TEA-COFFEE

Industry Snapshot

POSITIVE

The Indian tea industry is a 176-year-old industry, with an estimated market size of Rs.19,500 crore. The industry presently employs nearly 35 lakh workers, of which approximately 13 lakh are employed directly in the tea plantations, wherein women constitute almost half the workforce. The tea output in India gradually increased in the calendar year (CY) 2011 at 988 mn kgs, registering 2.3% year-on-year (y-o-y) growth. In CY10, India ranked second in production and consumption after China and fourth in terms of exports. CARE Research expects the recently witnessed positive trend in tea output in CY11, to continue at a CAGR of 0.4% from CY12 to CY14. The domestic tea consumption is also likely to increase from 837 mn kgs in CY10 to about 920 mn kgs by the end of CY14, thus posting 4-year CAGR of 2.4%. Coffee is the second-most traded commodity in the world after crude oil. In coffee season (October to September) CS 2010-11, India produced 3.02 lakh tonnes of coffee, most of which was grown in the southern states of Karnataka (71%), Kerala (22%), and Tamil Nadu (6%). Coffee is cultivated on nearly 4.05 lakh hectares in India, and 70% of production is grown on small farms that own an area lesser than 10.12 hectares. The coffee output is expected to subsequently increase to 3.62 lakh tonnes by the end of coffee season CS 2013-14, at a CAGR of 6.2%, owing to increase in coffee cultivated area from the present 4.05 lakh hectares to 4.2 lakh hectares by the end of CY14. Coffee consumption is expected to improve at a 4-year CAGR of 6.4% from 1.08 lakh tonnes in CY10 to 1.38 lakh tonnes in CY14.

Duty Structure
Customs Duty (%) Machinery for coffee harvesting, processing, packaging, bagging, etc Coffee vending and brewing machine Before After Impact 7.5 5 Excise Duty (%) Before After Impact 1 2

Coffee & tea pre mixes

10

Proposal and Impact

Budget proposals Impact on the industry

Nominal excise duty of 1% increased to 2% on Increase in excise duty to marginally increase 130 items that include tea and coffee pre-mixes. their prices. This would have no major impact on the companies and would be passed on to consumers. Reduction in customs duty on coffee plantation, Will result in marginal cost savings for coffee processing and packaging machinery from 7.5% plantation, processing and packaging to 5% companies. Reduction in customs duty on coffee vending and Will result in marginal cost savings for the brewing machinery from 10% to 5%, with companies operating in coffee vending and concessional custom duty of 2.5% on parts/ coffee outlets. components thereof.

Impact on companies
Company Gujarat Tea Processors & Packers Ltd. (Wagh Bakri Tea Group) Tata Coffee Ltd. Impact Comments Increase in excise duty on tea pre-mixes to 2% would have minimal impact as prices would be passed on. Reduction in customs duty on coffee plantation, processing and packaging machinery will result in marginal cost savings. Increase in excise duty on coffee pre-mixes to 2% would have minimal impact as prices would be passed on. in customs duty on coffee plantation and machinery, in addition to coffee vending and brewing machinery will result in marginal cost savings for the company across its business units. Increase in excise duty on coffee pre-mixes to 2% would have minimal impact as prices would be passed on.

Amalgamated Bean Coffee Trading Company Ltd.

Reduction processing