Traders doubt Indian tea can succeed in Pakistan

India's high tea prices and stiff competition from other producers are likely to thwart Indian chances of winning a large chunk of the world's third-largest tea market in Pakistan, traders said on Tuesday.

An Indian Tea Association trade delegation will promote Indian tea during a five-day visit in an attempt to secure a slice of Pakistan's 140 million kg annual tea market.

But traders in Pakistan expressed scepticism that the group will be able to make much headway when they arrive on June 28 as the first Indian trade delegation to visit Islamabad since tensions between the two nuclear powers began easing in April.

"They are constantly trying to penetrate... our market, but with very little success because of quality and prices factors," said Farooq Khawaja, a tea importer in the port city of Karachi.

"If the Indian government subsidised its tea for Pakistan-specific export, than there would be a breakthrough, otherwise I am not at all hopeful."

In 2001, Pakistan imported 3.1 to 3.3 million kg of low-quality tea from India, but trade was halted when rail, road and air links were blocked after an attack on the Indian parliament that was blamed on Pakistan-based militants late that year.

Khawaja said tea prices in India, the world biggest tea producer, were kept artificially high due to the reluctance of the Indian government to allow free competition in its domestic market.

"India should first open its market to foreign leaves to determine fairer export prices before trying to enter our market," he added.

African competition

Traders said Indian tea would face stiff competition from African leaves, which virtually dominate Pakistan's market, where low quality makes up about 15

"Taste for African tea has developed in Pakistan over the years...its quality and price both are acceptable here," said another tea importer in Karachi.

Kenya, Pakistan's biggest tea supplier, accounted for 50 per cent of its legal tea imports, with African countries as a whole supplying 72 per cent.

Pakistan also buys tea from Bangladesh, Indonesia and China.

It imported around 120 million kg of tea worth Rs 12.6 billion through legal channels during fiscal year of 2002-03 (July-June), while remaining demand was filled by smuggled tea.

Khawaja Saeed, the chairman of Pakistan's Tea Association, said local blenders and some multi-national companies looked to south Indian low-quality tea for mixing and blending.

"A few blenders are importing south Indian tea for mixing as it is costing them less...more blenders could book orders from India, which is offering low-quality tea at 85 to 90 cents per kg," he added.

Foreign tea blenders in Pakistan who also have a presence in India hope improved ties between the countries will spur imports of Indian tea and pave the way for joint ventures in this trade.

Earlier this year Pakistani business group Lakson and Tetley Tea, a British subsidiary of India's largest tea producer Tata Tea, set up a tea blending plant near Karachi that will mainly use Sri Lankan, Kenyan and Indian tea.

"This venture will give a direction to tea trade between the two countries," Khawaja said.