The recently signed Free Trade Agreement with the Association of South East Asian Nations is a deterrent to the Indian plantation sector. Under the agreement, the import tariff of tea and coffee will be brought down to 45 per cent
from the existing level of 100 per cent and pepper and cardamom to 50 per cent from 70 per cent over a period of 10 years.
This will hit the Indian plantation sector as it is not competitive, cost wise, and will be wiped out from the domestic market as well as from the export market, according to D P Maheshwari, president, United Planters' Association of Southern India.
Speaking to reporters at Coonoor, Tamil Nadu. on the eve of 116 annual conference of Upasi, Maheshwari said the pact that will come into force from January 1, 2010, will hit the Indian plantation commodities worst as imports from Asean region will be cheaper. In the Asean region, production cost and taxes are much lower.
Sri Lanka, Kenya, Vietnam, Malaysia, Thailand and Indonesia in Asean have shifted to plantation commodities such as tea and coffee during the last decade solely to export worldwide.
Unlike the farm sector, the plantation sector in India is subjected to agriculture tax in India, which is 50 per cent in Kerala and 30 per cent in Karnataka. Only Tamil Nadu has abolished the tax.
In volume terms too, India is not in a position to compete with some of the Asian countries.
In coffee, for instance, there is no comparison with Brazil and Vietnam. They account for 45-50 per cent of the total world production, whereas India accounts for less than 4 per cent.
In price terms, India cannot compete with Vietnam, as coffee is grown there on virgin lands and productivity is better.
In India, labour costs have spiked in the last 10 years. Most estates are very old and productivity has fallen. India has limited opportunities to increase coffee area, as it needs to replant coffee plantations.
Platers feel that while going in for trade agreements, the interests of the domestic industry should be taken into account. Plantation sector is just recovering from the economic slowdown that had severely hit exports.
The FTA will have further disastrous consequences and will compel many estates to close down leading to socio-economic unrest, they said.
Planters in India are seeking budgetary support from the government to counter cheaper imports. They want the government to implement the inter-ministerial committee's report, which recommended sharing of social costs between the employer (50 per cent) and Central/state government (40:10).
The committee, constituted by the ministry of labour to look into the issues concerning the plantation sector had submitted its report in 2003.
The plantation industry feels that its recommendations are constructive and if implemented they will go a long way in bringing relief to the plantation sector.
