NEPAL

ADVISORY SERVICES ON EXPORT DEVELOPMENT OF PRIORITY SECTORS OF NEPAL SECTOR STUDY ON TEA
June - September 2007

MAHINDA WARAKAULLE
International Consultant on Tea

RAMESH MUNANKAMI
National Consultant

BASTIAAN BIJL
Trade Consultant – Market Information, Market Analysis and Training

Project NEP/A1/01A A project financed by the EU and ITC under the Asia Trust Fund

While efforts have been made to verify the information contained in this document, the International Trade Centre UNCTAD/WTO cannot accept responsibility for any errors that it may contain. The views expressed in this report can in no way be taken to reflect the official opinion of the European Union, the Trade and Export Promotion Centre and ITC. The usual disclaimers regarding responsibilities apply to this report.

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Preface
This sector study is part of the Technical Cooperation Project “Advisory services on export development of priority sectors of Nepal” (NEP/A1/01A). The project is implemented by the International Trade Centre UNCTAD/WTO (ITC) and the Trade and Export Promotion Centre (TEPC), and co-funded by the European Union and ITC through the Asia Trust Fund (ATF). The project is intended to identify products that show good export potential, taking demand and supply side issues into account, and to formulate practical recommendations for the development of Nepal’s most promising exportable products, with a view to develop and diversify Nepal’s export potential. The project consists of two phases. The first phase of the project consisted of a comprehensive Export Potential Assessment, looking into the export potential of 14 non-traditional products. During the second phase the five most promising are studied in more detail, engaging international product specialists. The results of the Export Potential Assessment were presented to representatives of Nepal’s private sector, Government and donor community in February 2007. Following this meeting it was decided to study the following products in more detail during the second phase of the project: large cardamom, pulses, Chyangra cashmere and silk products, floriculture and tea. The present study must be seen in this context. The sector study on Tea was prepared by Mr. Mahinda Warakaulle (International Consultant on Tea), Mr. Ramesh Munankami (National Consultant), who conducted a number of interviews with enterprises concerned in Nepal, and Mr. Bastiaan Bijl (International Trade Data Analyst). The sector study builds on the results of a fact-finding and needs-assessment mission conducted in Nepal in June 2007 (see Annex I for mission programme). During this mission, the ITC Consultant entertained a number of meetings with individual companies, exporters, producers, traders, government officials, and business associations. The main findings and recommendations of the report were consequently presented to - and validated by - key sector stakeholders during a workshop in Kathmandu in August 2007. The authors would like to thank Mr. Koen Oosterom, Office for Asia-Pacific, Latin America & the Caribbean (OAPLAC), ITC, for his support. Lastly, the authors would like to thank all enterprises concerned who kindly answered the ITC questionnaire and key sector stakeholders who engaged in meaningful discussions with the team and volunteered their views and knowledge. For further details on the present study, please contact Mr. Koen Oosterom (email: oosterom@intracen.org).

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Abbreviations and Acronyms Used
ADBN AEC ATF CoC COP CTC DOA FCL FNCCI GL HACCP HIMCOOP HOTPA ISO ITC MOA MOC MOF MOI PAC PE/PP MRL NARC NASAA NPC NR NTCDB NTDC NTA NTPA SAARC SAFTA TEPC Terai SP Agriculture Development Bank of Nepal Agro - Enterprise Center Asia Trust Fund Code of Conduct Cost of production Cut, tear and curl Department of Agriculture Full container load Federation of Nepalese Chamber of Commerce and Industry Green leaf Hazard Analysis and Critical Control Point Himalayan Tea Producers Cooperative Himalayan Orthodox Tea Producers Association International Standards Organization International Trade Centre Ministry of Agriculture Ministry of Commerce Ministry of Finance Ministry of Industries Pakribas Agriculture Centre (Research) Polyethylene/polypropylene Maximum residue level Nepal Agriculture Research Council National Association of Sustainable Agriculture of Australia National Planning Commission Nepal rupee Nepal Tea and Coffee Development Board Nepal Tea Development Corporation Nepal Tea Association Nepal Tea Planters Association South Asian Association for Regional Cooperation South Asian Free Trade Agreement Trade and Export Promotion Centre Low level land mass Selling price

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.....................3.................2 2...........1 2.......2 2...........6 2.................................................................................. iv Table of Contents............................. 4...18 Overview of world production and trade .............43 3.................................................................................................................................................3...................5 2.............................................................................................................. 8 Parties involved .................. 3.................................................................2 Obstacles and shortcomings for exports .............................................................................................................................................10 2........................................24 Growth in national tea exports ...............................24 Export of tea from Nepal ..............................................................................5 Background and Objective ...............................................3 2.....................................................................48 The enabling environment............................................................................3 2......33 Basic household units ..............................2 2.................45 Implications of these agreements for the sector in Nepal:...............................6....4........... 48 At the Farmers and Company Level ............................... Regional and Multilateral Trade Agreements.............46 4...........................................34 Orthodox tea factories:........................................4 3....................38 Existing studies..................4........1 3......................24 Export of tea to India ...........7 2..........................9 2.............................................................. 7 Coverage of the Study .............................16 The global tea market ............. General Context and Executive Summary...............................................2 1..1 1..........................3 3..................................2 3..................4.....................................3 2.....44 Regional Trade Agreements ....................3 1.4.................................................... Export Services in Nepal.......................................................................................................32 Processing of Tea ..................................5 Bilateral..........3 2........41 SWOT Analysis ....................................................................... 8 Recommendations ..............................................................................................................................................8 2......................................33 CTC processing units:..3............1 2.............................. iii Abbreviations and Acronyms Used ........29 Yield and Cost of Production (COP) ............................................................................................................. both public and private ..............................................................44 Transit Agreements................. regulations and standardization in the sector ............ 8 Key Findings: Obstacles and Short Comings ..............................4 2..............................48 5..................................................................................... v 1.....35 Rules.....................44 Pertinent provisions under the WTO agreements.......Table of Contents Preface ...........................26 Tea production in Nepal ..........................31 Tea development .......................................................................................... strategies and policy papers in the sector .................................................1 4.................................... 2........................................................................27 Growth in tea cultivation and production...........39 Socio Economic Impact of the Sector ...................................................................................................................................................2 2.......................10 2...........................12 The tea Industry in Nepal .......................................................1 2.................5 2...............................................................................28 Type of tea produced ............................................................................................................. 7 1................. 44 Bilateral agreements ..........................................................................................30 Geographical distribution of production ................................4.........2.............................4 2..2 2.................6....25 Export of tea to countries other than India ............1 2.....................................................34 Availability of raw material.....................................................................31 Crop diversification.....................2.................................................................................................1 2.................38 Quality and international competitiveness ............................ 50 Page v ....... 16 The Sector in General ....................4 1....................................................................................11 2.... price and quality ..........6...................................18 Trends in world consumption ..............

......................2 ........1 Recommendations for farmers......1 .....19 Table 2...................International trade in tea .......................................................................11: Total Tea Production and Tea Plantation Area.................59 6..........................................................................................................................Major Importers of green tea in <3kg packages ......... 2003-2006 .............................Major Importers of black tea in <3kg packages.68 Annex I: Timetable of Meetings and Activities: ......12 ...........................25 Table 2.......................................................................................................78 Annex VII: Composition of a typical tea beverage ....................9: Export and Import of Tea from/to Nepal to India (Q in Kg.....................10 ..............77 Annex VI: Guidelines for good leaf standards and processing .................................................................. producers and exporters .................................................................Export of Nepal Black and Green to other countries except to India.................).....5............13 .................4 Meso-level action plan .......................................................2 Recommendations for the business environment........................23 Table 2.......69 Annex II: geographical distribution of tea cultivation........23 Table 2...........................6 Prioritization of action plan – If we have a million …......................3 ......79 Tables Table 2.............72 Annex IV: List of contacts in main two potential markets..............................Growth in cultivation and trade of Nepalese tea.........................................2 The Government Institutional Supports .........29 Table 2................................................................Production of Tea according by CTC/Orthodox in various countries.....................75 Annex V: Flow chart ....24 Table 2....................................Major Importers of black tea in bulk.........61 6..................................22 Table 2.................................. Recommendations and Action Plan....................................................................27 Table 2............................................29 Table 2...................................Major Importers of green tea in bulk .......19 Table 2............................................................................................1 5.........................................25 Table 2................................50 The Private Agencies and NGOs ........................7 Conclusion....................... 54 6.............8 .............................7 .........mainly CTC in bulk...........................................................Type of tea produced 2005/06..............3 Micro-level action plan ...........................................................54 6...............................................4 .......21 Table 2.................................................. Value in ‘000Rs.......5 – Pakistan’s Imports of black tea............58 6........................31 Page vi ...............................................................................................6 ............ 2005 .......................................................5 Macro-level action plan .....................60 6........57 6..Geographical distribution of production .....................................................................................................................................................51 6...

these percentages will be above 80. If the unofficial figures are added on. about 70% hilly areas having ideal conditions for agriculture development and crop diversification. is declining and facing increased threats. conclusions and recommendations at a roundtable meeting of stakeholders that will validate the main findings and endorse a future course of action. hill and lower or Terai regions. and to formulate practical recommendations for the development of Nepal’s most promising exportable products. Currently. with land area of 147. the private sector and the donor agencies for the export development and promotion of tea from Nepal. A comprehensive Export Potential Assessment looked into 14 non-traditional product sectors and five sectors were identified as having high potential for further export development. The decline in their rice and jute exports. Further in-depth studies were conducted on the five product sectors that included large cardamom. It enjoys diverse weather and climatic conditions where the topography ranges from 305 m to 8848 m altitude. Administratively. 14 zones and 75 districts whilst ecologically it can be divided into the mountain. Over the years the importance of some agricultural crops such as paddy and jute have declined sharply due to loss of export markets and farmers changing to other cash crop and to tea cultivation which seem to be more remunerative and eco friendly. Nepal depends heavily on exports of hand woven carpets and ready made garments which bring in nearly 60% of their annual export earnings. taking demand and supply side issues into account. which dominated the export sector. An immediate purpose of the study is to assess the export promotion potential of tea products and to present the findings. The objectives of this study are to identify the priorities for export policies. dependent mainly on this one market caused these two items to lose their importance as a sustainable agriculture commodity bringing in earnings to the rural farmers. 1. with a view to developing and diversifying export business.1. Page 7 .181 sq km that stretches 885 km from east to west. and floriculture products. determine the strategies. This study is in the spirit of a quest to diversify and lift Nepal’s exports away from its overdependence on Carpet and Clothing exports. With the phasing out of the Multi Fibre Agreement from 1st January 2005 and the decline in export demand for the carpets. This document covers the study on Tea. the significance of these two major items. Against this background. India is the main trading partner of Nepal and the official figures indicate that 68% of export and 67% of import trade of Nepal is with India. recommend practical action programmes and provide guidance to the government. the country is demarcated into 5 development regions. Pashmina and silk based products.1 General Context and Executive Summary Background and Objective Nepal is a landlocked country with a highly literate population of 28 million. tea. lentils. This dependence makes the economy of Nepal vulnerable. the Government of Nepal requested the support of the Asia Trust Fund to identify products that show good export potential.

Himalayan Orthodox Tea Producers Association (HOTPA).” 1. Nepal Tea and Coffee Board (NTCDB).. 1. Additional processing facilities will thus help increase Nepal’s tea export. processing and marketing. Ministry of Agriculture and Cooperative. Local Chamber of Commerce and Industry. Bilateral and Multilateral Donor Agencies.. But the processing capacity has not developed to cope with the increased production of green leaf. Department of Agriculture. backward and forward linkages. The other responsible supporting agencies for the programme or project implementation are the Ministry of Industries. The coverage of the study includes: Overview of the sector and opportunities Key obstacles and shortcomings for export Consequences of multilateral. specially the small farmers. Wise spending on recommendations for future projects – “If we had a million. On the other hand. obstacles and shortcomings for export. regional and bilateral trade agreements on the sector Export Services in Nepal of interest to the sector Action Plan for further development of the sector. buyer requirements. the International Trade Centre UNCTAD/WTO. a) The past efforts of all stakeholders have helped increase the production of green leaf at small farmers.1. export support services. focusing on the areas that need be improved so that Nepal tea can gain a firm foothold in the international tea market both for quality and supplies.3 Parties involved The major parties involved in the study are the Government of Nepal. which may be detrimental to this sector.. trade data. Nepal’s tea sector is selling raw materials to Indian factory instead of value adding in the country and exporting the finished tea. cooperatives and tea estates. implications of regional and multilateral agreements and the recommendations with action plan. Shortcomings for Exports: Shortcomings or gaps for export are the factors missing – and which could facilitate existing and potential export.2 Coverage of the Study The study on tea focuses on supply side issues. Commerce and Supplies. the Nepal Tea Association (NTA). Page 8 . the Nepal Tea Planters Association (NTPA). the European Union. the recent restriction imposed by India in the imports of green leaf from Nepal has raised a serious fear among the farmers. AgroEnterprise Centre of Federation of Nepalese Chambers of Commerce and Industries (FNCCI). As a result. Himalayan Tea Producers Cooperative (HIMCOOP). Nepal Agriculture Research Council. and the Trade and Export Promotion Centre (TEPC).4 Key Findings: Obstacles and Short Comings This report highlights the current obstacles and shortcomings in production.

Many buyers and countries require test reports on residue level. k) No research facilities of tea including for promotional and marketing linked with research. This duty of 10—15%. etc j) Facilities to add value to the basic product are not available. The State’s supply of electricity to essential business houses such as tea factories should be made available on an uninterrupted and continues basis. such as an auction market to attract sellers and buyers to one location. Thus Page 9 . Inconsistent quality and non-uniformity of products with no supportive certificates causing difficulties to make good blend mixes. e) No brand image still built to make global buyers aware of Nepal tea and their quality. c) Accredited and equipped laboratory not available to test and analysis of samples for exports. The machine downtime and effect to quality of product can be at high cost. b) Bank loans are difficult to obtain and interest rates are high. This has been due to the overdependence on Indian exporters and marketers performing this function using blend mixes of both origins with Nepal tea “lost” in their identity. price movements in other auction centres. and used for packing tea for export to India and other destinations are not eligible to a duty rebate. radiation clearances with each consignment. i) No market information system available to give guidance to exporters on current trends. Export prices can be higher by 1-2 USCts per kg. all imported. g) No central marketing facility. And there is no institutional setup that generates such human resources in the country. No blending or mixing facilities available to cater to the demands of buyers who require bigger consignments. increase the cost of processing and the exportable item becomes too pricey. which will help in developing new products suitable for changing market demand. if waived.b) Certifications and test reports on the products from accredited laboratories/ authorities are not available. which is sometimes the difference between a contract or refusal mainly to the bottom level of tea. f) Only small parcels of lots are available to be offered out. h) Lack of human resources and professionally qualified and experienced personnel to promote tea sector. Exporters are levied a VAT payment of 13% which although refundable is very difficult to get back. d) Insufficient product diversification to interest buyers of speciality range of teas into niche markets. c) Packing material such as plywood chests/paper sacks. Obstacles for Exports Obstacles or bottlenecks to export are the existing factors reducing or delaying or otherwise disturbing existing and potential export. a) Cost of inputs and mainly electricity with interruptions to supply. d) Export trade is not supported by the Government. will make the product more competitive. changes in consumption habits. heavy metal. Orders are held up for long periods till the results are released from laboratories overseas. affect quality.

1. g) h) Route via India to the Bangladesh seaport of Chittagong should be developed to overcome delays. k) Little Government support for active participation in international trade fairs to showcase Nepal tea. producers and exporters a) Infrastructure: Green leaf farmers are located in areas. taking into account the trends in volume of imports by target countries and their preferences in taste and tea grades. good agricultural practices must be strictly followed to ensure minimum damage to soil and environment. it is important to look into product diversification. causing damage to the leaf in transit. Although they are able to produce the leaf in quantities. Thus soil erosion and leaching can be minimized whilst organic population can be preserved. and moisture retention must be well addressed to minimize adverse effects of weather. Access to the farmer’s premises quickly and in vehicles that are suitable should be made available to the providers of ancillary services. d) Tools and Implements: As the NTCDB has in their program a scheme to supply tools and implements at subsidized costs the new type of plucking bag should be imported free of duty and made available at reduced cost so that the leaf quality can be preserved. Delays and hold ups at Indian seaport and in transit effecting delivery times. e) Quality Controls: Whilst the farmers should ensure that their pluckers are following the practice of selective plucking. no real benefits have still accrued to Nepal except with Pakistan. the factories should be very strict Page 10 . which have poor infrastructure. i) j) Policies in India affecting consignments to some buyer countries. porosity. f) Although bilateral and multilateral trade agreements have been entered into with various Governments.5 Recommendations Recommendations for farmers. bicycles. b) In opening of new land. The government’s commitment should be clear and transparent. Recommend the import of commercial vehicles suitable to the industry on duty free basis. c) In order to tap into new markets. The physical properties of soil such as density. These should either be abolished or made seriously effective. The bags used for plucking are also not the current recommended types which have now been designed to keep the leaf intact as well as allowing it to “breathe’ without causing fermentation before it arrives at the factory premises. Tea policy and NTCDB are conceptually well established but are ineffective. Poland and elsewhere.finances are scarce and export cost pricing calculations has to include such costs e) Exporters unable to deliver as per standard accepted by buyers resulting in loss of credibility of Nepal trade. and facilitate shipments to Pakistan. transport is affected by using methods. which are unsatisfactory such as on animal back.

