Export units allowed to sell more "instant tea" locally.

NEW DELHI -- In a boost to the domestic tea vending industry, the Indian government has allowed export-oriented units (EoUs) to sell more "instant tea" in the domestic market to meet the growing demand in the country. There is a strong demand for instant tea due to increased consumer preference for convenient, instant food and beverage products.

The Commerce Ministry has now increased the cap on EoU sales of "instant tea" in the domestic tariff area (DTA) from the existing 20% of free-on-board value of exports to 30O/o. This will improve availability of "instant tea" for the tea vending industry, which has been importing (instant tea) from Sri Lanka and other foreign markets, say industry players.

The "instant tea" exports have recently seen some slowdown due to a decline in export orders on account of the appreciation of the rupee against the dollar. However, the domestic tea vending industry, valued at about Rs 400 crore, has been growing at 35% compounded annual growth rate (CAGR) in the recent years, say industry observers.

"This is a progressive step. It will not affect the domestic tea industry, as EoUs are still not permitted to sell tea (instant tea excluded) in the domestic market. The tea growers will continue to be protected. The cap should have been raised to 50% as available for a number of products," industry sources said.

In fact, seeing the growth prospects for this industry and also its employment creation potential, the finance minister, P. Chidambaram, had in budget 2008-09 announced full excise duty exemptions on tea/coffee pre-mixes.

Currently, EoUs are permitted to sell up to 50% of their flee-on-board (f.o.b.) value of exports in the DTA. There are, however, exceptions to this norm. The EoUs are not allowed to sell motorcars, tea (excluding instant tea) and alcoholic beverages in DTA.