices. According to some industry reports, tea production in the country in 2018 was 1,312 million kg (mkg), exports were 249 mkg, and imports were 20 mkg, which led to a surplus of 58 mkg.  

Patra said regarding the issue, “An import duty of 100 percent is the primary reason why imports are low and not contributing to the woes of the industry.” 

While ITA was not a part of the recent meetings the Commerce Ministry has been holding in preparation for next week’s RCEP Ministerial Meeting in Beijing, where the 16 members are expected to make their positions on market openings clearer, it had given inputs at meetings on RCEP organized earlier this year by the exporters body FIEO and the Directorate General of Foreign Trade (DGFT). 

The high Production cost of Indian tea 

Production cost of tea in India is one of the highest in the world since the past due to some factors such as Labor wage, high wage structure, high social welfare cost, and high transportation and handling charges, low cost of production. Many RCEP nations are ready to export tea to India at much lower prices, ITA argued. 

“We are particularly fearful of China whose production is increasing every year. China now produces black tea which is not liked by the Chinese and is thus looking for overseas markets. India is its first and easy stop. If duties are lowered, it will be very easy for China to dump its excess tea here,” said Patra. 

Limited scope for Indian tea exports 

On the other hand, there is limited scope for exports of Indian teas within the RCEP bloc as there isn’t much demand except China, which already has its own over-production to deal with.  The Indian tea industry, which is the major source of livelihood for over 1.2 million workers directly, any disruption will affect the livelihoods of 1.2 million people severely, Patra said.