Wednesday, December 23, 2009

Pakistan's Tea Addiction Can Stimulate Economy

Pakistanis' great hospitality to strangers and strong addiction to tea has given birth to many proverbs. The best known of these is the one about the "three cups of tea" which goes like this: On the first cup, you're a stranger, and on the second, a guest. By the third cup, you're family.

Pakistan is the world’s third-largest importer of tea with nearly 175 million kg of annual consumption, costing an estimated $500 million, and increasing at about 4% a year. It imports tea from 21 countries, with the lion's share of black tea imports coming from Kenya, Bangladesh and Sri Lanka. The country's green tea requirements are met by imports from five countries led by Indonesia and Vietnam. Only a small fraction of Pakistan's tea imports come from neighboring India.

Tea prices, which hit record highs in 2009 due to droughts in India, Sri Lanka and Kenya, should stabilize in 2010 as weather has returned to normal in the main producing regions in Asia and Africa, the Food and Agriculture Organization (FAO) said. It is estimated that global tea production has been cut by as much as 20% this year.

The UN food agency said its Tea Composite price, the indicative world price for black tea, hit a high of $3.18 a kg in September, driven by the droughts and higher demand, up from an average price of $2.38 per kg in 2008. At 34 percent annual increase, tea prices have significantly outpaced overall food price inflation, which has also been running in double digits in recent years in Pakistan.

China, India, Sri Lanka, Kenya, Turkey, Indonesia, Vietnam, Japan, Argentina and Bangladesh are the top 10 tea producing countries in the world.

Pakistan is not a tea producing country but it is the third largest importer of tea in the world, behind Russia and the UK. Because of its high tea consumption, and the fact that it has no production of its own, it is a market which is keenly pursued by main tea exporting nations. Tea affects the taste buds; therefore, it is difficult to replace a particular variety with a substitute. This explains why certain types are favored by certain countries : for example, the Russians and former Soviet republics favor Indian and Sri Lankan teas. UK and Pakistan prefer Kenyan teas.

To cut spending on tea imports, trials have been conducted for growing tea in Pakistan, particularly Mansehra, Battagram, Swat and Azad Kashmir. These trials have shown good results in Northern Pakistan, but the necessary commercial investment needed to develop a viable industry has not yet materialized.

With the rising tea consumption and growing import bill, it is important for Pakistan to give incentives for investments for tea cultivation. Such a policy can help create jobs in the northern regions where they are most needed, while at the same time providing economic opportunity to young people to take a step toward creating the much-needed peace and political stability for the entire nation.

Related Links:

Food, Clothing and Shelter in India and Pakistan

Tea Growing Regions in Pakistan

How Much Tea Does Pakistan Drink?

Tea in Pakistan

FAO Data and Statistics

Solving Pakistan's Sugar Crisis

Pakistan's Water Scarcity

Food Inflation in India and Pakistan

6 comments:

Riaz Haq said...

Here's an Economic Times report on increasing Indian tea imports in Pakistan:

Pakistan's dependence on Indian tea is gradually increasing. This year, Pakistan has imported 20 million kg of CTC teas from India, which is one of the highest in recent years. A drop in Kenyan production has also helped India to strengthen its position in the Pakistani market.

A trade delegation from Pakistan Tea Association will be visiting India in April during which long-term business deals are expected to be clinched. With Iran stopping its purchases from India due to a payment problem, Indian tea producers are banking on Pakistan as one of the emerging export markets in the coming years.

Pakistan is largely a market for the CTC variety and said to be the second largest importer after Russia. The country's total official tea import volume is around 120 million kg. But tea industry sources say that a high import duty results in additional tea making its way into the country through grey channels. Almost 65%-70% of its total official tea import comes from Kenya, while India accounts for 15%. But with Kenyan production down by almost 9% to 259.77 million kg, India has an edge this year.

"Pakistan has been a good buyer so far from south India and is even buying from north India as well. The strengthening of the dollar against the rupee has also made Indian tea competitive in the Pakistani market," said Azam Monem, whole-time director, McLeod Russel India.

"Kenyan prices are higher compared with India and its production has been down. This could be an advantage for us," Monem added.