Regular inspections of their premises should be undertaken so that inferior.eg multi-wall and rigid type aluminium foil lined kraft paper sacks from Sri Lanka. m) The same applies to the export cargo. In such instances dispatch of the made. j) k) The traditional plywood chests. Page 11 . Packaging Material: All packaging material is imported either from India or Sri Lanka through Indian traders. Although it is a difficult task. i) Certifications: As far as possible most medium and large export oriented factories should be encouraged and assisted to obtain the ISO/HACCP certifications as a strategy for future marketing. l) The made tea is packed into PE/PP bags and are stored till they are ready for use. are still being used for exports into India. Duty concessions should be available for such transactions. however small their operation. As it is not an environmentally friendly form of packaging material. f) Political Interference: Government should support the factories to run their business in the best practical manner to achieve quality products without allowing labour or outside influences to dictate terms to factory staff on good management practices. opportunities should be created to import packaging items directly on a duty free basis . Improvement and minimizing documentation requirements is one method of reducing down time. h) Health Hazards: Some factories and packaging plants are unsuitable for tea processing and are a health hazard. Whilst some instances can be beyond the control of Nepal. the state machinery should be used effectively to patrol the borders so that import of inferior quality inputs not only to the tea industry but agricultural crops in totality is protected by not allowing substandard and banned cheap products. These items are imported and re-exported. With bilateral trade agreements.in their controls of leaf intake to reject all unsuitable and damaged leaf at factory door. it is always prudent to develop an efficient system for clearance of cargo with minimum delays being incurred. Hence there will have to be continuation of imports for export packaging for the time being. The industry is at present too small for any commercially viable enterprises to produce the needs of the industry only. processors. packed and ready product to more suitable storage facilities should be done without delays. its use should be discouraged and the use of rigid paper sack should be promoted. which is held up in covered trucks for many days in transit to Kolkata port in open storage areas. This form of packaging. A scheme must be evolved by the NTCDB to register all tea farmers. such as with Sri Lanka and multilateral agreement with SAFTA under SAARC countries already in force. substandard and polluted products are not put out into either export or domestic market. particularly in the Terai areas where temperatures and humidity can be very high will speed up the deterioration of the product. g) Agricultural Inputs: Tea extension staff and the individual farmers must be more vigilant regarding the indiscriminate use of chemicals and pesticides. which were discarded from use some time ago.

q) Export Marketing: The tea industry in Nepal is small. This is a big disadvantage. new concepts in tea consumption and a whole array of inter-related subjects from which the interested visitor can drawn on. it is difficult to build up a brand image unless with personal contacts and constant interaction. out of the total global output. if carried out. speciality market segments. heavy metal presence. there is no “home” for it. The alternative would be to strengthen the existing Government Food Testing Laboratory with a mandate to do commercial testing of export samples of all agricultural products to become a profit center whilst at the same time to devote a part of the time to conducting research and development. The Agro Enterprise Center of FNCCI puts out some information but this is insufficient when market information and current developments are the essential information that an exporter requires.n) Quality of Product: Above recommendations. so that the exercise becomes a viable proposition for the NTCDB. A full list of buyers of all types of tea in every consuming country must be incorporated into the database so that they can be accessed. Once the consignment is rejected. Further enhancement to quality can be achieved if the manufacturing practices are adjusted to different times of the season to make optimum use of the leaf quality and their inherent characters to bring out the maximum natural flavour. aroma and strength. There have been many instances where such samples have been found to be contaminated and thus orders having to be cancelled. Furthermore any promotional and advertising would be at a prohibitive cost. However there are limitations in setting up a laboratory by a private enterprise as well as any international survey company due to the volume of business being commercially unattractive. The trade attachés in all the embassies overseas must be used as a constant source of information gathering and updating. Therefore the need to have a well equipped laboratory in Nepal. fungal infestation and issuing reports that are required by the larger section of international trade today. Therefore it is more prudent to work with marketing and distributing companies who are experienced in handling food items and specifically beverages and tea. This must include as much as possible. information on world markets. (ITC statistics). for an annual fee. demand patterns. The volume exported currently is around 0. With this small quantity entering the world market. Furthermore the information of the individual export companies in Nepal with the types of tea they can offer showing the leaf appearance and cup quality in the form of photographs can be included in the website. As the orthodox tea is considered a special product. o) Test Reports: There are no laboratories or survey companies capable of conducting tests and analyses on residue levels. it would also be more beneficial to work with the Speciality Tea Page 12 . A website is to be developed by the NTCDB which is an excellent concept and all stakeholders should be involved in it’s design as the information required by each different sector is different and it takes time to get an information system designed with a professional planner. p) Information System: There seem to be a total lack of information gathering in the industry with little or no active attempt to collect. as samples of teas awaiting export have to be sent to laboratories in India and Germany for such tests to be performed.32%.23% and production is 0. should ensure a product of better quality than what is presently available which would be the ultimate goal of the producer and processor and the tea industry as a whole. analyse and distribute the information to the stakeholders.

Therefore the tea produced/processed bear a very close similarity to the Indian Darjeerlings and CTC’s. or applying subtle changes to the methods of manufacture. manufacture. market information and international statistics. extension. Due to the vicinity of India and easy access. Nepal must strive and develop Geographical Indicators. HOTPA/HIMCOP are already working closely with the American Speciality Tea Association and are developing the product within the parameters set down by them to facilitate entry to their market segments. and technology have all been directly or indirectly brought into Nepal. which is specific to tea with all the relevant divisions of an agricultural based commodity in place to look into agronomy. t) Research and Training: Like all other areas of the industry this too lags behind. All the machinery is of Indian origin except those in the older factories some of which are from UK. There is a need to establish a tea training centre or tea school to develop human resources required for the tea sector. This private company composed of senior and experienced persons should direct the affairs but also ensure that the interests of all parties are met fairly.This company to undertake the promotional and market intelligence work. mainly for the orthodox tea areas. The company must monitor the quality available for export through the respective associations. information and now the important aspect of marketing to look into new product developments with global consumers in mind. pathology. there are tea buyers who supply the cafes that serve special blends and varieties of beverages including tea and these buyers must be contacted by participating in trade fairs where special teas are exhibited and their business solicited. Negotiate with international brand owners and get into JV partnerships with them to supply and ensure Nepal teas are included in these branded products. Any potential research instincts have been suppressed to the extent that innovation in the industry or changes in the style of manufacture. The production and processing and the quality of the final product in such clearly defined and identified areas has to be closely studied and special features associated with them classified to use them as a marketing tool. bio-chemistry. training. Page 13 . have not been introduced. s) It is also necessary that the seedling and clones developed in Nepal be protected. It should be the driving force to establish the Nepal Tea logo and brand in the global market. physiology. market planning forecasts. r) Two marketing entities have been formed in the orthodox and CTC sectors to do the marketing function under the names of PLANTEA and HIMCOOP. In every country. usage of inputs.Associations and such bodies established in a number of countries. similar to Darjeerling in India and Dimbula/Nuwara Eliya in Sri Lanka so that branding and marketing such produce can be done. It is very necessary to establish a Research station. progress at field level and development of new plant varieties. Merging them to form one marketing company or association with a board representative of stakeholders in both sectors for the improvement of market share in the global market for Nepal tea in totality needs to be seriously considered. future trends. Research has been generally neglected.

Export services at present are lacking and this aspect too has to be drastically improved not only on the state side but also with the private sector’s participation.Recommendations for the business environment a) Business Environment and Export Services: With the privatization of the tea industry. Lakshmi Bank. It is also essential that a scheme should be drawn to bring in finances by way of a Cess payment. factory and city levels. the Government controls were gradually removed in the operations of the large tea gardens and factories. they do not have the network of correspondents overseas to facilitate transaction. research. import duty on necessary inputs which need to addressed by the Government and some changes introduced if the industry is to move forward. which still remains under Government control and is responsible for giving direction and guidance is lacking in performing their duties. Nepal Commercial and Credit Bank. operating in Nepal. NIC Bank. Kumari Bank. whilst others such as Nepal Bank Limited. Immediate revamping of the direction in which the NTCDB should focus and methods to obtain financial assistance from the Government must be treated as priority. the State Bank of India. interruptions to supply of essentials. Hence there is lack of purpose and direction and almost all the programs. which hinders the smooth transactions in banking matters. There are no incentive schemes for the development of exports. Nepal Bangladesh Bank. which are outlined on paper for the betterment of the industry. contributions in certain areas. On paper the program is well thought out looking into all aspects to solve the shortcomings. Himalayan Bank. technologically and guidance on application of agri-inputs. Many local banks are operating. which is detrimental. who’s task is to drive the industry forward. The composition of the present Board is not fully and really representative of all stakeholders. still remain largely unattended. The NTCDB. Financial constraints seem to affect even the extension and training programs which have been severely hampered and farmers are left to seek advise from their Indian counterparts for almost all their inputs both advisory. Rastriya Banjiya bank. have also lost their significance. However. tax levies. Nepal Investment Bank. some specific to one sector like the Agriculture Development Bank. Bank of Kathmandu. Although these banks are able to handle export financing and documentation. Machhapuchera Bank. contribution towards advertising and promotion etc from the now private industry to swell the coffers of the NTCDB for their use in extension. However the main positions on the Board must be with the now important private sector. There are a few Banks with foreign collaboration established such as Standard Chartered Bank. There are no financial facilities available to exporters at favourable rates. training. b) Export Financing: There is only one international bank. Nabil Bank. membership payment. There is also no Page 14 . such as pre-shipment finance. The industry must be willing to contribute their share to the common cause. information and marketing which can be developed to benefit all. which they controlled. The environment is also not conducive to conduct business in a smooth way due to political interference and disruptions to normal work at field. Therefore it is essential that their attitude towards the Government authorities and statutory bodies change and work in a combined manner in a cohesive way so that all stakeholders become willing partners to get moving forward. Everest Bank. as it has been handed over to them to develop the industry. high costs. expansion. which are essential in giving directions to the industry.

and facilitate shipments to Pakistan and Poland.Export Credit Insurance scheme available to safeguard exporters in the event of default from overseas buyers which is now a grim reality. Factoring opportunities are not available. Page 15 . The Government has to look at opening up opportunities for more foreign participation not only in the fields of finance and banking but also joint venture partnerships and land ownership by foreigners. c) Route via India to the Bangladesh seaport of Chittagong should be developed to overcome delays.

There appears to be a lack of committed focus and outlook for the betterment of the industry as a whole. and improve on quality with proper application of new developments using modern technology. and producing similar Page 16 . Ilam. which are lower in quality. tea constitutes only 0. The Government divested their holdings so that the private sector would become the engine of growth for the industry envisaging that tea would be one of the major crops for poverty reduction in the rural and Hill areas and become a significant export earner. tea is grown in two areas. Nepalese tea plantations. these aspects have not been addressed by the vast array of authorities.5% of CTC tea.1 The tea Industry in Nepal The Sector in General The tea industry began in 1863 in the Himalayan area with the first factory for processing built in the district of Ilam in 1878. organizations. Over 30. Terhathum and Dhankuta) of Nepal as tea zones. Panchthar. because of individual or separate interests and insufficient willingness to work together in a cohesive manner to achieve a common goal.5% whilst the bigger estates produce 73. Nonetheless. Although tea was known as a commercially viable crop. the leaf improves with good sunshine and dry winds to give the Autumnal teas with better quality. A large number of small holder farmers are engaged in growing tea in both areas and they now account for 26. which are very similar to those of the Indian Siliguri region. The first flush leaf comes out in May/June and followed by the second flush. it was not until 1982 that it’s significance as an export earner was identified by the government with the designation of eastern districts (Jhapa. in the Terai and the hills. From then onwards. associations and local bodies involved in the tea business. It is a seasonal crop with no harvesting in the cold period. there has been a significant increase of export in quantity and value of tea over the past years.5% to the total export earnings of Nepal commodities at present. The industry began to be more organized and recognized as a potentially significant sector with the government promoting the establishment of the Nepal Tea and Coffee Development Board Act in 1993 and setting up of the Tea Board. diversify product range. have comparatively young bushes with 29% of smallholder farmers owning bushes less than 5 years old. 2.000 people are directly involved in the industry with a large percentage being rural women. A National Tea Policy was introduced in year 2000 to support the growth of the sector. the Government provided assistance to the tea growers and processor in a modest way for its development. Again in August/September. Due to the varied weather conditions and soil composition. under significantly different agro-climatic regions.2. The tea produced in the Terai region originates predominantly from clone bushes. The bushes are grown both from clones and seed stock varieties and should enable the producers to capitalize on these natural conditions to increase. However. The rainy period starts in July and more weathery teas are processed at this time. This quality differences are more pronounced in the orthodox teas. Against this background. Therefore this industry has the potential to empower rural women through poverty alleviation and has become the focus of attention of many international organizations and many NGO’s. benefiting from diverse agro-climatic conditions.

There is a large volume of trade in many countries across the borders. Iran. the processing too. Differences in methods of measuring and recording data (official and unofficial). which is normally high. Afghanistan. obstacles and recommendations for future action. all of which are not monitored and recorded. associations. As no one source is able to provide a comprehensive picture. Vietnam and their neighbouring countries cannot be correctly calculated and even guesstimates may not be accurate. the plant material used come from the same mother bushes and clones. These porous borders are a haven for unofficial business in tea. Although data available in general. using Indian lines of machinery. Nepal and many other countries remain therefore unaccounted for. Page 17 . Tea is one item. etc. There seem to be a lack of a cohesive working environment being followed and implemented so that a united national development effort is lacking. However. different data sources are used in this report to present production and export figures. It must be noted that the per capita consumption in the Asia producer region.e. based on available data indicates that approximately 17. classifications. With tea growing areas very close to each other. being similar. This situation is spread even to the CIS states. Pakistan. particularly in China. the data is not contradictory in supporting the main message of the report. i. NGO’s and INGO’s working in the sector. which is traded heavily in this manner. in-spite of there being many authorities. Department of Customs and ITC databases. institutions. These figures must therefore be treated with care. Reliability of data It should be noted that accurate data is not available. Over 90% of the produce is exported to India officially/unofficially whilst the small balance find their way to international speciality tea markets in small parcels at attractive prices. across the borders of the two countries. as cross border trade and smuggling is common. cooperative units. lead to some pertinent discrepancies. assumptions used. National Tea and Coffee Development Board. produced in countries such as China. a high amount at cottage level. Turkey. the final product range of Orthodox tea is same/similar. a guesstimate is that around 20m kgs of green leaf goes to Indian factories across the border. As the machinery used for processing being the same supplied by Indian manufacturers. Large quantities of tea. India. This is due to the rapid expansion in land area and increased production. India. Therefore customs data in these countries are inaccurate. although most governments in these countries accept it and even encourage it. Bangladesh. seem to be inaccurate. Most of produce in border areas enters neighbouring countries via unofficial channels.20 m kgs of green leaf from the hill areas find it’s way to Indian factories in the Darjeerling area. TEPC. farmer groups. the main findings. Most of this trade goes unchecked and cannot be quantified.CTC type of tea. A guesstimate. a fairly high percentage of which is done unofficially or smuggled. They reportedly produce around 12 m kgs per annum in 23 factories. Orthodox tea grown in the hill regions mainly from seedling varieties is very close to the Indian Darjeerling type. Iran.

extracted from available data collected. Withering is done to reduce moisture to 65-70% using normal air for a shorter period of time. Mainly marketed as the single or double chambered 2g teabags servicing the middle segment of the global market Quick brewing convenience item very popular in the developed markets. the moisture content has to be reduced to 40-45% by using hot air for 12-16 hrs Processing Processing broken up to 4 main stages of withering. Very strong liquor. Only 3 grades. Seedling leaf has less moisture. Liquor properties Leaf black in appearance. published the following figures. less leathery and environment does not assist in enhancing the concentrates. Page 18 . not very strong and coloury but brisk and bright in cup. Tear and Curl) Tea Leaf from VP plants.Box 1: Comparison of Orthodox and CTC Tea Orthodox Tea Leaf Mainly leaf from seedling plants. The leaf is broken into small particle sizes using a rotovane (similar mincing machine). Popular in the Middle East and high end developed markets CTC (Cut. Suitable for traditional brewing but small leaf grades are used in the quality conscious and high end teabag markets Marketed as loose tea in packets. 2. There are about 10-12 grades based on leaf size. . In the withering process of green leaf. The leaf is rolled to process whole leaf. flavour and aroma. Leaf brown in appearance. more leathery appearance and has more concentration of flavour compounds (amino acids) which can be enhanced with environmental conditions. expressed in thousand metric tons. aroma and quality. Assam JAT is preferred More moisture or juicy. fermentation and drying (firing).2 The global tea market 2. China JAT (type) is preferred. There are no big leaf grades in this method of processing. Suitable for teabags but also used in the traditional manner of brewing in certain countries which prefer a very strong liquors. rolling in 4-5 rolls. with darker colour and bright infusion. Has more flavour. semi leaf size and a lesser percentage of small leaf. and sent though the CTC machine to make the small sized leaf shotty.2. Less quality.1 Overview of world production and trade In the year 2005 International Tea Committee bulletin. tins as well as the now developing pyramid bags. The process is continuous. It then goes through the fermenting bed and into the drier. less bright infusion.

