The country’s major tea producers’ body Indian Tea Association (ITA) believes that pan-India auctions, introduced by the Tea Board in June this year, will be more suited for the traders after the rollout of GST as under this much-awaited uniform indirect tax regime, trading of the brew will be much easier for the participants.
“Ideally, pan-India auctions could have been more suited with the GST regime. Today, there are some concerns over interstate transportation of tea,” ITA vice-chairman Azam Monem said on Thursday during a media conference here.
Explaining the issue, Sujit Patra, ITA secretary, said at present, there exist multiple taxes on tea and tax rates are different on the brew in different states. “But, after the rollout of GST, there will be a uniform indirect tax rate on the commodity and that would help traders in interstate transport of their tea stocks. Traders will then find it much easier to participate in the pan-India auctions,” Patra told FE.
Despite all efforts of the Tea Board, pan-India auctions have so far been unable to generate competition for a fair price discovery for the tea makers. Many producers are compelled to sell tea well below the cost of production and it will have serious consequences in the future on the sustainability of the industry.
Tea Board has mandated that 50% of the tea manufactured must be routed through public auctions.
Commenting on this, Monem said, “Pan-India auction is in a transitional stage. ITA is studying it…We will be engaging with the Tea Board. It will iron out the problems.”
Prices continue to be a major concern for the tea industry of India, the world’s second largest producer of the brew after China, as these have not been keeping pace with increasing costs of production, which has soared by around 9.5% in the last four years.
ITA said this year the industry is facing a more challenging situation as tea prices remain low due to oversupply in the world market on the back of higher productions in north India and Kenya. “Total tea consumption is around 4.5 billion kg worldwide. But in the last sixth months, there has been an additional supply of around 90 million kg. It is putting pressure on domestic prices,” said Monem.
Another major challenge, the industry is facing is tea consumption in India has been growing at a meagre 3% rate annually. “We are worried as per-capita consumption of the brew in our country is low compared to the neighbouring countries. Half of people in the age group of 15-24 are taking only one cup of tea a day. We should promote tea consumption among the young people on an urgent basis. We are promoting consumption of generic tea for this purpose,” the ITA vice-chairman said.
According to him, the industry body is campaigning in different malls and supermarkets to promote functional tea as the variant of the brew is ‘tremendously’ popular among youngsters.
“We are carrying out B to C campaigns now and visiting every loose market of different cities,” he said, adding the tea producers’ body was also talking to the government on more aggressive campaigning for tea consumption growth.