Export Policy for Tea Reviewed work(s): Source: Economic and Political Weekly, Vol. 3, No. 3 (Jan.

20, 1968), p. 184 Published by: Economic and Political Weekly Stable URL: http://www.jstor.org/stable/4358143 . Accessed: 25/01/2013 17:33
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January 20, 1968 ruling Samyukta Vidhayak Dal. In the reshuffle the Jan Sangh ministers have been deprived of important portfolios like co-operation and local self-government. The Jan Sangh had exploited its control of these departments to pack co-operatives and local government bodies with partymen. The sharpness of the party's initial reaction to the loss of the portfolios was, therefore, underthere was angry talk standable of the SVD electing a new leader in place of Charan Singh. But the shrewd calculations on which Charan Singh had based his moves are now becoming clear. The SSP and Communist ministers resigned from Government over specific issues like abolition of land tax and release of those detained in connection with the State Government employees' strike, but thQ discomfiture of the two parties particularly of the SSP, since it is the second largest party in the SVD arose from the fear that the Jan Sangh by exploiting the portfolios in its control was worsting them in the struggle for political influence at the district and lower levels. By taking away some important departments from Jan Sangh Ministers, Charan Singh has mollified the SSP and the Communists who, though no longer in his Government, may be expected to continue to support it. The move may also bring back the Swatantra party which had left the SVD in July last year. The General Secretary of the party, N Dandekar, has expressed 'satisfaction' over the reallocation of portfolios. The party has only 12 seats in the Assembly, but in the precarious balance between the SVD and the Congress and betwcen the different units of the SVD, even these matter. For the moment, then, Charan Singh seems to have survived by skilfully exploiting differences between the parties constituting the SVD. The Jan Sangh has clearly backed down; it has withdrawn the demand for replacing Charan Singh, and the Jan Sargih leader, Ram Prakash, who is also Deputy Chief Minister, has expressed confidence that the crisis will blow over. The reason for the Jan Sangli's retreat is that the fall of the present Ministry may well lead to a mid-teim election in the State, since because of the differences within the Congress it is improbable that a Congress Ministry
184

ECONOMIC AND POLITICAL WEEKLY for-med by C B Gupta will survive for any length of time. The Jan Sangh is clearly not anxious for an election at this stage and this strengtherns Charan Singh's hands in dealing with the party. If these various considerations continue to carry weight with the different parties, resignation of SSP and Communist Ministers and cutting down to size of the Jan Sangh may have left the Chief Minister actually stronger than before. In any case there is no chance of the SVD pulling together under anyone else.

BUSINESS

Export Policy for Tea

IN 1967 tea exports recovered to 205 million kgs from 175 million kgs in 1966 and 199 million kgs in 1965. The unit value realisation rose from Rs 5.77 per kg in 1965 to Rs 7.67 in 1966 anld to Rs 8.78 in 1967, a, rise of about 50 per cent ovei 1965. Only part (about one half) of this benefit, which accrued largely from devaluation, was absorbed by export duties. India has again become the world's largest exporter of tea, relegating Ceylon to the seeond place. Retrospectively, Governm,ent's policy of sustaining the price of tea by imposition of export duties appears to have served its purpose. Devaluation of sterling last Novcnber and the consequential devaluation of the Ceylonese rupee by 20 per cent have now brought some new factors into the situation. The austerity measures adopted by UK are likely to reduce the sterling price of tea, while Ceylon's devaluation has restored the competitive edge of its tea. Predictably, the tea export interests have stepped up their demanrdfor export duty abolition no doubt with an eye on the impending
budget.

In recent weeks much progress seems to have been made towards evolving some kind of joint action on these lines. There is a move to set up a joint Indo-Ceylon marketing organisation. So long as these delicate negotiations are going on, it would be worthv-hile to exercise a degree of restraint in meeting competition from Ceylon. Since tea is of predominant importance in Ceyon's exports as well as in its internal economy, a premature move on India's part to improve its competitive strengtl would invite retaliation and harm the intercsts of both. While tea interests have been contcnt over the years to look to Government repeatedly for concessions and incentives, they have done little to diversify the direction or product pattern of exports. Exports have been unduly concentrated on UK (55 per cent) while many neighbouring regions which are large con sumers of tea have been ignored. The appreciable increase in tea exports to East European countries in recent years has demonstrated how new market areas can be exploited by adopting favourable trade policies.

India and Ceylon between them account for three quarters of world tea exports; competition in the world market is, thus, mainly duopolistie. At the same time, the demand for tea has tended to be highly inelastie to price changes. The declining trend in world tea prices over the last many years has been mainly the result of increase in competition between the sellers rather than of greater buyer resistance at prevailing prices. Logieally, the longterm interests of the two main exporters would be best protected by joint aetion towards maintaining the export priee of tea rather than dissipation of poten-tial foreign exchange earnings by mutual competition. This could take the form, among other things, of regulating the quantum of offerings on the London market.

Diversification at HMT
EXTENSION of IDB re-discount facilities to machine tools has not improved the sales of Hindustan Machine Tools. In the year to March 1967, HMT received 150 enquiries for deferred payment but sales materialised for only 10 machines. The principal difficulty in utilising this facility lies in the inability of buyers to furnish bank guarantees. This is one more example of how well-intentioned schemes get bogged down because of procedural
tangies.

Recession notwithstanding, the absolute volume of orders booked, pro-

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