The Indian Tea Association (ITA) on Thursday said that the pan-India e-auction would be more ‘suited’ for the traders if it was introduced after the roll-out of Goods and Services Tax (GST).
“Ideally, pan-India auctions could have been more suited with the GST regime. Presently, there are some concerns over interstate transportation of teas,” the association’s Vice Chairman Azam Monem said.
Currently, there are different taxes on the brew in different states and traders are facing difficulties in interstate transport of their tea stocks.
“After the rollout of GST, there will be a uniform indirect tax rate on the commodity and it would help traders in interstate transport of their stocks. Traders will then find it much easier to participate in the pan-India auctions,” said the tea lobby group’s Secretary Sujit Patra.
Despite efforts being made by the Tea Board of India, pan-India auction which was rolled out in June so far has not been able to generate competition for a fair price discovery for the tea makers.
“The tea prices for Indian producers for the last ten years have grown at around CAGR (Compound Annual Growth Rate) of 6 per cent, trailing the rise in input costs which have increased at a CAGR of over 10 per cent during the same period,” a statement said.
Prices have not been picking up with increasing costs of production, which has soared by around 9.5 per cent in the last four years.
Many producers were forced to sell teas well below the cost of production and it would have serious consequences in the future on the sustainability of the industry.
The Tea Board has mandated that 50 per cent of the teas manufactured must be routed through public auctions.
The industry in India, the world’s second largest producer of tea after China, is reeling under subdued prices due to oversupply in the world market on the back of higher production in north India and Kenya.
“Total tea consumption is around 4.5 billion kgs world-wide. But in the last sixth months, there has been an additional supply of around 90 million kgs. It is putting pressure on domestic prices,” said Monem.
The modest annual consumption growth at 3 per cent is also a major challenge.
“We are worried as per capita consumption of the brew in our country is low compared to the neighbouring countries. Fifty per cent of people in the age group of 15-24 are taking only one cup of tea a day,” he said.
“We should promote tea consumption among the young people on an urgent basis. We are promoting consumption of generic teas for this purpose,” he said.