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Sector Focus : Tea And Coffee

State of the industry (2000-01)

Tariffs and prices

(Rs/tonne)	Tariffs				Domestic
	Customs (per cent)		Excise		prices
	2000-01	2001-02	2000-01	2001-02	(Jan 2001)
Tea (CTC)	44.0	76.8	2,000	2,000	90,200

1 Calcutta auction price

Source: CRIS INFAC

• Domestic demand for tea is expected to increase by 1.2 per cent, due to an increase in availability.
• Domestic tea production is expected to increase by 3.7 per cent, due to favourable weather conditions.
• Exports are expected to increase by 12.9 per cent, due to an increase in domestic production.
• In the domestic and export markets, price realisations declined, due to an increase in domestic supply and low international prices.
• Cost of production of tea is expected to increase, due to an increase in labour costs.
• Margins of tea producers are expected to decline due to the decline in domestic and export realisations, and higher costs of production.

State of the industry (2000-01)

• During April-October 2000 period, production of coffee increased by 20.2 per cent.
• During the same period, exports declined by 14 per cent, due to a decline in international prices.
• Given that domestic consumption of coffee has been increasing at 2 per cent, inventories are expected to increase significantly in 2000-01.
• Margins declined due to a decline in domestic and export realisations.

Budget impact

Impact factors

Company name	Impact	Reference
Bishnauth Tea	Pos	A, B, C
(28.35, 31.00)
George Williamson	Pos	A, B, C
(72.00, 72.00)
Goodricke Group	Pos	A, B, C
(46.00, 49.65)
Harrisons Malayalam	Pos	A, B, C
(13.30, 14.35)
Jay Shree Tea	Pos	A, B, C
(56.00, 60.45)
Tata Tea	Pos	A, B, C
(243.50, 270.80)
Warren Tea	Pos	A, B, C
(88.50, 98.00)

Note:
Figures in brackets indicate the closing share prices, on February 27, 2001 and February 28, 2001, respectively.
pos= positive.

Source: CRIS INFAC

A: Tea and coffee imports are expected to be brought under the OGL, from April 2001, under the WTO agreement. The customs duty on both tea & coffee has been increased, from 44.04 per cent to 76.8 per cent. Although this is expected to help in restricting tea imports, domestic coffee producers are not expected to benefit as currently, domestic coffee prices are lower than international prices.

B: The increase in the deduction rate of upto 40 per cent would enable producers (growers) to increase funds for development purposes. Under Section 33 AB of the Central Income Tax Act, tea growers and manufacturers were eligible for a deduction of upto 20 per cent of the sum deposited with the National Bank for Rural and Agricultural Development, (or in such other account as approved by the Tea Board) or 20 per cent of their business profit, whichever is lower.

C: The reduction of surcharge on corporate tax, from 13 per cent to 2 per cent and the expected decline in interest rates, is expected to have a positive impact on producers.

Rediff-CRISIL Budget Impact Analysis
Budget 2001

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

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