2 shows world tea producers broken down into CTC and orthodox teas. the origin countries retain nearly 100m kgs additional. However it must be noted that in the Middle East. It can be safely assumed that there would be an annual shortfall in production to meet the demand much more than the data indicates of 5.000 MT to supply the world nonproducing consumer markets only.420 Retention at Origin 1.000MT shortfall from the calculated 21. The production figures indicate a rate of expansion and growth at 3. Also as a producer of orthodox tea Nepal is a small player.2 .Table 2. and Near East. As can be seen from the table.5%. but the opposite in the case of producers like Turkey.869 Imports 1. Table 2. excludes other teas Source: International Tea Committee Statistics Yearbook Page 19 .000 MT. from their increased production.000 MT. Vietnam and a few other countries of origin do not reflect the actual situation. especially in Africa.446 Global Consumption 3. indicates an annual increase of around 1. 2005 CTC Orthodox India 833 88 Bangladesh 57 2 Sri Lanka 16 298 Indonesia 12 113 China 48 Taiwan 1 Iran 25 Malaysia 3 Myanmar 18 Nepal 7 1 Turkey 135 Vietnam 8 62 Africa 475 16 CIS countries 17 S. The increased quantity retained in all producer countries is calculated at 94. Table 2. for growing domestic consumption annually.5% or higher whilst in the highly populated Asia it would similar.000 MT annually thus indicating a figure of 5. From above data. Calculated figures based on per capita consumption. The current world export is 1.199 million kgs (incl.315 Source: International Tea Committee Statistics Yearbook It must be noted that above figures. usually obtained from official channels do not present the correct picture as data available from China.000MT.563. orthodox production is in smaller volume. which will reflect an official increase of 110.America 83 PNG 7 Total 1.1 .29% per annum. 13 East African. Indonesia. which is about 21. From a global perspective Nepal is still one of the smallest players representing two tenths of a percent of global production. re-exports) produced in 12 Asian. tea consumption is very high and increasing at 3. 4 South American countries together with some smaller producers (COMTRADE).415 910 *Includes Estimates.Production of Tea according by CTC/Orthodox in various countries. Sri Lanka and Vietnam.International trade in tea Year 2005 Production in 35 countries 3.

UAE. Pakistan buys most of its tea from Kenya/other East African producers meeting 61% of it’s import requirements in 2006.5 shows. Syria. As orthodox tea is of higher value. show the main world importers of black tea in bulk (mostly CTC). Pakistan is clearly an attractive market for Nepalese CTC exports and Nepal also enjoys a 10% tariff advantage under SAPTA over Kenya. Egypt and Jordan (likely to be importing on Iraq’s behalf) and CIS countries like Ukraine and Kazakhstan.3. processing and exporting of tea. change in import and export regulations that may disrupt normal supplies can cause price fluctuations. and paid an average CIF value of 19. it can be assumed that the countries showing highest unit value imports in table 2. Annex V presents a typical flowchart that described the consecutive steps involved in growing. Strong growth in imports of black tea in bulk is occurring in Middle East. In 2005 Pakistan’s imports peaked significantly higher than other years. 2. Pakistan’s imports in 2006 were up from 2003 and mainly in value.4. averaging 12% in value over the last 5 years and paying increasing prices as growth in value exceeds growth in quantity over this period. As table 2. black tea in <3kg packs (orthodox and CTC tea) pre-packed and retail packed. The bigger international buyers usually wish to base their purchases on “just in time” deliveries at their doorstep to reduce financial costs and also buy large consignments. Table 2. Nepal tea industry does not have the facilities to offer such large consignment as a central warehousing and blending complex is not available. Saudi Arabia.000 US$/ton in for its imports from Nepal. Norway and Finland especially stand out in this context and to lesser but not insignificant extent. Douwe Egberts and a few other brands which are also marketed worldwide although not as widely.4 have a preference for orthodox teas. Germany is an important buyer of Nepalese orthodox tea. Italy and Canada. in countries such as Iran. Pakistan is an important buyer of CTC tea from Nepal and is in fact the world’s second largest buyer of bulk packed black tea.. and green tea respectively. The German market is also showing steady growth. particularly now due to the very advanced communications systems. Although it would be difficult to list all big buyers in most consuming countries there are some like Unilever/Lipton who have become worldwide marketers of tea with others like Lyons-Tetley. Page 20 . East African producers. mainly Kenya met this supply requirement with 72% market share in the same year. political upheavals. Decline in quantity or damage to crop.The production quantities in each major producing country is closely monitored by international buyers. Nestle. On both counts Nepal is at a distinct disadvantage.

828 19.606 4.727 3.640 Imported Quantity (MT) 1.223 8.127 2. Growth Value p.521 19.264 3.943 1.649 19.145 34.430 39.110 2.809.914 28.578 2.454 7.503 1.151 124.684 23.347 1.3 .648 12.022.161 35.147 17.423 78.534 43.002 41.962 33.632 8.769 1.369 243.987 1.262 16.291 1.916 51.Major Importers of black tea in bulk Av.656 1.551 137.896 20.796 16.684 1.350 31.178 1.684 75.Table 2.137 Av.303 2.467 57.795 1.636 15.556 22.164 1. Quantity 2001-2005 (%) 1 -2 8 -1 -4 2 Malaysia 14.600 128.485 18. Growth p.193 25.439 227.a.658 3.375 2.775 16.884 36.852 34.401 828 2.965 144.742 20.240 1.429 Unit value (US$/unit) 1. 2001-2005 (%) 4 -2 13 1 -4 5 92 2 31 11 0 40 23 4 7 2 10 2 18 5 153 -3 -18 -7 20 16 1 114 -3 -25 -5 10 -2 27 15 0 15 19 -14 5 -2 5 Importers World estimation UK Pakistan Russian Federation USA Japan UAE * Iran Germany * Saudi Arabia Kenya * Syria * Ukraine Kazakhstan * Sudan Netherlands* Poland * South Africa Chile India Canada Jordan Ireland Iraq Hong Kong Imported Value US$ thousand 1.967 98.987 2.962 19.307 17.701 16.383 1.271 94.157 2.882 Source: ITC calculations based on COMTRADE * Re-export figures included Page 21 .916 7.241 15.507 37.800 166.920 87.a.

872 20.088 13.028 56663 56.937 4.854 868 1. Growth p.369 21.767 3.542 13.269 Imported Quantity (MT) 243. Quantity 2001-2005 (%) -4 -10 -8 -6 6 19 -5 14 4 6 -1 7 -3 2 1 -26 9 -6 -7 13 11 26 8 2 6 -5 Finland 11.729 11.694 11.863 122349 70228 68588 63.081 6.537 4.Table 2.309 26.047 10.713 6.206 8.388 5.544 1.736 1.371 3.539 12927 12.659 11.a.744 2.021.437 2.566 5.670 10.866 13.908 5.432 9.085 Av. 2001-2005 (%) 5 7 -7 9 4 19 8 16 0 9 8 12 8 9 -22 -11 12 7 -2 11 12 42 6 7 7 3 Importers World estimation Russian Federation Saudi Arabia Canada UAE * USA France Australia Japan Italy Sweden Syria * United Kingdom Poland Libya Ukraine Iraq Netherlands Kenya New Zealand Germany Belarus Belgium Norway Denmark Imported Value US$ thousand 1.765 10.643 3.747 8.234 4.494 17.658 2.544 1.588 20.565 5.177 2. Growth Value p.Major Importers of black tea in <3kg packages Av.719 10.871 2.797 2.269 16.084 25.661 56552 42919 29.363 9.070 846 Source: ITC calculations based on COMTRADE * Re-export figures included Page 22 .741 3.091 1.180 38.363 5.528 9.210 23.231 4.181 Unit value (US$/unit) 4.202 3.060 10.614 17.a.723 16.202 8.526 6.4 .207 4.985 3.225 13793 13.942 9.

050 4.178 3.257 822 5.067 3.302 1.612 6. 2003-2006 Value 2006 US$ thousand World Kenya India Indonesia Sri Lanka Rwanda Viet Nam Bangladesh Burundi Tanzania Uganda Malawi 221.460 9.476 6.777 1.071 3.634 75.977 9.365 12.042 3. but the importance of United States. Quantity 2001-05 (%) 3 8 -2 19 -7 9 28 4 -7 3 0 % of World Imports 100 16 14 10 5 4 4 3 3 2 2 Algeria 6.441 728 Quantity 2004 (MT) 118.325 14.458 13.617 2.886 12.315 5. Growth p.241 41728 36987 26.013 Quantity 2005 (MT) 137.287 3.316 7.721 1.663 Quantity 2006 (MT) 115.685 2.276 8.704 8.727 9.116 1.136 7.211 14.191 8.a.710 9.265 9.Major Importers of green tea in bulk Imported Value US$ thousand 263.199 3.900 Unit value (US$/unit) 1.mainly CTC in bulk.136 9.957 1.567 134.092 6.261 3.392 2.207 5.842 1. Growth Value p.355 10.485 40 1. Growth and upward pressure on prices can be seen in both bulk and non-bulk global imports.559 2.238 Source: ITC calculations based on COMTRADE Page 23 .222 1.843 139.208 577 1.5 – Pakistan’s Imports of black tea.748 2.897 3. Very rapid growth in Ghana cannot go unnoticed.Table 2.a.467 806 Value 2005 US$ thousand 227.504 4.542 1.991 5.952 3.672 2.086 767 991 631 Value 2003 US$ thousand 190.446 2.645 7.315 5.080 1.283 12.277 6.941 3. Table 2.941 462 3.767 12.419 65.6 and 2.565 4.7 show the world’s major importers of green tea. Russian Federation and West Africa cannot be ignored.035 6.207 11.372 Importers World estimation USA Japan Germany Morocco France Russian Federation Mauritania Uzbekistan Senegal Imported Quantity (MT) 141.163 4.431 18.077 23 1.942 Av. Canada.205 2.134 7.800 164.442 9. Traditional markets are in North Africa and France’s North African population.910 2.518 8.600 91.901 3.050 12.398 Source: COMTRADE Table 2.487 9.008 138.117 819 Nepal 1.918 9.337 2.687 10.570 445 3.6 .177 5. 2001-05 (%) 10 27 -1 20 -5 20 34 22 0 -8 7 Av.743 1.435 2.864 3.578 2.646 6.182 831 3.081 685 Value 2004 US$ thousand 200.118 2.484 1.813 2.322 6.492 969 Quantity 2003 (MT) 114.451 1.232 11.568 5.469 1.576 72.283 5.101 1.497 8.227 1.862 3.

536 15.770 70.a.164 6.1 Growth in national tea exports 1 Annex VII presents a composition of a typical tea beverage Page 24 . being distinctly seasonal in temperate countries. Quantity 2001-05 (%) 11 8 1 120 14 9 23 13 60 Importers World estimation Morocco France Ghana USA Canada Russian Federation Algeria Mauritania Libya Imported Value US$ thousand 318.Major Importers of green tea in <3kg packages Av. Weather plays an important role in the production as the quality of the made tea is considered to be lower during the rainy seasons and buyers who seek a distinct quality in the blends operate to a lesser degree during these “rush” periods. Growth Value p.753 5.245 Imported Quantity (MT) 120.163 4.196 4. there is more demand now being created with emphasis more on bio-organically grown varieties.Table 2.345 1.822 3. Capitalizing on tea being increasingly recognized as a health beverage following recent scientific and medical findings.029 1.836 8.018 20. An interesting development is the increased demand for speciality. 2.326 2.401 4.394 5.217 19. b) Orthodox tea sometimes whole and semi leaf tea which gives a light brew c) Green tea which has a completely different taste There are subtle changes from the above 3 main types where consumers with special preference and fancies look for their requirements1.833 9. The tea market fluctuates according to the demand of these three main types.2. Growth p.884 Unit value (US$/unit) 2.786 8.848 5. 2001-05 (%) 21 18 15 134 19 41 54 19 70 33 12 38 Av.296 23.7 .113 3.2 Trends in world consumption The world market has developed 3 distinct preferences in which to enjoy the favourite cup of tea.3 Export of tea from Nepal 2.705 Source: ITC calculations based on COMTRADE 2.402 11.647 1. a) Teabags mainly in the developed countries and for convenience.308 % of World Imports 100 22 9 7 6 6 5 5 3 3 2 Belgium 7.817 2.057 14.821 29.3.427 40. bio-organic and herbal teas. There is also a shift in the manner in which tea is consumed with these seasonal changes with a move from it being a hot beverage to iced tea or cold beverage.032 7.a.146 1.423 2.

024.152 400. They may be sold locally in the mountain areas out of small householders’ domestic production units.195 Total Quantity Value 195.524 3.825 446.697 262.207 7.350 1. There appears to be about 10-12% of the green leaf from the CTC areas and over 200% of green leaf from the orthodox areas going across the border to India.549 6.176 28.700 ha 0.297 28.749 219.469 7.312.196 31.359.2 Export of tea to India Nepal tea industry is very vulnerable due to their dependency on one major market – India.196 2.500 2.640 44. The total recorded export earnings in 2005/6 amounts to US$ 982.Growth in cultivation and trade of Nepalese tea 1996/7 Area Imports Exports 3.714 482.700 ha calculated even at a low yield of 750 kgs made tea per ha from available data.924 33..279.455 25.158 360.500 ha 6.5 million kgs 5.Due to a strategy of expansion.6 m kgs.518 NA 375.298 225.093 330.327 323.877 4. and reached some 650% over the last decade. for over 90% of their orthodox and nearly 40% for the CTC teas.973 4.825 264.096. This is based on the land area in the orthodox region of 6.681 1.370 58.064 2.868.966 291. The imposition of strict control at the border and stopping of imports of orthodox made tea as well as green leaf by India caused a complete stoppage to the otherwise Page 25 . It is therefore imperative that their agricultural produce as well as expansion of their international markets be diversified. which further illustrates Nepal’s vulnerability. An increase of 61% is recorded in export volume of unit packs below 3 kgs whilst bulk exports have risen by 35% over the last one year.8 .421 82.0 million kgs percentage increase/decrease 450% (800%) 650% The exporters have grown to 20 whilst the importers have decreased.449 704.318 410.337 378.) EXPORT IMPORT Year Green Tea Quantity Value 80.496 58. growth of tea exports from Nepal has even been more impressive.9: Export and Import of Tea from/to Nepal to India (Q in Kg.157 31. As the above table shows.3.854 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 Source: Department of Customs. Table 2.946 757.006 2.613. 2.000.533 18. the dependency on India as a trading partner for tea has increased tremendously in the past 5 years.890 736. The published figure of processed orthodox tea is only 1.994 39. Table 2.608.579 347.874 NA Total Quantity Value 4.2 million kgs 0.983.055 74.246 98.207 382. Value in ‘000Rs.703 264. Nepal has a very large border trade going on primarily with India although there is also some border trade with Tibet.512 113.195 Black Tea Quantity Value 4.946 408. As the following table shows.77 million kgs 2005/6 15.676 2. Therefore any changes outlined above which will affect this one outlet will cause severe price fluctuations.800 410.839. the total area for tea cultivation has increased with some 450 % over the last 10 years.007.

This position is further compounded by the indiscriminate use of pesticides and insecticides by the Nepali farmers who have therefore brought upon themselves a dubious reputation of being producers of tea that has higher than accepted pesticide residue levels rejected by most buyers in the EU. In this way. Australia and New Zealand. This situation has become a problem of concern to the Nepal Government. Herein lie the problems the tea industry confronts as the giant neighbour with unlimited porous borders can/will use the produce of Nepal origin to sell into. Indian traders have created a psychological myth that Nepal tea is lower in quality and does not command as high a price in the open market or through auction system.free flow of export and sharp price declines occurred. and potential threat posed to their special tea image and brand built over many years. Unless. which is now taking it’s toll on the Darjeerling tea with both quality and quantity declining will open the possibilities for Nepal orthodox tea for price gains and entry into new markets. Japan. Therefore Indian border patrols have been intensified this year to stop the flow of green leaf and made orthodox tea from Nepal. 2. both their insatiable domestic market and lucrative export markets either passing them off as Indian tea or unfortunately using the Nepal tea as low priced blend mixes or “fillers” and “price reducers” in their export blends. it is likely that Nepal orthodox tea would face the same fate as their rice and jute industries. Indian authorities are getting more concerned by the decline in the volume produced of their own Darjeerling tea. whilst green leaf became unsaleable and unusable. the work stoppages caused due to political unrest in India. Many discerning overseas tea buyers/packers and consumers are aware of this situation in the planting areas and there is a danger of the value of the Geographical Indicator (GI) of Darjeeling Tea eroding.3 Export of tea to countries other than India The following table presents the recorded exports of black and green tea to countries other than India. which has caused many hardships to the farmers.3. Similarly. urgent action is taken to rectify the shortcomings mainly in the orthodox tea sector. North America. Page 26 . Another reason for the price to be beaten down is that once Nepal teas enter the Indian territory it becomes a terminal market for it’s disposal and unscrupulous traders capitalize in such situations.

