The tea prices have decreased by 30 percent since July 2013 and this is likely to impact negatively on the earnings.
KTDA says the drop in prices has been occasioned by increased supply of teas in the market and favourable weather.
Between January and September this calendar year, over 60 million kilogrammes of made teas from the East African region have been sold through the Mombasa auction and of this amount, Kenya was the greatest contributor.
As a result, a kilo of made tea has sold at an average price of Sh205.03 between July and November 2013 compared to Sh314.44 the same period last year and this is the lowest price registered since October 2008 when the price of tea per kilo sold at Sh176.60.
KTDA Chairman, Peter Kanyago says besides the low prices, the tea industry is being affected by the 1percent Ad Valorem tax imposed by the government, and this was making the tea business more costly to operate.
“The Ad Valorem tax charged on Kenya’s tea is high, making our tea less competitive in the market. Coupled with the 16percent VAT tax on local sales, business becomes difficult to operate. We are appealing to the government to consider waiving the taxes,” Kanyago said during the KTDA directors’ conference in Nairobi.
Ad Valorem tax is the levy imposed on the total custom value of the tea at the point of sale at the Mombasa Tea auction.
Ministry of Agriculture, Livestock and Fisheries Cabinet Secretary Felix Koskei said the government was aware about the issues affecting the tea industry and is partnering with the industry to overcome the challenges.
“There is a task force that has been formed to look into the issue of Ad Valorem tax and we shall respond adequately once we have analysed its recommendations. On tea hawking, the law is very clear that it is illegal. We will communicate with the County governments to immediately enforce the law,” Koskei said.
KTDA CEO Lerionka Tiampati said the industry is facing a number of challenges, which will gradually be overcome.
“The tea industry in Kenya is facing a number of challenges such as fluctuating foreign exchange rates, climate change, increasing fuel prices, decreasing smallholder farm sizes and political instability in key markets. However, the industry will eventually surmount these challenges,” KTDA Tiampati noted.