"Per capita consumption of tea has reached 1kg per annum and this is expected to go up further," said CS Bedi, chairman of Indian Tea Association. "We had been trying to develop business relationship with Pakistan over quite sometime now. Political tensions between the two countries have not marred our effort and over the years exports has been increasing to Pakistan," Bedi said.

He added that a delegation is coming from Pakistan Tea Association to explore business opportunities with India. "We hope to enter into long-term business deals with Pakistani tea traders," said Monem.

India is now offering Pakistan a wide array of tea blends at different price points. "Earlier, Pakistani tea trade used to complain about high prices of Indian tea. But now they understand that India offers quality teas which are at par with thee Kenyan tea or even sometimes even better," said Bedi.

Riaz Haq said...

Here's Kenya's Business Daily's report on tea exports to Pakistan:

Kenya’s dependence on Pakistan for tea exports is gradually being eroded by the Asian country’s improved ties with India.

Pakistan, which buys more than 17 per cent of Kenya’s black tea, last year imported a 21.8 million kilogrammes of tea worth $27.2 million (Sh2.3 billion) from India, compared to 8.3 million kilogrammes worth $15.5 million in 2010.

“One would expect that with the improved trade relationship with Pakistan more and more tea will be bought from the neighbouring country,” said East African Tea Trade Association marketing manager Brian Ngwiri.

As India’s share of the Pakistani market grew, Kenya’s slice dropped from 60 per cent in 2010 to 55 per cent in the last financial year, according to latest data from the Pakistan Tea Association (PTA).

East African Tea Trade Association showed that Kenya exported 58 million kilogrammes worth $175 million (Sh14 billion) to Pakistan in 2010 compared to 70 million kilogram worth $204 million (Sh16.9 billion) in 2011.

“Kenya’s share of total tea imports by Pakistan has reduced by five per cent,” PTA said in a press briefing last week.

Total Pakistan tea import increased by a third in the last fiscal year to 127 million kilogrammes worth $301 million from 95 million kilogrammes worth $252 million imported in 2010.

However, industry insiders said more Kenya tea could be finding its way to Pakistan through smuggling via Afghanistan.

Tea Board of Kenya data indicates Afghanistan increased its imports from Kenya by the highest margin — 48 per cent to 49 million kilogrammes — among the 48 destinations supplied with Kenya tea last year.

“The ratio between tea imports through legal and illegal channels is almost equal,” said PTA Chairman Mohsin Saifi adding that Pakistan loses between $50 million and $80 million annually in revenue due to tea smuggling through Afghanistan.

The Pakistan government charges a 10 per cent import duty, a 15 per cent sales tax, a 10 per cent value added tax and another two per cent income tax on imported tea, laying the ground for a black market to flourish.

Afghan imports Kenyan tea that is blended and sold to Pakistan at an extra charge of 15 per cent making it competitive
Pakistan meets its green tea requirement from five countries including Indonesia, Vietnam, Bangladesh, China and Sri Lanka. Vietnam has a major share of 64.38 per cent in this group. Indonesia, Bangladesh and China shares in Pakistan’s green tea market are 2.33 per cent, 3.58 per cent, and 29.76 per cent respectively.


http://www.businessdailyafrica.com/India+rivals+Kenya+with+Sh2+3bn+tea+exports+to+Pakistan+/-/539546/1299784/-/1098a9kz/-/

Riaz Haq said...

Here's Express Tribune on Pak tea imports:

Parliamentary Secretary for National Food and Research Natasha Daultana told the National Assembly on Monday that Pakistan imported black tea from 19 countries worth Rs25.03 billion.

Replying to various questions during the Question Hour, she said that around 127,316 metric tonnes of black tea was imported during 2010-2011. The major share of 55.1 per cent was imported from Kenya followed by India at 17.13 per cent.

Giving information regarding the government’s steps to increase cultivation of tea, she said successful plantation has been demonstrated, its yield potential and quality have been assessed to be economically viable and finally a production package has been evolved through the research efforts of scientists of National Tea Research Institute (NTRI) under Pakistan Agricultural Research Council (PARC).