397.967 38 236 5.10 . The quantities consumed in the northern areas.367 5. 2 Page 27 .497 28.778 21.676 24.147 38 3.318 7. For the sake of this report.901 68. where free access is difficult and the use of home grown/made tea seem to be unaccounted in the available data.446.662 8.777.210 834.676 29.570 Green Tea Quantity kgs 856 13. And their contribution in total production is increasing over the years as more small farmers are being attracted towards tea cultivation due to many reasons.545 87.739.886.979 2.942 264.832 2.808.800 6. However basing on the data available of domestic market of sales figures the local market is only around 7 m kgs giving a per capita figure of 2.4 Tea production in Nepal A large number of small holder farmers are engaged in growing tea in both areas: the CTC in Terai and orthodox in the hill districts. including its profitability compared to other substituting crops. There is some interest now coming from Pakistan with about 10% exported in the last year. nearly 60% of the CTC tea is sold in the domestic market2 whilst nearly the total balance goes to India.237.508 27.080 1.331.903 119. This indicates the country’s total consumption being nearly 9.211 4.791 537.960 2.892 54.189 3.720 Green Tea Value (in NRs) Total Quantity kgs 4.762 100.Export of Nepal Black and Green to other countries except to India Country Black tea quantity kgs 4.959 1.806 1.5% of CTC tea production and 67.548 30.922.665 746.0 m kgs per annum.525 271 122.707.6% of orthodox tea.725 4.715 16.086 1.263 1.267 859 327.446 Black Tea Value (in NRs) 40.000 115 1.263 923.752 1.663 139.256 10.551 92.502. particularly in the hill areas.800 Total Value (in NRs) 40. 2.Table 2.229 351.830 2.843 65.461.826 16.270 2.731.200 61.497 28.942 264.810 B’Desh Japan Korea R Pakistan Taiwan UAE USA France Germany UK Latvia Hong Kong Canada Italy Czech Rep Total Source: TEPC 930. These figures belie the drinking habits as it is apparent that there is much more consumption of this preferred hot beverage.123 859 340.039 25.246 1.637. the following classification is used: Smallholder farmers: Medium-sized gardens: Plantations: 0-40 ha > 40 ha > 40 ha and including a factory The available data on the national per capita consumption is very low at 350g for a population of 28 m. It is estimated that they now account for 26.176 38 2.455 43.508 27.036 155.255. Reportedly.752 2.224 525 156 60.57 kg.891.721 25.987.468 28.987.256 2.236 Over 90% of orthodox tea processed is sold to India through official and unofficial channels.036 177.502.770.555 193.

000 4. a sudden jump in area and production under private category is noticed in the year 2000/01.000 0 19 99 /0 0 20 01 /2 20 00 /1 19 94 /5 19 96 /7 19 92 /3 19 97 /8 20 03 /4 19 95 /6 19 93 /4 19 98 /9 20 02 /3 20 05 /6 20 04 /5 Quantity Area Ha.000 14.000 12. Page 28 . Production Mt.000 16.000 2.000 8.000 6.1 Growth in tea cultivation and production Both the total area and production of tea in Nepal have increased tremendously over the years and have significantly increasing trend as is clear from Figure 1 below. Year As the following table shows.4.000 10. tea production and cultivation of tea by both smallholder farmers and larger gardens/plantations has grown considerably in recent years. The NTDC was privatised and accordingly the area and production under it are reported into the private sector category. Accordingly. Figure 1 Area and Production of Tea: NEPAL 18.2.

186 4.817 4.4.179 8.090 6.012 Production in kg.000 ha under tea cultivation by year 2010 and further projected to 62.805 542.150 8. Nonetheless. 7.700 ha in 2005/2006 3 Page 29 .143 6. 2. data collected from associations/chambers/and INGO/NGO's suggests that a total of 12.036 1.237 Garden 2.073 6.857 3.000 ha under tea cultivation by 2010.113.997 12.Table 2.385 3. growth has been impressive.800. However.881 Small holders Total 1614000 1992/3 1993/4 1994/5 1995/6 1996/7 1997/8 1998/9 1999/00 2000/1 2001/2 2002/3 2003/4 2004/5 2005/6 75000 10.2 Type of tea produced There are reportedly a total of 12.000 982.478.112.192 6.655 3. 134 medium sized gardens and 38 large plantations.818 4.915 5.688.942 603.346 12.403 1.912 938 938 938 938 2.000 ha by 2020.515 10. Combined.000 194.136 496.000 125000 18.443.500. Area in ha CTC Production in kg. 5 Please note that other data sources suggest a total of 15.060 2.179 8.231 1.009.000 468980 418242 1010499 1548503 1653855 1720000 3956535 4816188 5.864.250 10.575 5.131.100 16.989 7.685 2.000 1.900 16.000 837.720 6.443.000 1.012 15.1 indicates a total of 7.330 13.087 Total Area in ha5 8.390 2. of smallfarmers Plantatio n area Total Private 75.6 million kgs is orthodox type.915 4.869 8312 8.901.000 1. the expansion has been much lower and estimates have been revised to have 18.073 8.310 5.881 496.2004 smallholder plots.314 6.321 8.11: Total Tea Production and Tea Plantation Area Tea Plantation area in hectares Financial Year Private NTDC 3 Tea production in Kg's Small holders No.912 7.200 smallholder farmers are active in areas concerned.244.244.579 5.591 4.012 687.788 2.320 1744000 1946403 2737329 2905942 3018571 4492980 5085237 6638082 7518575 8198000 11651204 12606081 13. Table 2.239 3.12 .577.655.Type of tea produced 2005/06 Particulars Orthodox Area in ha 1 2 Production in kg.501 4.643 15. these produce a total 13. 8.976 Source: National Tea and Coffee Development Board The Nepal Tea Development Corporation (NTDC) was established in 1966 by the Nepalese Government.857 5.100 3.000 7714669 7789893 8. The Government divested their holdings so that the private sector would become the engine of growth for the industry 4 Table 2.089.270 12.400 1.907 NTDC 860.577.154 493 644 828 879 1.100 smallholder farmers.107 Small Holder 4.845 7.250 11.760 6.243 1.869 Total 7.033.688.237 Source: National Tea and Coffee Development Board Although the government’s plan was to have 28.191 1.907 5.6 million kgs of made tea of which 1.239 3.252 6.329 925.

Those who follow the Code of Conduct are able to get a premium of nearly 20 % for their green leaf. smallholder farmers account for 67 and 34 percent of the production of orthodox and CTC tea respectively.125 US$ per kg. this money is delayed sometimes up to 6 months in both areas. about US$ 0.60 from the factories. although in some instance overcrowding was observed. As the international tea market is very competitive. as more than 11 plantations and 45 gardens (mostly non-small farmers) have not yet been registered with NTCDB. causing financial strain.50 to 1. The selling price is around US$ 1.55 kg pa and the density of plants is 14. The farmers sometimes get paid almost after six months from date of direct delivery to the factories. At the factory level. the average yield per plant is 1. the yields are significantly low. The COP and corresponding selling prices are lower in the CTC areas. almost double their cost of production (COP). there seem to be no fixed method of calculation to arrive at the green leaf price. nearly 25% lower than India and 30% below Sri Lanka. However. In the hilly areas of Ilam and Fikkel the plant population in the plots observed were less and more scanty.4. In the orthodox areas. However they are beaten down on the price by about 10-20 %. however.000 per ha.000 kgs in some instances. The incidence of pests. The farmers are unable to get an accurate calculation of their COP and very often the financial costs are not taken into account. relative low yield is a cause of concern. insects and fungi was more as this region is damp and is more conducive for them to thrive.5 % of the CTC produce. They prefer to sell to middlemen or tea dealers as most often money is paid immediately on delivery. Their COP is around 0. In Jhapa and Morang the farmers indicated that their yields are in the region of 18. 2. Even fertilizer and pest control inputs seem to be inaccurately compiled. Smallholder farmers Smallholder farms are generally well maintained with plant population being adequate. Farmers fall into difficulty and find it hard to obtain loans at the Government’s stated low interest rates and as farmers are also at the Page 30 . as the quality of plucking is not kept at the ideal 2 or 3 leaves and bud. In the CTC areas the yields are lower than in Kenya.093 to 0. There are Green Leaf Tea Dealers who pay spot cash.According to this table.500 kgs going to 22. Also. These data should be taken with care though. Farmers in the CTC areas are able to get a fair price for their leaf. during better times whereas the orthodox tea farmer suffers very often obtaining a price about 10-15% lower than their COP.3 Yield and Cost of Production (COP) According to NTCDB field representatives and Farmers in the CTC area. This is due to lack of knowledge of simple costing methods. Farmers have to accept price levels indicated by the factories.03 kg less. These are high indications but seem to be acceptable. other data suggests that smallholder farmers account for 26. In the CTC areas. the Siliguri auction prices are used as a guideline and is reviewed every week whereas in the orthodox regions they are completely at the mercy of the factory.

830 123 Other 834 4.e.334 36. The larger estates average lower yields/ha than the smallholder farmers.good and coarse.107 7.13 below.087 1.237 Jhapa 6. The estate workforce tea plucker earns US$ 1. which affects quality whilst processing. this district alone accounts for approximately 88 % of the tea production of Nepal.334 82.131.990 425 Terathum 23 4.758 13. However due to political pressure on labour matters the factories are forced to accept all leaf delivered. 857 4. The bulk of the tea. Here again the same scenario of coarse plucking and haphazard use of chemicals were evident.Geographical distribution of production S.570 199.817 2. Panchthar. They should not only have mixed crops but also livestock Page 31 . Table 2.270 889.976 4.830 72 Total 8. Jhapa.4. However most farmers have short term mixed cash crops such as vegetables. the Government declared the five districts i. interspersed in the land with some shade trees usable for generation of biogas.324 41.350 119.912 8. however.469 Panchather 382 80. In these five districts the main production of tea is concentrated. corn to supplement their income making maximum use of the space available.164 36.220 141 Dhankuta 219 45. Their yields are lower being around 14.012 Production Kg 12. there is not much area left for any other crops to be inplanted. Some have the bigger trees such as Jak.330 Farmers No.344 31.901.347 406.13 .869 Ilam 1. habitually they are not amenable to accepting technical advice and change their methods Medium sized gardens and big plantations These are tea gardens in excess of 40 ha and with many having their own processing factories.100 Source: National Tea and Coffee Development Board 2.114 36.295. is grown in Jhapa (only CTC grown there).000 per ha. 2.816 523 644 146 907 16. as also highlighted in map included as annex II.443.033.018 US$ per each additional kg.688.220 3.5 Crop diversification Although crop diversification in tea has been looked into. No District Gardens Area 1 2 3 4 5 6 Production Kg Area ha Small Farmers Production Kg 4.928 5.154 Total Area ha 8. According to NTCDB data. There are instances of pluckers delivering up to 35 and even 50 kgs.50 per day for delivering 26 kgs of leaf with an incentive payment of 0. consisting of mixed leaf . Terhathum and Dhankuta of the eastern development region as 'Tea Zone'. Ilam. presented in table 2.244.647 297 789 247 317 7. which is situated in the far southeastern Terai part of Nepal.4.907 7.mercy of the middlemen. This type of mixed integrated farming which causes minimum damage to the ecological system must be encouraged as they form self-sustainable units and bring in additional income.4 Geographical distribution of production In 1982. due to maximum land usage and close planting of bushes.500 to 16.

NTCDB have a scheme to assist in nursery development and maintenance by providing 50% grant on plant material and seedlings. These shoots are sold at a price around USCts 0. (US$ 0. The characteristics of each of these plant types should be studied in detail and manual prepared.12 subsidy on the material). Mobilize farmers to form into working groups or cooperatives Constant monitoring of the farmers fields to see incidences of pest/insect/ fungal infestations and advice on control methods. control of pests and insects and the proper use of chemicals. estates and private farmers. Camelia sinensis. Providing loans at low interest of 1. which had been developed at the Indian Tea Research Station and used extensively in Indian tea gardens. There are two main types from the same botanical plant species. which have been introduced to Nepal for planting in the two different growing areas. They also provide subsidies for purchase of tools and implements as well as training of farmers through their extension offices. The extension offices provide technical know-how on the preparation and use of bioorganic fertilizer. Their leaf is more leathery and during the changing climatic cycles. Field visits are made to designated areas on a regular basis to educate farmers. pesticides and insecticides. These are ideally suited for the processing of CTC variety where the leaf is more succulent.5 Tea development At present there are 43 varieties of tea grown in Nepal. NTCDB extension offices have 4 main activities to perform: a) b) c) d) Training of farmers Crop Protection methods through demonstrations and distribution of sample materials of Pesticides. Page 32 . Nurseries are operated by the National Tea and Coffee Development Board’s (NTCDB) regional offices. Insecticides. and these are also divided according to usage of types of fertilizer.5% is being considered. which is not being done due to lack of an authority to conduct such research and development. concentration of juices vary thus giving aroma and flavour for limited periods. nine from seed stock and others being clones.23 each giving on average 3 cuttings. These too have been experimented and developed in India at their Tea Research Station for the Darjeerling region and introduced into Nepal.rearing cattle. The clone varieties developed from cuttings from mother bushes are used in the tea gardens in the Terai regions of Jhapa and Morang districts. The NTCDB farms have experimental plots of about 5 -7 different varieties. Quarterly surveys are done to assess the field problems. In the hilly areas varieties from seed stock are used to propagate the nursery plants. to prevent disease effecting one type. The animal waste is usable in getting biomass 2. buffalo and goats to obtain diary products for consumption and sales but also poultry including ducks. Inland ponds can de constructed to rear fish varieties for protein supplements in their diet. and Chemical and Organic fertilizer.

This has caused environmental damage and an imbalance in the insect population. 2. however. This type of small workshops were not seen/visited in the Terai region but it is likely that there are such units processing a type of green tea from their own leaf for marketing in localized areas. Page 33 . Leaf Roller. Bunch Caterpillar and Reds Slug Caterpillar. Aphids. Looper. the factories and machinery used are dissimilar. The pests. 2.6 Processing of Tea With mainly two diverse types of tea being processed. Scarlet Mite. have caused the final product to contain more than the maximum level of residues permitted. insects and other diseases seen in Nepal are Blister Blight. Flush Worm. having large plots sell the green leaf produce (current level in Ilam USC 0.18/kg. Annex VI presents some guidelines for good leaf standards and processing. Pink Mite.28 depending on leaf quality/grade. insects and other diseases Observations on visits to farmers holdings showed evidence of many insect and pest diseases and it seemed likely that they were spraying the control chemicals.25 to 0. Rust. Red Spider. It is likely that small holders having bigger plots of around 5 or more ha are engaged in this type of processing. The COP in the experimental plots is around USC 0. Helopeltis. where the insect and pest presence is higher due to the dampness of the atmosphere. The product is a green tea of about 5 grades ranging from the full leaf to smaller grade. Trips. where the withering is done on crudely turned out troughs and the withered leaf hand rolled in wooden pans. Fermentation and Drying with adjustments on time frames and using different method to obtain the final products. mainly located in the hilly orthodox regions. The nursery system seems to be adequate as they have been able to supply plant material for the increased demand in the past few years. doing their own direct marketing at the small townships on a busy day. The basic process. to protect the plants and ensure their high yields for commercial gain ignoring the set down regulations of following the correct cycle for spraying. The output per day is about 8-10 kgs. Fertilizer. Rolling. Jassid. The strengths and efficacy of some of these products available in the open market is questionable and there is no proper monitoring.6. all above extension and advisory activities are not being performed at optimum levels.1 Basic household units These are small cottage level workshops. The population in the mountainous areas may be obtaining this type of hand made tea as regular marketing channels are unable to reach them. Some extension offices. Due to financial constraints. Purple Mite. Indiscriminate and high use of pesticides and insecticides and incorrect application cycles mainly in the orthodox areas. is the same being Withering. The Agro Import Association based in Jhapa district is the only one trying to monitor and give the farmers the correct guidelines on their usage. insecticide and pesticides are all imported duty free on official and unofficial channels and are readily available.Box 2: Incidence of pests.green leaf. Brown Blight.

Farmers wish to form into cooperative units and run their own small factories of output of 100 to 150 MT per annum in some instances more as a measure to spite the existing ones who do not service them adequately whilst in certain areas it is a necessity due to availability of large quantities of green leaf. Others are smaller ranging from 100 MT to 400 MT with older machinery but processing a good final product. The CTC factories process the following 6 grades: BP BOP BPS BPSM Fanning Dust Some factories separate the green leaf into those supplied by COC certified farmers. To achieve this factories have to keep strict records of the suppliers of green leaf up to the final packed product stage. Each factory has between 4-6 rollers of the Indian type with different tables and battens to the ones used for the conventional orthodox tea processing with 2-3 driers of UK or Indian manufacture and a sufficiently well equipped sorting and packing room. In the orthodox factories too. the effort is not worthwhile. a select few factories are conscious of maximum residue levels and their importance and either use only green leaf produced in their own fields or under their monitoring with farmer associations who follow the correct agricultural practices. Their capacities range from 100 MT per annum to 500 MT. This is one way the factories are trying to overcome the problem of pesticide residue level. from those that are not certified. there are 23 CTC factories. there is separation of leaf supplied into the 2 categories of COC certified farmers and others. However. Some of them are recently constructed with large capacities going upwards of 600 -1000 MT per year.2 CTC processing units: According to data available. Terathum and Dhankuta and are styled along the lines of the Indian Darjeerling factories. Nearly 90% of the product goes into the Indian Page 34 .6. with new continuous processing lines of CTC machinery imported from India. 2. which are less strict. primarily being restricted to the domestic and Indian market. The indiscriminate use of pesticides has been able to prevail due to the lack of market diversification. Some of the factories have applied for HACCP certification whilst a few are seeking ISO certification. Due to the expansion program and increase in leaf production it is envisaged that 2-3 more CTC factories will be needed to meet the supplies. having a different production.6. If this exercise does not bring in a higher price. They have a green leaf collection area to receive the raw material and large withering troughs as their withering time is longer than for the CTC tea.3 Orthodox tea factories: These are all located in the hilly areas of Ilam. built at a cost of around US$ 500.000. Panchthar. 2.

