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Exporters oppose ITA's subsidy proposal

By Our Staff Reporter

KOLKATA SEPT. 5. The Indian Tea Association (ITA) finds itself in a rather awkward situation. According to sources, at a joint meeting with the Tea Board authorities in New Delhi early last month, the association proposed the to Union Commerce Ministry to immediately announce a special short-term export subsidy of Rs. 5 a kg on incremental volumes to Russia, other CIS countries, Iraq and Afghanistan (in addition to the existing subsidy of Rs. 2 a kg on incremental volumes) to push up dwindling exports to 200 million kg this year, up by about 20 million kg from ITA's previous estimate of 180 million kg.

While the proposal is awaiting Government's nod, a large number of exporters objected to the move and the Indian Merchant Tea Exporter's Forum (IMTEF) has submitted a memorandum to the Tea Board alleging that such subsidies only help the fly-by-night operators to earn `windfall gains' undercutting the established exporters that too at the cost of Government exchequer and without any rise in total exports.

While the ITA chairman, Bharat Bajoria, denied existence of any such move or the opposition to it either, the sources said the proposal had faced strong objection from most of the prominent exporters at the meetings convened by ITA, primarily to devise ways to increase exports to Russia which were down by 14 million kg in the first six months, prior to the submission.

Majority of exporters were unanimous that the prevailing market conditions were averse to higher exports.

The division became sharper once ITA included Iraq, Afghanistan, and other CIS countries within the purview of the proposed scheme.

While Afghanistan still offers little hope for direct exports, exports to Kazakistan dropped by about two million kg in the first six months. Exports to Iraq increased manifold in 2002.

The cause of concern of exporters were: as the competitors of Indian tea operate at a lower cost and mostly produce for exports, any such step would be retaliated.

What is worrisome, there could be dumping of substandard teas causing more trouble in future said Bharat Arya of J. V. Gokal, one of the few packet tea exporters to Russia and Kazakistan. "I am unable to visualise how such schemes would help genuine exporters".

The biggest reservation was on "the inclusion of Iraq and the reasons behind drawing the scheme," said a number of merchant exporters on condition of anonymity.

Exports to Iraq were more governed by politics they said, alleging that "the current move will benefit a single exporter, with dubious distinction, the most".

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