Replying to another question, she said the stock of fertiliser is sufficient to meet the domestic demand of the country. The Parliamentary Secretary said the estimated demand of urea for Rabi during 2012-13 is around 3 million tones, reflecting a gap of only 0.344million tonnes. She added that at present the opening stock of urea at the start of Rabi 2012-13 is expected to be 0.503 million tonnes. Daultana informed that due to 12 per cent gas curtailment for urea plants, the estimated domestic production of urea will be around 1.90 millon tonnes.

The Parliamentary Secretary said the DAP availability in upcoming Rabi 2012-13 season seems to be satisfactory.


http://tribune.com.pk/story/452168/pakistan-imported-tea-worth-rs25-03-bn-last-year-parliamentary-secretary/

abhishek chaturvedi said...

is it soon possible that pakistan starts growing its own tea??

Riaz Haq said...

Here's ET report on tea cultivation research in Pakistan:

A modern tea research laboratory has been set up in the National Tea Research Institute (NTRI) Manshera. The laboratory will process and cultivate tea on a commercial basis to enhance domestic production and reduce the import bill of the commodity.

The laboratory consists of departments for soil sciences, entomology, biochemistry and horticulture for research and development of tea production in the country.

The project, initiated by the Ministry of Food and Agriculture, will be completed within the next two years at a cost of Rs490 million.

Addressing the inaugural ceremony at NTRI, Pakistan Agriculture Research Council (PARC) Chairman Dr Muhammad Afzal said that the import bill for tea was around Rs 20 to 22 billion per annum, which is a huge burden on the national exchequer. The biggest relief, he said, would be the reduction in foreign exchange spent on tea imports.

He said that the forest departments of Azad Jammu and Kashmir and Khyber-Pakhtunkhwa (K-P) had provided 1,000 acres for research purposes.

In addition, three tea nurseries have been set up in AJK, Swat and Bajaur Agency, with 32 acres being cultivated in Abbaspur in AJK, and 29 acres in Bajaur. The chairman said, “These nurseries now have million of plants which are ready for cultivation.”

The PARC Chairman also added that the laboratory has the capacity to process 10 tons of high quality green teas. He said that the NTRI would help the country become self-sufficient in tea production, while also increasing farm income and alleviating rural poverty.


http://tribune.com.pk/story/164240/tea-research-pakistans-favourite-beverage-could-go-local/

http://www.parc.gov.pk/ntri.html

Riaz Haq said...

Here's Daily Times on green tea production opportunities in Pakistan:

Pakistan Agriculture Research Council (PARC) Chairman Dr Iftikhar Ahmed has stressed the need for focusing on domestic green tea production to meet the requirements of the country.

During his visit to National Tea Research Institute (NTRI) Shinkiari, the PARC chairman said that the country could be self-sufficient in green tea, imports of which have now risen to 33,000 metric tonnes.

He said that NTRI should focus on green tea cultivation to make the country self-sufficient in green tea production.

NTRI Chairman Dr M Azeem, Sardar Ghulam Mustafa, Dr Naseer Malik, Dr Abdul Hayee Qureshi, NTRI Director Dr Farrukh S Hamid and other senior scientists were also present during the visit of PARC chairman.

On the occasion, Hamid briefed the chairman about the history of tea cultivation and present status of its expansion in the potential area of Khyber Pakhtunkhwa.

He also gave a detailed briefing about the present import of tea in the country, like, 127,000 metric tonnes of black tea during the fiscal year 2011-12.

The NTRI director said that Pakistan was the third largest importer of tea in the world.

The PARC chairman was also informed that NTRI has produced 12 clones of high-yielding potential and has established the progeny garden.

The tea germplasm available in Pakistan are of Chinese origin and best suited for the production of green tea, moreover, the market price and consumer acceptability demands that green tea production is more economical compared to the black tea.

Green tea has been enjoyed by the people in China and Japan for thousands of years, not only for its taste but also for the health benefits associated with it.

The secret of green tea lies in the fact that it is rich in catechin, polyphenols, particularly epigallocatechin gallate (EGCG), a powerful anti-oxidant.

The positive health effects of green tea are that it prevents cancer, reduces high blood pressure, anti-diabetes effects, prevents liver disease, food poisoning, has antidepressant properties and weight loss factors.


http://www.dailytimes.com.pk/default.asp?page=2012\09\29\story_29-9-2012_pg5_12