3% consumed locally mainly in the big cities. marketed to expatriates/tourists and about 1% in special gift wrapped units. will give good growth and sufficient green leaf to keep the factories in full operation. harvesting from very young bushes.7 Availability of raw material. price and quality Due to the recent rapid expansion seen in land area under cultivation in both the Terai and hilly regions.market. with about 7% to EU. some just coming into bearing. The grades processed in the orthodox factories are as follows: Leaf Grade STGFOP TGFOP GFOP FOP OP Broken grades BOP1 GFBOP BP’S GBOP FBOP BOP Fannings TGOF GOF OF Tippy Golden Orange Fanning Golden Orange Fanning Orange Fanning Broken Orange Pekoe 1 Golden Flowery Broken Orange Pekoe Broken Pekoe Souchone Golden broken Orange Pekoe Flowery Broken Orange Pekoe Broken Orange Pekoe Nomenclature Special Tippy Golden Flower Orange Pekoe Tippy Golden Flower Orange Pekoe Golden Flower Orange Pekoe Flower Orange pekoe Orange pekoe Green Tea Leaf Grade YH Broken FYH GP H Fanning Dust Fine Young Hyson Gun Powder Hyson Soumee Dust Young Hyson 2. farmers seem to make use of them to increase their yields as observed in some fields. With adequate availability of fertilizer and chemicals for controls. Indiscriminate and over use of these will be detrimental in the long term not only to the fields but Page 35 .

which will have MRL’s over the required parameters. Fertilizer and chemicals required are mostly imported from India or brought across the border illegally. are reasonably priced. The existing factories in the orthodox areas are unable to absorb all the produce and leaf prices have declined sharply as well as having to be destroyed due to spoilage. The chemical inputs are available at affordable prices but due to the open policy of entry some of the products are of inferior quality and may also include banned substances. There are private dealers. The methods of preparing bio-fertilizer is also taught to the farmers by the extension offices and the NGO’s working in certain areas who produce it themselves whilst Page 36 . due to the close vigilance at the border of the hill areas. Whilst there is adequate availability in the Terai regions. Due to the stringent controls imposed on Indian factories in the Darjeerling areas and closer border checks. Although there is provision for rejection of bad leaf. These are available to the farmers at market prices and since there is no duty. cup quality and on closer analyses and tests for residue levels.also the environment as detected in certain areas but the commercial interest seem to override others. some of whom are able to provide technical expertise along with the sales. in spite of the quality being poor. According to observations some of the items that are smuggled seem to be adulterated and lack the expected efficacy. Banned pesticides and insecticides may find their way into the market through these unofficial channels. Therefore green leaf is available in abundance with farmers having great difficulties in disposing of them. shortages occur for these farmers. insecticides and bio fertilizer. The Extension offices of the NTCDB instruct farmers on the proper use but have no hand in the sales. The growers who are not with the COC are likely to produce a leaf. not only due to excessive use but also spraying the chemicals at the incorrect time to gain maximum advantage commercially. Other production inputs Chemical fertilizer. due to political interference there is undue pressure put on the factories to accept all of what is delivered. Urgent attention is needed to address this problem as it is likely that the Indian Tea Board will be more vigilant on this as the international reputation built over many years of their prestigious geographical indicated brand has been threatened. All these shortcomings contribute to the final product being of poor leaf appearance. pesticides. Farmers working under the COC rules and regulations seem to adhere to them in the use of chemicals and periods of applications. but the quality of the plucking is done in a haphazard manner with unsuitable coarse leaf also included in their deliveries to the factories. the import of insecticides and pesticides has increased by 118% in the past five years. insect control repellents According to official data only. the flow of green leaf and made tea into India through the border has come to a virtual standstill this year. an overall unsuitable and almost un-saleable product into sophisticated markets.

the average being a low 32 kgs per ha. The yields increase during the rain periods and decline when drought conditions affect the bushes. this form of packaging is acceptable as there is a two-way trade beneficial more to the Indian side. The Rigid Paper Sack developed in Sri Lanka especially for big leaf grades is now increasingly used in consignments to these destinations. Not many open-mouthed paper sacks are in use The tea chest is an obsolete form of packing and has been discarded in the western countries. In addition. However.5% and VAT 13%. development tax of 1. Furnace oil. Since 90% of orthodox exports end up in India. which are used to pack mainly the lower grades in both regions. Australia and New Zealand due to the difficulty encountered in storage space. transport cost is about 5% of the sack cost. mainly to pack the leaf grades such as SFTGFOP and TGFOP. In addition the farmers are educated on the use of natural insect repellents such as Neem-based products. imported from India and of Sri Lanka origin through Indian suppliers. Energy Sources Electricity is costly and there are very frequent power failures.some marketing outlets also have these on sale. due to the purchasing power of farmers being low. Firewood is used in 4 factories and mainly in the household units. Packing materials The commonly used packing materials are the polyethylene/polypropylene (PE/PP) bags. it is discouraged due to environmental damage. and coal are the other energy sources used in the factories and these too are imported from India. There are also subtle changes in the concentration of the chemicals in the leaf. The better quality and leaf grades in the CTC tea are packed into multi wall inner aluminium foil lined. with the dry periods bringing these more onto the leaf surface thereby giving a better raw material for producing a made tea with more flavour and aroma. Although the usage is small. The packaging requested/required by the western buyers are paper sacks even for the leaf teas. which cause disruptions to the factory operations. Tea bushes do not require high irrigation and the seasonal monsoon rains provide the required amounts sufficient for the season unless in very adverse periods. the usage of fertilizer is restricted. Page 37 . This affects product quality. The paper sacks are subject to an import duty of 15%. For the orthodox teas. as even some Middle East buyers are beginning to request this form of packaging. disposal and potential damage to environment. apart from the yields becoming lower is that since Indian farmers are not “organic” the thinking is that there is no need for the Nepal farmers to change sacrificing quantity. The medium and smaller leaf grades are packed in paper sacks of the valve mouthed variety. The reluctance to use organic fertilizer. Power is required to run the withering fans and some of the machinery. 4 or 5 ply kraft paper sacks mainly of the valve mouthed variety. all of Indian origin. This sack is now used in larger volumes from Sri Lanka. the packing material is the old traditional tea chests. Japan. and as observed some factories in Nepal use them.

there is no end user available anymore for the producer.9 Quality and international competitiveness Because of the almost monopolistic Indian market. growers and exporters are expected to meet internationally accepted standards that have been set. There is no laboratory equipped to carry out all these required tests nor is there any accredited international survey company available in the country. However there is a difference as the prices realized are 10 – 15% lower. adherence to all aspects to obtain the necessary certifications are imperative. with little attention paid to quality levels. the Nepal farmers and factories seem to overlook the importance of controls. samples have to be sent to Indian or other foreign laboratories. heavy metal content. The overall limiting factors are stricter than the Indian standard. Within this context. cloth pouches. having a lesser percentage of fibre content. Buyers increasingly ask for a pesticide MRL certificate.The retail sales market uses printed boxes. what is unsold has no value. The Nepal Government tea standard complies with ISO 3720 internationally accepted parameters for made tea. These farmer groups have Internal Control Officers to monitor the progress and each farmer’s details of inputs and outputs will be recorded. related to radiation levels. and including caffeine parameter. Some are seeking ISO and HACCP certifications whilst HOTPA/HIMCOOP -the associations with whom all the bigger factories have membership strive to achieve the standards set down by the COC in working with farmers who have opted to become a part of the program. If one wants to compete in the international market. Only those factories venturing to seek other markets and better/higher prices are being very selective about quality controls.8 Rules. wooden boxes and a wide variety of gift packages which are all made in Nepal of good quality at cottage level. MRL etc. 2.e. The NASAA based in Kathmandu records the reports. This exercise takes about 3 weeks and if the test proves positive. regulations and standardization in the sector There are no Codex standards set for Nepal tea as yet although some preliminary work has been conducted. which is a fast growing segment. printed aluminium foil packages. Due to this. woven material. or are being introduced. Therefore like all goods. adherence to good agricultural practices (GAP) and good manufacturing practices (GMP) are very essential and the Code of Conduct drawn up by the Tea Alliance is a step in the right direction to achieve this goal. Nepal tea standard has been set with some variations in its components. which are costly and time consuming. Furthermore with Nepal striving to become a major supplier of bio-organic tea. This is due Page 38 . pesticide maximum residue levels. The current Terai region products of Nepal are very similar to the Indian CTC tea. i. 2. The tea-bagging industry is still in its nascent stage with hardly any packers having modern machinery. It is the intention of the Department of Food Technology and Quality Control to give this aspect priority in the preparation of manuals based on Codex/ISO in making original listings. a regulation imposed by many importing countries.

fertilizer. very likely the domestic arena whilst there is growing interest from Pakistan but the prices are low and even not remunerative. White Tea. However these are types that have very limited interest. Buyers in North America who may look at these speciality teas are also unlikely to pay good prices as such teas are available at cheaper prices from China and Vietnam who are big producers. make it difficult to gain entry into competitive international markets. insecticides and pesticides has caused doubts in the minds of buyers in certain countries as the news travel when samples are rejected on analytical reports. Bangladesh and Indonesian CTC’s are active on the international market along with emerging producers of this category of tea such as Vietnam. some factories are also processing in small quantities types such as Oolong tea. Annex III provides an overview of the major tea consuming countries and their preference in tea grades. The Kenyans and better Sri Lanka CTC teas are distinctly better in this respect. The strong position of well-established brands such as Darjeerlings and some specific Ceylons for the orthodox teas. New CTC markets should be looked at to overcome this situation. Pakistan and Germany show potential for growth in the 2 types of tea. The secondary grades of orthodox teas are difficult to sell because their liquor properties do not qualify for any speciality market although their two main grades will have some demand from niche markets. Uganda and some Sri Lankan teas in the world tea bags market segment.10 Existing studies. Over 90% of the exported Nepalese CTC quantity finds its way to the Indian market. Rwanda. In addition to the usual orthodox grades. which are the price leaders. strategies and policy papers in the sector There have been a number of studies undertaken for the industry in the recent past for its development.to the cup quality being a little “thinner” and less strong. to give direction and policy guidelines. the sector Page 39 . This is due to the product being discounted in comparison to the East Africans and other good origins although the discounts do not seem to be justifiable. Indian. The reputation that has Nepal earned of excessive. indiscriminate and incorrect use of chemicals. 2. Burundi. Green tea and Oolong tea produced are too small in quantity to make an impact in the markets that look for these types. The quality of the orthodox teas are not consistent. The orthodox Nepal tea is also discounted compared to the Indian Darjeerlings. as there seem to be difference in the same classified grade in leaf and liquor properties making it difficult for orthodox teas to be sold in big parcels unless there are blending facilities available. Furthermore buyers look for a very strong quick brewing tea for CTC grades as they are used primarily in teabags. With the establishment of the Nepal Tea and Coffee Development Board in 1993. Sencha and Green Tea. CTC teas will always face strong competition from Kenya. In addition. The list attached as annex IV gives names and addresses of companies of two main potential markets that the export trade in Nepal could approach to develop contacts and foster business. which seems to be difficult. Malawi. The factory is unable to determine with certainty that their product will be clean unless close monitoring in field practices of the large numbers of smallholder farmers is conducted.

A laboratory building is already completed and funding is now being sought for maintenance and equipping with testing machinery such as GC. This will provide the opportunity to develop a Geographical Indicator Tea for identified areas as a good marketing tool. Neemgel and biogas. The main items are: Increase land area coverage to 40. This will enable the department to be competent in testing for almost all the requirements as laid down internationally. they have been conducted for the benefit of commercial and cash crops of Nepal. accreditation with internationally accepted laboratories is imperative to gain recognition. A drawback to this program is the financial viability as the demand for commercial usage may be limited. - Page 40 . AAP. 4) NTCDB conducted a study that identified new tea areas of virgin land for growing of bio-organic tea using products such as Neem. 1) The Tea Policy Paper in November 2000: . Although some of the studies are not directly related to tea. This is still to be presented as a policy paper to the Parliament for approval. 3) UNIDO assistance with technical guidance from FAO through a study conducted is to be made available to strengthen the Department of Food Technology. A training program for qualified personnel is also an essential part of this program. originated in the USA based on standards outlined by IFOAM/CODEX ALIMENTARIUS/The International Social and Environmental Accreditation and Labeling(ISEAL) and Alliance and Social Accountability International.5% concessionary rate of interest and schedule facilitation Rebate on land registration tax Up to 50 years lease prospects of Government land Introduction of Cess levy to manufacturers/importers/exporters Establishment of research development center with private sector participation Incentives to ancillary industries NTCDB to be revamped to have more private sector involvement Establishment of a Tea Development Fund. This will give vital assistance to the processing units to enable them to obtain the ISO 22000 and HACCP certifications. GCSMS. Some factories in the hill areas have already been successful or are in the process of obtaining these certifications. On completion. This is still to commence.This outlines the future program for tea. now an essential requirement in many importing countries.studies were conducted mainly under their purview.875 ha in 5 years Increase annual production to 46. Once implemented. The Code of Conduct for tea growers and processors was conceptualized by this alliance for the overall improvement of the product. Graphite Furnace and requirements for microbiological analyses. HPLC. GCMS. the next step would be the creation of an agency to assess and issue certificates independently on the product conforming to GAP and GMP practices.1M kgs of which 30m to be orthodox Additional employment opportunities for 79310 people Priority lending at 1. 2) Global Development Alliance for Tea Crops with the participation of GTZ/USAID/Winrock/FNCCI/AEC/NTCDB/SNV /HOTPA and HIMCOOP. Financial assistance of up to 20% is being considered as a package by some donor agencies.

A N S Thapa for Winrock International 18) Study on the Prospects of Orthodox Tea Business in Nepal – A Field Work Report by Campion Collage – B Shakya 2000 19) Report on Orthodox Tea ‘Market Study in Spain and Germany – HOTPA 2000 Other than for the study conducted for the EPA. A recent study done indicates the tea farmer Page 41 .Development Associates for Regional and Rural Development Report prepared for GTZ in cooperation with ICON-Germany 10) AEC-2002.Tea Event Proceedings of Agro Business Interface 2001. which was not sector-specific.11 Socio Economic Impact of the Sector Nepal has a predominantly rural population similar to other Asian neighbours.5) A three year World Bank Project Study on Food Research and Agriculture Commercialization and Trade is being undertaken with the Ministry of Agriculture to study the improvement of existing cash and commercial crops and implement a research and development program. About 30. with a majority of the workforce being women. The tea scene is changing continuously with demand and marketing strategies varying with time. From a gender perspective this is important although the work is in the lower categories.000 family units are involved within the sector and more than 40. there has been no recent studies done for tea.August 2001. 2. 9) Poverty Reduction through Development of the Tea sector in Nepal Deva 2001. 6) Export Potential Assessment study done by ITC in early 2007 and follow up studies on five identified export items including tea.Compilation of papers by resource persons 16) Extension and Research Needs of the Nepal Tea Industry A M Whittle 2003 17) Concept Paper on the Study of Nepalese Tea Industry – Vision 2020 – Nepal Tea Crop Global Development Alliance . 7) Nepal’s Export of Green Leaf Tea to Indian Market done by M N Sharma with NTCDB 8) NARC 2001.000 labour force. Therefore constant updates are necessary to keep abreast with new developments. The tea farmer earns more income from their land than those involved growing other crops except for cabbage and ginger.Challenges and Prospects of Himalayan Orthodox Tea Industry in the 21st century 13) 2005 – The Souvenir of Nepal Tea Association 14) Orthodox Tea Profile – HOTPA –2000 15) AEC-Agro Business Interface -2001 . Nonetheless.Identification of Tea Problems /Constraints and it’s future Rsearch Strategy . it provides important additional income to families as well as empowering rural females. mainly as pluckers with lesser incomes.April 2001 11) Economic Survey –Government of Nepal –Ministry of Finance 2005/6 12) GTZ-Nepal 2002.

