The Competition Commission of Pakistan (CCP) urged the government to take strict action for curbing the illegal trade of tea, which causing loss of millions of rupees to the country.
In its latest study on “Competition Assessment of the Tea Industry in Pakistan,” the commission observed that smuggling was the biggest threat faced by the domestic tea industry, causing loss of millions of rupees to the government and forcing legal importers out of business.
According to the study, the incentive to smuggling comes from the difference in taxation on tea imported for Pakistan and that imported for Afghanistan.
“This difference can be reduced through tariff rationalization by reducing the tax imposed on Pakistani imports and by increasing the cost of tea landing in Pakistan for Afghanistan,” it said adding, “by decreasing cost of legal imports, the smuggling trade can be made unprofitable.”
In the study, the CCP also urged the government to revisit the negative list under the transit Afghan Pakistan Transit Trade Agreement (APTTA) to limit the imports of products that hurt the domestic market.
It said that under APTTA, the Afghanistan-bound tea imports land at Pakistan’s port and the product leaves the port, but instead of crossing the border, it flows into the Pakistani market, particularly in the towns of the province of Khyber Pakhtunkhwa (KPK).
“Even if the product crosses the border, the border’s porous nature allows for the product to be transported back and sold at a lower price in Pakistani markets,” it said adding that such an arrangement creates opportunity for corruption and is harder to control.
It the study recommended that use of the transit agreement facility for such products might be prohibited or a limit should be applied on the volume of imports.
The CCP study said that this matter should be taken up by Afghanistan Pakistan Transit Trade Coordination Authority (APTTCA), Ministry of Commerce with Afghan counterparts, so as to curtail black tea import that is in excess of Afghan demand.
According to the study, the industry was represented by the Pakistan Tea Association, adding that since the membership of the association consists mostly of tea traders, it was unable to represent challenges faced by tea producers.
Apart from the National Tea and High Value Crops Research Institute (NTHRI), Unilever is the only company having experience of tea growing in Pakistan, who is a member of the PTA as well. While a tea board existed, it could not play an effective role in the affairs of the industry.
It urged the Ministry of National Food Security and Research (MNFSR) to consider creating a ‘Tea Wing’ to devise policies and programme to encourage both production and trade of tea.
The need for a statutory organization as highlighted by the NTHRI, could be fulfilled initially by this Wing, that may be transformed to a full-fledged Board, if so needed at the long run.
The Wing can perform a broad range of functions relating to rendering financial, and technical assistance for cultivation, manufacture and marketing of tea, particularly, to develop the small growers’ model in Pakistan, it added.