I

ndonesia, the world’s seventh largest tea producer, plans to upgrade the standard of tea and tea products produced locally as well as sourced overseas.

Deputy Trade Minister Bayu Krisnamurthi said on Wednesday that new developments in the industry, which demanded improved qualities of raw material for both local consumption and exports, would be accommodated by measures supported by the National Indonesian Standards (SNI).

Higher standards would open up more opportunities for plantations, outside those owned by state plantation companies (PTPN), to join auctions for major buyers.

“Our key concern is to enhance competitiveness, to increase added-value in our production chain and to further develop the flagship commodity,” he said.

The government’s standards for tea set the maximum limit of pesticide residue. The limit will be raised under the planned new standard.

Indonesia, once the world’s fifth largest producer, suffered a decline in tea production due to shrinking tea plantations as farmers prefer more lucrative commodities.

Tea plantations have dropped by 3,000 hectares per year to 123,351 hectares in 2011. The tea plantation business has also become less attractive due to the low added-value for investors.

Bayu said that in line with the push to improve standards, the government also planned to differentiate import duty for unprocessed tea and finished products to help protect local growers and industries.

“We want to facilitate easy access to raw materials and semi-finished products to inject growth in the local industry,” Bayu said while acknowledging that imports were inevitable as imported varieties were used for blending. Indonesia imports tea for blending sourced primarily from India, Kenya and Sri Lanka.

Indonesia has imposed a 5-percent import duty on tea but has lifted it to zero percent for Southeast Asian countries under the ASEAN free trade agreement.

The tariff is still relatively low compared to other countries, such as Sri Lanka and China who impose up to 30 percent duties. The World Trade Organization allows import duty up to 40 percent.

In 2011, Indonesia imported 20,000 tons of tea. During the same year, Indonesia produced 123,700 tons of tea, with around 75,000 tons exported.

Secretary for the Indonesian Tea Council Harry Hendrarto welcomed the government’s plan to upgrade tea SNI, but warned that the move should be accompanied by measures to support local planters.

“Otherwise, the policy will severely hurt local growers and business as some of them will face difficulties in meeting the standards,”he said.

— Linda Yulisman