Page 42 . They are: a) Ending of child labour b) Ending of caste and social discrimination c) Salary and wages payable based on labour laws of the country d) Women empowerment. The earnings are reportedly around US$ 20 per ha per month in the Hills and US$ 32 in Jhapa.earns an average income of US$ 175 per month. Loans at concessionary rates at 1. Government assistance by way of land allocation without restriction on size as well as lease agreements facilitated by the government are available through the Agricultural Development Bank. Indiscriminate and high use of pesticides and insecticides and incorrect application cycles mainly in the orthodox areas. able to bind the soil and stop erosion. have caused the final product to contain more than the minimum level of residues permitted.5% are possible for cultivation of land. The Code of Conduct introduced has focused attention on the social responsibilities too for the community. where the insect and pest presence is higher due to the dampness of the atmosphere. The land use is better for tea as the undulating terrain and barren areas can be used due to the hardy and deep roots of the bushes. This has caused environmental damage and an imbalance in the insect population. child education and human development e) Clean and secured workplace f) Cultural and development and information g) Recognition of corporate social responsibility by the factories.

Unique environment and natural weather patterns to develop better quality and speciality product Emerging private sector to be speciality advisory agents/suppliers of inputs for the industry Supports available for obtaining internationally accepted certifications for new and existing factories. which are rapidly developing to meet global requirements. tools and machinery. VAT refunds delayed Dependant on Indian port and territory for transportation Implementations of good government policy ineffective and often overruled Inadequate government supports Poor reputation for product due high MRL and quality. the declining prices of poor teas globally which are the first to suffer in market price movements can affect produce • • Page 43 . Threats • • • • • • • • • • • • • Losing markets due to poor quality Political instability Interference from outside elements in the internal management of companies/factories Lack of human resources. Migration of young labour force to urban areas for better employment Global warming and other natural disasters having adverse effects on agricultural areas mainly low lands.. plant material. especially in quality control and export marketing contributing to loss of credibility. Improving facilities of food laboratory and obtain accreditation Improving/expanding bilateral and regional trade and transport agreements to improve exports and cargo facilities with India and Bangladesh Existence of new organically certified growing areas in virgin land for bio-organic tea now having increasing global demand. . Strengths • • • • • • • • • • • • • • • • Good climate and geographical conditions Large area under tea and availability of land for expansion Environmentally friendly crop Short crop cash cycle Young bushes Low labour costs Farmer cooperatives willing to work together Methods of cultivation and standards required clearly laid down Rural and women employment/empowerment Contribution to poverty alleviation Steady growth in export volume and earnings Institutions are in place to guide the industry Communication system adequately developed in village areas Private sector driven Availability of international expertise Government grants and subsidies on land lease. Lack of well equipped and accredited laboratories No research facilities No central marketing facility Lack of human resources Packing materials expensive Market information inadequate Quality of product inconsistent and need be standardized to meet buyers demands Facilities and standardised quantity not available to prepare large consignment for export Low yield • Opportunities • • • • • • • • • • • • • Good brand image including GI could be established specially under deteriorating image of Darjeeling tea Additional factories could be established given the existing green leaf production Large blending. Banks are interested to facilitate easier agriculture and export financing and develop export insurance cover and factoring facilities. the relative advantages/disadvantages of the sector in the global marketplaces are being discussed in the table below. Ad hoc changes in Indian policy effecting smooth operation and causing sudden hardships to all in the industry Competition from other producer countries. Middle men interfering with the supply chain mainly at rural farmer level due non-availability of finances Increasing global availability of tea with many countries expanding tea areas resulting in an oversupply situation Due to poor performance by exporters and differing of offer/delivery samples. Loans at attractive interest rates Code of Conduct drawn up to achieve GAP/GMP and Fair Trade practices Weaknesses • • • • • • • • • • • • • • • • • • Shortage of processing capacity Poor quality chemicals/insecticides and pesticides and their overuse and incorrect applications Poor on farm infrastructure Irregular supply of electricity Financing difficulty. warehousing and packaging facility for supply of bigger consignment could be established Sufficient availability of land in identified areas for expansion and new plantations Developing new export markets Strengthen NTCDB dedicated for the development of tea sector with private sector participation and making itself functional and more effective Developing a research and training centre that can produce new clones and seed stock suitable for the Nepal environment.2. product quality and exportable quantities. Relying heavily on Indian processing and marketing expertise thereby losing country image Inadequately policed border trade having a detrimental effect on inputs.12 SWOT Analysis Based on the above. loss of credibility and important buyers Unless quality is improved to higher standards.

Residential and office space of 2000 sq m is provided at Haldia. Open land area space is provided in Circular Garden Reach Road of 4972 sq m and Haldia dock interior zone of 6985 sq m. 3. Banglabandh. Regional and Multilateral Trade Agreements Bilateral agreements Nepal has entered into many trade agreements with other countries towards improving trade and exchange of cultures. The transport/transit agreement with Bangladesh allows entry of Nepal goods to the ports of Chittagong and Khulna-Chalna through Biral. Rasuwa/Kyerong and Yari (Humla)/Purang at their frontiers are allowed to be used. but allows in it’s schedule of items the export of Bangladesh tea which are CTC grade into Nepal.2 Transit Agreements The sea port of Kolkata is allowed to be used for transit cargo of Nepal with two covered sheds totalling 6. Chilhati and Benapole. With the increase in importance of global economic Agreement on South Asian Free Trade Area (SAFTA) contains 25 Articles. 3.1 Bilateral.835 sq meters provided at Kidderpore docks and also shed no 8 at Kolkata jetty. It was concluded during the 12th SAARC Summit held in Islamabad in January 2004 to promote and enhance 6 Page 44 . To facilitate trade overland from Nepal to China the trading points of Kodari/Nyalam.3 Regional Trade Agreements The SAFTA6 is considered as one-step forward in the process of regional economic integration in South Asia. Entry to Kolkata port through Indian territory is allowed through 15 entry points but the most commonly used is Birgunj in central Nepal and Kakarbhitta in eastern border. Peoples Republic of Bangladesh Peoples Republic of Bulgaria Peoples Republic of China Czech Republic Arab Republic of Egypt India Democratic Peoples Republic of Korea Republic of Korea Mongolia Islamic Republic of Pakistan Republic of Poland Republic of Romania Democratic Socialist Republic of Sri Lanka United Kingdom of Great Britain and Northern Ireland United States of America Russian Federation Socialist Federal Republic of Yugoslavia All above agreements allow tea from Nepal to be exported under favourable duty concessions except Bangladesh. which does not allow tea imports from Nepal.3. 3.

Trade Liberalization Programme (TLP) . Two lists of products were drawn up – Sensitive list with no tariff reductions and non sensitive list where gradual reduction in tariffs at the initial stages leading to zero tariff was agreed on. every WTO member is entitled to seek redress against any impairment of its rights by another country through the dispute settlement mechanism. Nepal was allowed a transitional period until 1 January 2007. at least for WTO member countries. Most governments impose technical regulations or standards on (domestic and mutual trade and economic cooperation among the contracting parties by eliminating trade barriers in and facilitating cross border movement of goods between the contracting parties.Sri Lanka. which is especially important for a country’s exports. WTO membership gives a country the legal right not to be discriminated against in its trade with the other members of the organization. It has also created greater predictability of market access by “binding” reduced (or zero) tariff rates. SAARC members were motivated to set up SAFTA to harness the benefits of "free flow of goods" for the optimum utilization of resources and thereby support to develop their respective national economies. especially in developed country markets.It has been agreed to bring down the tariffs to 0 to 5 % (a) within a period of 7 years by non-least developed contracting states (to 20% within the first two years) and (b) within a period of 10 years by least developed contracting states (to 30% within the first two years). Pakistan and India. SAFTA does not preclude Nepal from receiving and giving tariff preferences under the existing bilateral agreements (Article 13). Nepal) and non-LDC’s . TBT. The principle of non-discrimination. The countries were classified as LDC’s (least developed countries: Maldives.4 Pertinent provisions under the WTO agreements Nepal is a recent member of WTO and acceded on 23 April 2004. is laid down in the most favoured nation (MFN) clause and the national treatment clause. It is expected that WTO membership will enhance Nepal’s capacity and capability to be more competitive in trade through policy and legislative reforms to attain an overall increase in trade efficiency and effectiveness. in order to bring its foreign trade regime into full consistency with the WTO Agreements on Customs Valuation. It has thereby taken an important step to be integrated with the global economy through the multilateral trading system. Bhutan. As an LDC. 3. Progressive liberalization of trade through successive negotiations has led to lower (or zero) import duties. Apart from the agreement to follow tariff reduction to products covered by Trade Liberalization Programme (TLP)7 the members have also agreed to eliminate all quantitative restrictions in respect of such products except otherwise permitted under the GATT 1994. such as Germany’s unilateral ban on the woollen carpets on the basis of perceived use of child labour or of azo dyes. In addition. Practically all products and markets are affected by one or several of the WTO Agreements. The SAFTA entered into force from the beginning of 2006. and thus increased export opportunities. Page 45 .integration. SPS and TRIPS. 7 The Trade Liberalization Programme (TLP) is not applicable to products included in sensitive lists to be negotiated by member states and which subject to review and also examination of the compatibility of such arrangement with relevant WTO provisions by the Committee of Experts (COE) every four years. Bangladesh.

such as the EU. Nepal committed to bring the Nepal Standards (Certification Mark) Act (1980) into full compliance with the WTO Agreement on Technical Barriers to Trade. upon request to any company producing goods for which technical regulations and standards exist in Nepal. tend to diminish due to stringent systems of Rules of Origin (ROO). This is called preference erosion. These companies are consequently allowed to use a distinctive sign in their products. as well as the environment. protective mind-sets of many member countries backed by lobbies of national private sector are still strong. However. Although CTC teas and orthodox teas were allowed across the border. India is usually considered a temporary and short-term phenomenon. Nepal would introduce a WTO-consistent regime with respect to rules of origin and anti-dumping and countervailing measures. The 1980 Act stipulates that national certification trademarks can be issued by the Nepal Bureau of Standards and Metrology (NBSM). animal or plant life or health. The preferential market access to the EU that Nepal enjoys through its ‘Everything but Arms’ incentive.5 Implications of these agreements for the sector in Nepal: Nepal’s tea products benefit from preferential market access under several regional and bilateral agreements.0m kgs of tea to be imported with zero duty. changes in Indian Page 46 . Tea has not significantly benefited as yet from these agreements except with Pakistan who have agreed to allow 6. Meeting WTO obligations represents a major challenge to Nepal. Benefits of regional integration. offers thus no additional benefits for exporters of Nepalese tea. which means that the product complies with the required regulations or standards. the MFN rate offered to third countries is already zero. and preferential market access schemes.imported) products to protect human. In case of regional treaties. This increase has been observed in the increased export figures mainly of CTC type but the prices realized are low. With reference to the standards regime. in many important export destinations. highly dependent on political ties. Nepal furthermore committed to enact a new Industrial Property (Protection) Law consistent with the TRIPS Agreement. It has been observed that Bi-lateral Trade Agreements are not always beneficial for small countries with limited exports. Furthermore shipping delays and longer transit times are also a deterrent. Each country is trying to include the most potential export items of the other member countries within the list of their import sensitive items. Whatever agreements and tariff benefit are available within these treaties. It is up to each exporter to find out about such requirements in the relevant foreign markets. Its ability to participate fully in the multilateral trade negotiations and make adjustments to their trade policies and rules remains weak. the market forces come into play as in the case of the Pakistan market. The Agreements on Technical Barriers to Trade and on Sanitary and Phytosanitary Measures ensure that such requirements do not create unnecessary obstacles to international trade and provide certain rights to exporters. The bilateral treaty with neighbouring countries. This new law would also include a provision for geographical indications. 3. As part of its commitments. subsidies and non-tariff barriers including Sanitary and Phytosanitary and Technical Barriers to Trade. where easier access to the East African markets which offer same type with much better quality being preferred.

With India’s annual increased production unable to keep abreast with their increasing consumption and the other countries too growing in their tea drinking habits. it is likely that more quantities will be absorbed in the region. Page 47 .policy and protectionist course of action. The positive factor for the future is that the SAARC region is highly populated and is naturally avid tea consumers. safeguarding the indigenous Darjeerling tea. lead by Pakistan. it’s brand and reputation has had severe repercussions on Nepal tea.

The machine downtime and effect to quality of product can be at high cost. increase the cost of processing and the exportable item becomes too pricey. As a result. specially the small farmers. Additional processing facilities will thus help increase Nepal’s tea export. 4. No blending or mixing facilities available to cater to the demands of buyers who require bigger consignments. On the other hand.4.1 Obstacles and shortcomings for exports At the Farmers and Company Level a) The past efforts of all stakeholders have helped increase the production of green leaf at small farmers. face delays in deliveries and apprehensive of getting tea with high residue levels. i) No research facilities including for promotional and marketing linked with research. Inconsistent quality and non-uniformity of products with no supportive certificates causing difficulties to make good blend mixes. 4.2 The enabling environment. e) Exporters unable to deliver as per standard accepted by buyers resulting in loss of credibility of Nepal trade f) Only small parcels of lots are available to be offered out. Page 48 . It is estimated that 3 additional factories are required in the CTC area whilst 11 more are needed to use the orthodox leaf. although most factories are operated at below capacity. d) No brand image still built to make global buyers aware of Nepal tea and their quality. cooperatives and tea estates. g) Overseas buyers are not able to get supplies with consistent quality. c) Insufficient product diversification to interest buyers of speciality range of teas into niche markets. The existing factories in the orthodox areas are unable to absorb all the produce and leaf prices have declined sharply as well as having to be destroyed due to spoilage. b) There seem to be a shortage of factories in some growing areas. But the processing capacity has not developed to cope with the increased production of green leaf. h) Lack of professionally qualified and experienced marketing personnel to promote sales. both public and private a) Cost of inputs and mainly electricity with interruptions to supply. the recent restriction imposed by India in the imports of green leaf from Nepal has raised a serious fear among the farmers. Nepal’s tea sector is selling raw materials to Indian factory instead of value adding in the country and exporting the finished tea. The State’s supply of electricity to essential business houses such as tea factories to be made available on an uninterrupted and continues basis. which will help in developing new products suitable for changing market demand. affect quality. which may be detrimental to this sector.

Export prices can be higher by 1-2 USCts per kg. Nepal tea industry does not have the facilities to offer such large consignment as a central warehousing and blending complex is not available. finances are scarce and export cost pricing calculations has to include such costs e) Accredited and equipped laboratory not available to test and analyse samples for exports. such as an auction to attract sellers and buyers to one location. all imported. c) Packing material such as plywood chests/paper sacks. Exporters are levied a VAT payment of 13% which although refundable is very difficult to get back. and used for packing tea for export to India and other destinations are not eligible to a duty rebate. changes in consumption habits etc Facilities to add value to the basic product are not available.b) Bank loans are difficult to obtain and interest rates are high. no real benefits has still accrued to Nepal except with Pakistan l) The bigger international buyers usually wish to base their purchases on “just in time” deliveries at their doorstep to reduce financial costs and also buy large consignments. This has been due to the overdependence on Indian exporters and marketers performing this function using blend mixes of both origins with Nepal tea “lost” in their identity. radiation clearances with each consignment. Thus. Page 49 . if waived. A bilateral transport agreement exists between India and Nepal but there are delays and obstructions faced by the exporters sometimes adding on to costs. Nepal is dependant on their immediate neighbours for the use of their seaports for export cargo. d) Export trade inadequately supported by the Government. will make the product more competitive. price movements in other auction centers. n) Political decisions in India affecting consignments to some buyer countries. i) No market information system available to give guidance to exporters on current trends. g) Insufficient Government support for active participation in international trade fairs to showcase Nepal tea h) No central marketing facility. Orders are held up for long periods till the results are released from laboratories overseas. m) Being land-locked. This duty of 10—15%. Many buyers and countries require test reports on residue level. j) k) Although bilateral and multilateral trade agreements have been entered into with various Governments. heavy metal. On both counts Nepal is at a distinct disadvantage. f) Organic certifications and test reports on the products from accredited laboratories/authorities are not available. which is sometimes the difference between a contract or refusal mainly to the bottom level of tea.

There is a perceived lack of commitment and with the absence of sector specific representatives in key positions. Although above programs are set out on paper as programs. although the program is in place.5. Assistance will be provided to set up a research and development unit. Trade and Supplies. with policy changes in the Indian Darjeerling scenario and rapidly evolving variations in the consumption habits. improve existing laboratory facilities to enable testing facilities for export cargo. as far as the exporters are concerned. They are willing to listen to problems and seek solutions and provide the impetus to the trade. the NTCDB arranges seminars overseas and workshops to advice and train on tasting and marketing. no assistance in any of the areas. In the near future. at this juncture. Financial constraints have been cited as the drawback for the overseas trade officials to gather relevant information and report back to reach the trade export sector. NGO’s and INGO’s who are available to assist the export trade. 5. It also provides market information by gathering news in the tea scene globally. this goal will be difficult to achieve. Planning. subjects of relevance are not taken up/solved. At this initial stage there should be aggressive participation in selected areas with Government’s official backing to give the necessary credibility. A promotion division of the NTCDB must be set as a priority and selected young persons with a marketing academic background should be recruited and given a Page 50 . no effective support and participation has occurred and results not achieved. it hopes to develop a website incorporating all the information useful to the trade which can be accessed by all within and outside Nepal. private associations. Furthermore. However their focus on the trading side is limited as this function may be under the Ministry of Commerce.1 The Government Institutional Supports Ministry of Agriculture The Ministry is aware of the problems faced by the industry with the current unrest in the farmer community due lack of processing facilities and Indian blockade. Tourism and Agriculture in a coordinated manner with NTCDB playing a pivotal role. with health aspects being a primary reason for this shift. Foreign Affairs. The Ministry through their authorized bodies must be more proactive in working together with the industry National Tea and Coffee Development Board The NTCDB assists in promotional work and is willing to provide some funding in the participation at exhibitions overseas in meeting part financing of the infrastructure with the participation of the Embassies. There is a dearth of trained and experienced people to promote marketing globally. Export Services in Nepal There are Government backed authorities. The need to put Nepal’s tea image in the global map is very important. There are over 20 important food fairs overseas held at important consumer countries some of which are sector specific. However in many instances. has been forthcoming. Unless substantial assistance in the form of finances and committed participation of the Nepal trade people based overseas is made available by the Government through the Ministries of Trade.

