Industry wants AED to go

IN FOCUS/ Tea

The Indian Tea Association has submitted its memorandum for the Union budget and the primary issue is the additional excise duty.

The Union government in the central budget 2003-04 withdrew the central excise duty on tea but, replaced it with an additional excise duty (AED) designed to build a fund for modernisation and development of the tea industry.

However, industry representatives feel that the fund which had accumulated over the past two years to the tune of around Rs 120 crore had not been utilised. No scheme had been passed under the scheme.

The ITA, in its submission explains that the excise duty, in any form, is an element of cost which the industry is unable to pass on to the subsequent stage of the value chain given the fact that tea prices are determined at a commodity level by market forces of supply and demand.

The CCPA has therefore requested that the ministry of finance withdraws the AED. The association's submission is essentially aimed at providing some immediate relief to the Indian tea industry, which has seen five-six consecutive years of price decline and a surge of cost pressures.

Sources in the industry said, that the fund which had accumulated should be used for giving incentives for orthodox production. However, the industry has mooted a special purpose fund for accelerating replantation activity.

The industry and Tea Board in conjunction with tea research institutions have done a detailed mapping of tea areas with bush age profiles of 40 years and over which fall into vulnerable category of low yielding areas.

The study revealed that around 2,12,000 hectares have to be targeted for replanting or rejuvenation over the next 15 years and the task should commence as early as possible.

As per the indexed cost of replanting/rejuvenation around Rs 4,000 crore would be required for the purpose.

Factoring in a subsidy at an enhanced rate of 40 per cent of the cost of planting and appropriate contributions from individual units as margin capital, a revolving special purpose fund (SPF) of around Rs 1,200 crore would be required to be set up towards this end.

Discussions have already commenced under the aegis of commerce ministry with NABARD and Indian Banks Association.

The ITA has requested the ministry of finance to accord top priority for the setting up of an SPF and the association sought a commitment in this direction be incorporated in the forthcoming budget 2005-06.