The AEC initiated its efforts in the tea sector by assisting entrepreneurs in providing information and undertaking necessary research for the overall development. etc. problems facing the industry to enable discussions with government. They should also support overseas participation on tea related matters as well as be actively involved in seeking and promoting tea as a primary export at all times during their sojourns overseas for trade promotion. a member should be recruited to the staff. with the knowledge. There is no sector specific specialist in their team who is able to assist in the promotion of tea. Any leaflets or brochures should try to include articles and latest work done by them on tea related information. trial productions. although its identity is “lost” up to now due to lack of a brand image and always being mixed as cheap filler with Indian special area tea. shortcomings. There should be representation of a sector specific representative in the main body who can apprise the board of the needs. duty waivers on machinery and vehicles. workshops. must be provided to the exporters so that they are encouraged to invest in sophisticated packaging machinery and suitable factory premises. business plan formulation.2 The Private Agencies and NGOs Federation of Nepalese Chambers of Commerce and Industries Trade chambers such as FNCCI are very important as they have the necessary clout to lobby with the Government and also with Chambers of other countries at a high level. 5. Trade and Export Promotion Centre This Government body is tasked with the function of providing support to the overseas export trade of all Nepal goods. conforming to the high standards of ISO 22000.training in Nepal and overseas. policy advocacy and lobbying. HACCP and all other parameters that are essential requirements in the food industry. Nepal boasts of a unique tea. When marketing such unique tea. it is recommended that the value addition is done at origin to preserve quality better. trainings. from the same group. Currently the AEC is continually supporting in launching various programs such as organization of trade fairs. The selected person can be the one who should be given overseas exposure to service the department. The Agro Enterprise Center (AEC) AEC. Therefore good packaging concepts must be developed. Government assistance by way of subsidized finances to defray part capital outlay. hiring renowned international advertising and promotion companies competent in food and beverage designing to assist the export companies to work together with NTCDB to develop good brand/s. which now has been identified as a primary export potential item. which falls under the aegis of the FNCCI. Almost 100% of tea exported is in bulk form and the value addition is done in consumer markets by packers or in India where the tea is mixed and packed into retail form for exports. has been the most significant private sector agency providing institutional supports for the commercialization of agrobased product since past couple of decades. and expertise following a training program as outlined below. In order to contribute more to this commodity. some of whom can be chosen to function as Tea Promoters/Marketers who can be placed in selected overseas embassies whilst others can be absorbed by the private exporters. obtain a higher price and help in building the brand/s image/s of Nepal tea. Page 51 .

National Tea Development Alliance This is an alliance that has been formed with SNV, GTZ, USAID, WINROCK, FNCCI, AAC, NTCDB, HOTPA and HIMCOOP. The composition indicates the focus of development to be the orthodox tea sector, although as mentioned earlier, the CTC tea sector too, which is larger can/should be encompassed onto the alliance, as there is good potential for improvement to contribute more to the Nepal economy. This alliance, at present, is more focused on the improvement at field and factory levels with the introduction and implementation of the Code of Conduct, and eventually to obtain certification with GAP, GMP, Fair Trade through an accredited agency in Nepal. This agency can be created by strengthening the Department of Food Technology and Quality Control and assisting them in staff recruitment and training program so that they are able to meet the necessary competency to gain the accreditation. The alliance can help in seeking donor funding to this department to equip their laboratory. This would have a much wider impact, as such an improved laboratory would be able to service the entire agricultural export sector and is likely to be a more commercially viable operation. With four strong INGO’s in partnership, and their international network, the possibility to seek buyers and groups/associations of special teas, identifying those international bodies conscious to help rural farmers in developing and poor countries is much easier. This is one positive manner in which the INGO’s within the alliance can help Nepal tea exports. The ethical tea partnership alliance created by a group of big packers in EU – 26 in all, is one of them and the Nepal tea industry should work in close cooperation with them as the alliance appoints a representative to look into all the aspects they require to being a supplier to them. There are other smaller groups in many developed countries, operating in a way that they are suppliers to shops and outlets having consumers that seek and buy items produced from poor countries to uplift their living standards. Nepal Tea Planters Association This association, started in 1987/8 is concerned with the welfare of producers and processors, mainly of CTC tea. Their contribution would be to ensure a quality leaf is supplied to the processors to enable processing a good tea free of pollutants to assist the exporters to find markets without the difficulties of their contracts being rejected, thereby building credibility so that long term relationships can be built beneficial to all stakeholders. They have created a marketing section referred to as Planters Himalayan Tea Plantations Limited (PLANTEA) and are credited with introducing the Nepal CTC tea to international markets. Nepal Tea Association This body of people involved in production and processing should assist in the same manner as outlined above for the NTPA.

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Himalayan Organic Tea Planters Association This was established in 1993 to look after the producers and processors of Nepal orthodox tea. Currently they have a membership of 22, 11 having gardens only and 4 with gardens and factory. The rest have only a processing facility. In 2003 the marketing arm under the name of HIMCOOP was created to find export markets. A code of conduct was drawn up with international assistance with the aim of achieving the production of a quality tea. This was made official and implementation process commenced in 2006. A good measure of success has been achieved so far with the participation and cooperation of NGO’s and INGO’s with donor funding arranged by USAID and JICA. In 2004 an international event under the style of “ Nepal Tea & the World” was conducted to make known the commodity to international buyers. The marketing arm assists the producers in finding buyers overseas and effects shipments on their behalf for an agreed fee. A drawback they seem to be confronted with is the inability to offer larger parcels of selected types, as the invoices processed are small. There are two aspects that have to be sorted out to meet the requirements demanded by the buyers: a) Ensuring that the components of a blend mix as required based on a standard sample that has been approved by the buyer/s are all of a similar nature and has no pollutants. The factories have to make certain of adherence to residue levels, heavy metal, chemical and fungal presence and ensure either absence or within the accepted parameters specified by the importing countries; The facilities are available for the blend mix to be done to ensure proper mixing under hygienically accepted conditions in premises that have the ISO/HACCP systems in place.

b)

Point number (1) can be solved with close monitoring of field practices if the garden is controlled by factory or dealing only with farmers who are willing to strictly adhere to the parameters set down by the code of conduct. Appointed field officers by the factory can visit the farmers for regular checking and monitoring of their activities and usage pattern of inputs. Point (2) of establishing a facility will require financial assistance and subsidies or duty waivers from Government. Financial aid from donor agencies is also a possibility in order to defray some of the expenses. Besides, there are Mechi Hill Tea Producers Association, Illam and Himalayan Tea Producers Cooperative Ltd, both addressing the issues of orthodox tea only.

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6.
6.1

Recommendations and Action Plan
Recommendations for farmers, producers and exporters
a) Infrastructure: Green leaf farmers are located in areas, which have poor infrastructure. Although they are able to produce the leaf in quantities, transport is affected by using methods, which are unsatisfactory such as on animal back, bicycles, causing damage to the leaf in transit. The bags used for plucking are also not the current recommended types which have now been designed to keep the leaf intact as well as allowing it to “breathe’ without causing fermentation before it arrives at the factory premises. Access to the farmer’s premises quickly and in vehicles that are suitable should be made available to the providers of ancillary services. Recommend the import of commercial vehicles suitable to the industry on duty free basis. b) In opening of new land, good agricultural practices must be strictly followed to ensure minimum damage to soil and environment. Thus soil erosion and leaching can be minimized whilst organic population can be preserved. The physical properties of soil such as density, porosity, and moisture retention must be well addressed to minimize adverse effects of weather. c) In order to tap into new markets, it is important to look into product diversification, taking into account the trends in volume of imports by target countries and their preferences in taste and tea grades. Annex III provides an overview of tea consumption in countries concerned and grade preferences. d) Tools and Implements: As the NTCDB has in their program a scheme to supply tools and implements at subsidized costs the new type of plucking bag and other relevant implements for the use by the farmers at the garden level should be imported free of duty and made available at reduced cost so that the leaf quality can be preserved. e) Quality Controls: Whilst the farmers should ensure that their pluckers follow the practice of selective plucking, the factories should be very strict in their controls of leaf intake to reject all unsuitable and damaged leaf at factory door. f) Political Interference: Government should support the factories to run their business in the best practical manner to achieve quality products without allowing labour or outside influences to dictate terms to factory staff on good management practices.

g) Agricultural Inputs: Tea extension staff and the individual farmers must be more vigilant regarding the indiscriminate use of chemicals and pesticides. Although it is a difficult task, the state machinery should be used effectively to patrol the borders so that import of inferior quality inputs not only to the tea industry but agricultural crops in totality is protected by not allowing substandard and banned cheap products. h) Health Hazards: Some factories and packaging plants are unsuitable for tea processing and are a health hazard. A scheme must be evolved by the NTCDB to register all tea farmers, packers/blenders and processors, however small their operation. Regular inspections of their premises should be

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undertaken so that inferior, substandard and polluted products are not put out into either export or domestic market. i) Certifications: As far as possible most medium and large export oriented factories should be encouraged and assisted to obtain the ISO/HACCP certifications as a strategy for future marketing. Packaging Material: All packaging material is imported either from India or Sri Lanka through Indian traders. The industry is at present too small for any commercially viable enterprises to produce the needs of the industry only. Hence there will have to be continuation of imports for export packaging for the time being. With bilateral trade agreements, such as with Sri Lanka and multilateral agreement with SAFTA under SAARC countries already in force, opportunities should be created to import packaging items directly on a duty free basis .eg multi-wall and rigid type aluminium foil lined kraft paper sacks from Sri Lanka.

j)

k) The traditional plywood chests, which were discarded from use some time ago, are still being used for exports into India. These items are imported and re-exported. Duty concessions should be available for such transactions. As it is not an environmentally friendly form of packaging material, its use should be discouraged and the use of rigid paper sack should be promoted. l) The made tea is packed into PE/PP bags and are stored till they are ready for use. This form of packaging, particularly in the Terai areas where temperatures and humidity can be very high will speed up the deterioration of the product. In such instances dispatch of the made, packed and ready product to more suitable storage facilities should be done without delays.

m) The same applies to the export cargo, which is held up in covered trucks for many days in transit to Kolkata port in open storage areas. Whilst some instances can be beyond the control of Nepal, it is always prudent to develop an efficient system for clearance of cargo with minimum delays being incurred. Improvement and minimizing documentation requirements is one method of reducing down time. n) Quality of Product: Above recommendations, if carried out, should ensure a product of better quality than what is presently available which would be the ultimate goal of the producer and processor and the tea industry as a whole. Further enhancement to quality can be achieved if the manufacturing practices are adjusted to different times of the season to make optimum use of the leaf quality and their inherent characters to bring out the maximum natural flavour, aroma and strength. o) Test Reports: There are no laboratories or survey companies capable of conducting tests and analyses on residue levels, heavy metal presence, fungal infestation and issuing reports that are required by the larger section of international trade today. This is a big disadvantage, as samples of teas awaiting export have to be sent to laboratories in India and Germany for such tests to be performed. There have been many instances where such samples have been found to be contaminated and thus orders having to be cancelled. Once the consignment is rejected, there is no “home” for it. Therefore the need to have a well equipped laboratory in Nepal. However there are limitations in setting up a laboratory by a private enterprise as well as any international survey company due to the volume of business being Page 55

information on world markets. This company to undertake the promotional and market intelligence work. analyse and distribute the information to the stakeholders. A website is to be developed by the NTCDB which is an excellent concept and all stakeholders should be involved in it’s design as the information required by each different sector is different and it takes time to get an information system designed with a professional planner. It should be the driving force to establish the Page 56 . In every country. for an annual fee.. Furthermore the information of the individual export companies in Nepal with the types of tea they can offer showing the leaf appearance and cup quality in the form of photographs can be included in the website. Merging to form one marketing company or association with a broad representative of stakeholders in both sectors for the improvement of market share in the global market for Nepal tea in totality should be seriously considered. speciality market segments. out of the total global output. market information and international statistics. there are tea buyers who supply the cafes that serve special blends and varieties of beverages including tea and these buyers must be contacted by participating in trade fairs where special teas are exhibited and their business solicited. q) Export Marketing: The tea industry in Nepal is small. new concepts in tea consumption and a whole array of inter-related subjects from which the interested visitor can drawn on. The Agro Enterprise Center of FNCCI puts out some information but this is insufficient when market information and current developments are the essential information that an exporter requires. it would also be more beneficial to work with the Speciality Tea Associations and such bodies established in a number of countries. p) Information System: There seem to be a total lack of information gathering in the industry with little or no active attempt to collect. The trade attachés in all the embassies overseas must be used as a constant source of information gathering and updating. demand patterns.commercially unattractive. future trends. A full list of buyers of all types of tea in every consuming country must be incorporated into the database so that they can be accessed. it is difficult to build up a brand image unless with personal contacts and constant interaction. Therefore it is more prudent to work with marketing and distributing companies who are experienced in handling food items and specifically beverages and tea. so that the exercise becomes a viable proposition for the NTCDB. r) Two marketing entities have been formed in the orthodox and CTC sectors to do the marketing function under the names of PLANTEA and HIMCOOP. Negotiate with international brand owners and get into JV partnerships with them to supply and ensure Nepal teas are included in these branded products.32%.23% and production is 0. HOTPA/HIMCOP are already working closely with the American Speciality Tea Association and are developing the product within the parameters set down by them to facilitate entry to their market segments. The volume exported currently is around 0. The alternative would be to strengthen the existing Government Food Testing Laboratory with a mandate to do commercial testing of export samples of all agricultural products to become a profit center whilst at the same time to devote a part of the time to conducting research and development. As the orthodox tea is considered a special product. (ITC statistics). This must include as much as possible. market planning forecasts. With this small quantity entering the world market. Furthermore any promotional and advertising would be at a prohibitive cost.

Nepal Tea logo and brand in the global market. mainly for the orthodox tea areas. which still remains under Government control and is responsible for giving direction and guidance is lacking in performing their duties. extension. progress at field level and development of new plant varieties. information and now the important aspect of marketing to look into new product developments with global consumers in mind. It is very necessary to establish a Research station. similar to Darjeerling in India and Dimbula/Nuwara Eliya in Sri Lanka so that branding and marketing such produce can be done. There is a need to establish a tea training centre or tea school to develop human resources required for the tea sector. who’s task is to drive the industry forward. All the machinery is of Indian origin except those in the older factories some of which are from UK. The composition of the present Board is not fully representative of all stakeholders. However. 6. and technology have all been directly or indirectly brought into Nepal. have also lost their significance. have not been introduced. the Government controls were gradually removed in the operations of the large tea gardens and factories. However the main positions on the Board of Directors must be with the now important private sector. physiology. The NTCDB. Nepal must strive and develop Geographical Indicators. s) It is also necessary that the seedling and clones developed in Nepal be protected. Immediate revamping of the direction in which the NTCDB should focus and methods to obtain financial Page 57 . which is specific to tea with all the relevant divisions of a agricultural based commodity in place to look into agronomy. Due to the vicinity of India and easy access. Financial constraints seem to affect even the extension and training programs which have been severely hampered and farmers are left to seek advise from their Indian counterparts for almost all their inputs both advisory. which they controlled. pathology. usage of inputs. bio-chemistry. t) Research and Training: Like all other areas of the industry this too lags behind. contributions in certain areas. Research has been generally neglected. Therefore the tea produced/processed bear a very close similarity to the Indian Darjeerlings and CTC’s. which is detrimental. On paper the program is well thought out looking into all aspects to solve the shortcomings.2 Recommendations for the business environment a) Business Environment and Export Services: With the privatization of the tea industry. The production and processing and the quality of the final product in such clearly defined and identified areas has to be closely studied and special features associated with them classified to use them as a marketing tool. Hence there is lack of purpose and direction and almost all the programs. This private company composed of senior and experienced persons should direct the affairs but also ensure that the interests of all parties are met fairly. which are essential in giving directions to the industry. The company must monitor the quality available for export through the respective associations. or applying subtle changes to the methods of manufacture. Any potential research instincts have been suppressed to the extent that innovation in the industry or changes in the style of manufacture. still remain largely unattended. technologically and guidance on application of agri-inputs. manufacture. training. which are outlined on paper for the betterment of the industry.

Therefore it is essential that their attitude towards the Government authorities and statutory bodies change and work in a combined manner in a cohesive way so that all stakeholders become willing partners to get moving forward. tax levies. information and marketing which can be developed to benefit all. the State Bank of India. wharf assistant and driver cum office boy. operating in Nepal. Nepal Commercial and Credit Bank. Himalayan Bank. a secretary cum office assistant. interruptions to supply of essentials. There are no financial facilities available to exporters at favourable rates. Many local banks are operating. The Government has to look at opening up opportunities for more foreign participation not only in the fields of finance and banking but also joint venture partnerships and land ownership by foreigners. Nepal Investment Bank. There is also no Export Credit Insurance scheme available to safeguard exporters in the event of default from overseas buyers which is now a grim reality. a shipping. contribution towards advertising and promotion etc from the now private industry to swell the coffers of the NTCDB for their use in extension. e) Route via India to the Bangladesh seaport of Chittagong should be developed to overcome delays. which hinders the smooth transactions in banking matters. documentation. membership payment. It is also essential that a scheme should be drawn to bring in finances by way of a Cess payment. research. Rastriya Banjiya bank. Machhapuchera Bank. as it has been handed over to them to develop the industry. Page 58 . Nabil Bank. c) Export services at present are lacking and this aspect too has to be drastically improved not only on the state side but also with the private sector’s participation. training. There are no incentive schemes for the development of exports. factory and city levels. Nepal Bangladesh Bank. NIC Bank. high costs.assistance from the Government must be treated as priority. accounts clerks. import duty on necessary inputs which need to addressed by the Government and some changes introduced if the industry is to move forward. Let us assume that this company has a small staff of 8 persons including the CEO. some specific to one sector like the Agriculture Development Bank. 6. The industry must be willing to contribute their share to the common cause. expansion. whilst others such as Nepal Bank Limited. Bank of Kathmandu. Factoring opportunities are not available. they do not have the network of correspondents overseas to facilitate transaction. There are a few Banks with foreign collaboration established such as Standard Chartered Bank.3 Micro-level action plan There are various companies involved in the industry but for this study the focus will be the export-oriented company. a person knowledgeable in tea commodity and it’s export potential who is the driving force. The staff consists of his assistant who is also a “tea” person. Everest Bank. d) Export Financing: There is only one international bank. Kumari Bank. b) The environment is also not conducive to conduct business in a smooth way due to political interference and disruptions to normal work at field. and facilitate shipments to Pakistan and Poland. such as pre-shipment finance. Lakshmi Bank. Although these banks are able to handle export financing and documentation.

precautions as to the quality of goods at all levels have to be monitored by the exporter to be certain of the satisfactory execution of the export order. This can be a unit within an existing monitoring body. If they are able to raise the finances. Execution of the export order will be difficult due to obtaining finances at high costs from the existing banking system and inability to cover the export risks. associations and cooperative groups all working within the industry. may have to be sent to the laboratory in another country by courier for testing and obtain a report for residue levels etc. show the contract and ascertain as to what export finance facilities they would be given. The company has to select two or three reliable factories in both tea-growing areas. As only one foreign bank and few under collaborations are operating in Nepal. 6. Cargo vessel will then have to be arranged and the goods will have to transported by truck with the assistance of a freight forwarder via the border at Kakabhitta in Birtamore for carriage of cargo from the port of Kolkata to final destination. with the correctly structured directorate with participation from all sectors. A representative sample of the goods has to be tasted by them to see if there are any undesirable characteristics in the leaf and cup quality. should be addressed and implemented. First would be to present a common front to the highest persons in government and prove that a strong private sector driven NTCDB. with appropriate amendments to suit the current scenario. The costs cannot be quantified but the difficulties and risks are evident in the execution of export orders. what interest they will be charged and whether they can cover themselves with an insurance policy against any risks that may arise due to nonpayment by buyer. and applications are done at the post harvest period time. Due to the prevailing conditions in the industry. They could negotiate with the factory for a credit period satisfactory to both parties and take charge of the goods. the program of action that is already in place should commence to implement them with adjustments/amendments to suit the present time and needs of all stakeholders. will be able to look after the affairs of the Industry with Government support in specific areas of regulations and guidance. the banking charges that either the buyer or exporter has to incur will be high which all add up making the buyer to beat down the contract price in including all the ancillary costs. One important aspect is for all of them to come together in a common forum and decide on a common goal for the betterment of the Nepal Tea Industry instead of working at tandem to only solve or achieve their own stated objectives. which are beneficial to the industry. Set up a monitoring unit with experienced professional staff to regularly check on quality of tea available for export and domestic markets. final product and the quantity that they have contracted will have to be purchased from the factory.4 Meso-level action plan There are many statutory bodies. if required by the buyer. If this is found to be ok. should be pushed through so that proposals. Page 59 . They will have to first visit their bank. Once they are satisfied.The company is able to get export orders for black made tea of both CTC and orthodox varieties and orders have to be executed under their supervision and guarantee on quality. The national tea policy of 2000. the sample. They have to ascertain by interviews that the farmers who provide the green leaf are reliable and have the know-how to see that their use of agri-inputs are of the correct type. which they have to visit to see to the cleanliness and facilities. Once the apex body is re-organized.

etc. packing and warehousing facilities in the orthodox and CTC tea areas so that this new private commercial company can provide the necessary facilities for exporters to use. Guidance must be provided by the state towards the formation of a truly representative private sector driven NTCDB by reconstituting the board with minimal but important government position to convey the thinking and decisions to be followed by the industry. it is essential to improve the laboratory facilities of the Department of Food Technology and Quality Control to meet the needs of the agriculture sector and organize it to function as a commercially viable entity. in the ambience of a Nepal Tea Shops.Food Fairs are held in many countries. in the preparation of their export orders. comprising of small number of delegates mainly of private sector including a strong but small Government contingent to participate with support. This could be done together with the Ministry of Tourism and Nepal Airlines. It is also advised to open outlets with assistance of.5 Macro-level action plan At the macro level the Government and the Ministries that overlook the various aspects of the tea industry should provide the necessary impetus and correct any shortcomings that would be brought up at the different meetings with different sector representatives and looked at in a manner that will address the grievances of the entire industry. insurance cover for risks in trade. overseas resident Nepalese. This does not help a national image-building program. At present the CTC and orthodox sectors look at themselves as being totally different entities. The Fairs of interest to market Nepal tea should be carefully selected and private sector export companies must be encouraged and assisted to participate. through the Ministry of Finance. It is furthermore essential to select target countries. 6. Look into making amendments to the customs procedures to minimize delays at the borders and in Indian territory by negotiating changes to benefit Nepal. based on an agreed fee. Countries concerned must be visited by a selected group from Nepal. As a priority. which have the potential to absorb Nepal tea. schemes to facilitate exports with the provision of loans at favourable interest rates. Page 60 . and in agreements with. This facility will need to look at all aspects of the industry from plant material breeding to market intelligence and new product development. to market tea amongst a variety of indigenous products. with the active participation of the newly constituted NTCDB and relevant Ministries. It is recommended to establish. also can be discussed at Government level. It is furthermore recommended that the Government provide duty free entry for packing material used for export cargo and for inputs necessary for the industry to expand and develop such as machinery. etc. and try to penetrate them. commercial trucks. transport.. Trade should be facilitated by establishing two blending. Assistance should be provided and funding sought. to set up a new sector specific research facility. These visits are to be arranged by the Embassies overseas so that matters pertaining to tariffs. tools and implements.

Through the Ministry of Trade. need to be verified. Page 61 .700 Above needs to be addressed immediately as a priority.000 US$ 19. speed up the implementation of the trade protocols of the treaties entered on bilateral and multilateral basis with the various countries to make optimum use of the agreements to promote sales of tea and transit/transport facilities. buyers contacts and other information to filter down to the exporters.600 US$ 45. There are further smaller extension offices in these areas.000 US$ 13. 2) Equipping the Food Technology and Quality Control Laboratory 8 The estimation of costs is tentative and based on indications received locally. brand and image. Necessary inputs Suitable equipment used for conducting of presentations such as Portable magi boards and ancillary items Basic laboratory equipment to test soil composition and a microscope Training program for 4 technical officers in a University or Food Technology Laboratory for one month on basic tests suitable for plants and specifically to tea Conducting of monthly workshops in the specific area in both CTC and Orthodox areas on field techniques and plucking standards. Total costs initial involvement Total annual costs Initial + 3 years operational Grand Total Estimate of costs8 US$ 300 US$ 1.300 US$ 1. however. Through the Ministry Foreign Affairs.6 Prioritization of action plan – If we have a million … 1) Strengthening of the Nepal Tea and Coffee Development Board There is a regional station in Bhadrapur and 2 main stations in Jhapa and Fikkel.500 US$ 1. either appoint special trade people with some training in the sales and marketing of tea and place them in key consumer countries or provide a short term training to the existing trade counsellors in commodity marketing with emphasis on tea to enable them to give a feed back of market. Providing motorcycles. These. Their work programme in terms of training and extension work cannot be carried out satisfactorily due to lack of infrastructure and facilities. 6.000 US$ 1. one each to the regional office and 2 main stations Equipping the regional office with a printing machine (Roneo duplicating type) for printing of the monthly leaflet with relevant updated information to the farmers Arranging a 15 minute slot in the Radio station specifically designed to the tea sector covering a wide range from field to market information to be aired monthly to reach farmers and all interested parties. Make full use of the tourist potential of the country through the Ministry of Tourism to promote the Nepal Tea logo.100 US$ 26.000 US$ 2.

000 Initial investment & 2 years operational cost Assistance in setting up of such a laboratory will benefit the entire agricultural export sector including the five identified commodities for development in Nepal. Agriculture Institutions.000 US$ 875. etc. a suitable section of above can be selected to assist or work in combination with one or more other donors to have a completed facility. and items for Microbiological testing Laboratory chemicals for 2 years Local training program fore 25 science recruits Training program for 2 overseas for 3 months Staff salaries for 1 year Maintenance & services for 2 years US$ 500. Many buyers request for such bigger volumes to feed their packing machines and the shipment has to comply with the density.000 US$ 40.Enable testing according to the requirements in the importing countries common to all agricultural commodities. A laboratory building is already constructed and completion of this program by adequately equipping it should be prioritized. 1 no each GCMS. such a facility will be beneficial for research work by Universities. it is very unlikely that the established and recognized international agencies will invest in setting up laboratories. Assistance from UNIDO and FAO for technical and training guidance has been pledged. Bangladesh and other neighbours may also make use of the laboratory. Funding is sought to obtain the necessary equipment and train the required staff. Most countries do not have such equipped laboratories. It is likely that the potential users in close proximity such as India. Such a facility should be able to offer their services to the entire agri-export sector. leaf size as well as a standard cup quality to ensure that all batches thus prepared are similar every time deliveries are made. Such a well-equipped laboratory should be assisted by the international agencies to gain accreditation by world bodies. Atomic Absorption Photometer. if the ventures are not commercially viable. Financial assistance should be made available by donor/s to meet the operational costs of the facility for one year till they can get fully independent and commercially viable. on a commercially viable basis by conducting tests and issuance of reports to an estimated 100 requests per month at an average of US$ 100 per certificate and be able to generate an income of about US$ 120. Although the cost is high for one party to bear. a facility has to be provided where several invoices of varying small quantities of a similar appearance and cup quality can be mixed or blended together to give a composite bulk conforming to a standard sample that has been accepted by an overseas buyer/s as being suitable for their needs. In addition. forcing the exporters of agricultural commodities to utilize the services of private laboratories in countries where such facilities have been installed.000 US$ 15.000 US$ 100.000 per annum. This is a requirement for the country and should be done on a two-year program commencing soon. 3) Setting up a bulk blending plant for orthodox tea In order to meet the requirements of overseas buyers who are in need of quantities in excess of the normal invoices.000 US$ 150.000 US$ 70. However. Page 62 . Estimate of costs Approximate estimated cost of equipping laboratory with 2 nos GC. Graphite Furnace.

Supervisor + 2 assistant Supervisors) salaries per annum Labour on contract basis – 10 workers X 20 days X 8 months Electricity/water and services Total Estimate of costs US$ 50.One of the setbacks observed is that no two batches of the same grade seem to be similar in leaf or cup quality. allowing a shift financial recovery of the initial investment. This would cost approximately US$ 750. the blending plant is to be constructed and machinery installed so that the premises and systems introduced will conform to the internationally accepted ISO 22000 and HACCP standards. The exporter who uses this facility will have to ensure: a) b) c) d) Blend components are of good quality and uniform All packing material to be supplied Transport to and from to be undertaken by them Nominate a person of theirs or a survey company. 4) Packing plant for value addition of CTC tea This facility must be made available to both the CTC and Orthodox sectors as they both represent the Nepal Tea Industry. Page 63 .750 US$ 96.250 US$ 4. A two weeks training in a similar facility in India will be satisfactory. including grading and tasting to familiarize them with the commodity. This plant is to be set up and operated with the marketing arm of the cooperative of the tea associations.000 US$ 5. The value addition will be in excess of 200% for a kilogram of tea.500 US$ 40.800 US$ 4. Capital outlay for plant: Floor area for blending and office area for administration = 400 + 100 Sq M Conveyor Belts Roller and Belt type Blending Drum of Capacity 6 MT Vibrator and Packing Equipment Total Operational expenses for one year: Staff (Manager.000 US$ 3.000 US$ 2. This facility is to be managed by the marketing division of Nepal Tea Planters Association PLANTEA. annual income of the plant would come down to US$ 50.000. Training for staff: The staff that is put in charge of blending will have to be trained in their respective fields. Based on processing 500.800 It is estimated that the annual revenues of the plant will exceed the operational expenses by far. This would enable the value addition at origin as well as afford the opportunities to exporters to develop their own brand for international markets using the Nepal Tea logo as a quality standard. if required to be present during operations.10 US Cts/kg blending/packing charges. This project too should be undertaken soon and completed within a period of 6-8 months. Whilst the processing at the factories will have to improve to ensure invoices of the same grade are very close to each other.000 kgs at an average charge of 0.000 US$ 13.

Estimate of costs US$ 53.000 Operational expenses Basis for calculation: .480 kgs per 8 hrs shift working to process 3.6 working days to prepare 1 x 20 ft fcl .400/- Total yearly income generated: US$ 237.0030 per bag X 500: US$ 1.600 The exporter must supply: a) b) c) d) e) required standard of tea tag to be used in the sizes of rolls specified by Factory printed inner cartons master cartons undertake transport to and from factory Page 64 .004 per bag X 500 = US$ 2. .50 per kg: US$ 151.50 per kg Cost of preparation of string & tag with envelope at USCts 0.000 US$ 2.000 US$ 7.000 kgs of tea packed into 2g size of teabags packed into inner boxes and outer master cartons.425 Total Cost of filter paper and string Cost of cellophane + adhesive tape Cost of electricity and other services Staff (1 no ea manager + technician + supervisor + 5 nos packing staff) Income Basis for calculation: Cost of preparation of string & tag only bags @ USC 0.000 kgs working single shift for 12 months =100.500 US$ 75.0040 per bag X 500: US$ 2.CTC packing plant Capital outlay for plant: Building including office 400 sq m Conveyor roller and belt systems High Speed double chambered string & tag bagging machine with envelope making attachment 400 bags/minute Equipment for packing section Training of technician at manufacturer’s factory Total Estimate of costs US$ 40. .00 per kg: US$ 86. the income would amount to: 70% of per annum quantity of 144.000 US$ 100 US$ 18.500 US$ 6.800 kgs X US$ 1.000 US$ 128.325 US$ 78.Usually such packing plants work two shifts and sometimes all 3 shifts in rush times.00 per kg Based on 70% with string & tag only and 30% with string & tag with envelope overwrap.4 X 20 ft fcl’s per month and 48 fcl’s per year.200 30% quantity = 43200 kgs packed into 2g bags with string & tag with envelop over-wrap @ 0.000 US$ 4. For our basic calculation purposes one 8 hr shift day is taken.

0.000 US$ 5.In a working period of 8 months of the year 40X 20.000 US$ 223. The exporter must supply: a) b) c) d) required standard of tea tag to be used inner printed boxes and master cartons Transportation of tea to and from factory Cost of the financial outlay and operational expenses for one season must be made available to get the facility operational on a commercial basis.000 US$ 2.0050 usc per bag X 2. based on preparation of 34. Capital outlay Building premises with office – 300 sq m Conveyor system roller and belt types Pyramid bagging machine with attachments Equipment for packing section Training of technician Total Estimate of costs US$ 30. This project.560 kgs per 8 month season of pyramid tea bags preserving the flavor. a facility for value addition must be set up as an incentive for the orthodox export companies to seek orders from overseas buyer who will require value addition into teabags of a special kind.000 US$ 4.400. . Page 65 .150 Total Cost of filter paper and string Cost of cellophane and adhesive tape Cost of electricity and other services Staff of 1 ea manager + technician + supervisor + 5 nos packing staff Income.500 US$ 180.1 x 20 fcl will have 864 kgs of tea. this project needs early attention if export earnings are to be increased. packed using see-through material to display leaf.Financial support for the capital outlay and one years operation should be provided to set the facility and their operation going.000 US$ 150 US$ 14.Preparation of 1 x 20 FCL will take 05 days working one X 8 hr shift. Again.560 kgs per annum: US$ 86. Estimate of costs US$ 40.000 Operational expenses Basis for calculation: .ft fcl’s will be processed.0 g per bag = US$ 2. . although not required as early as others is a concept that should be borne in mind to service those markets which request for pre-packed valued added consignments.50 /kg Total yearly income generated: 34. The added value will be in excess of 300%.500 US$ 6. 5) Packing plant for value addition for orthodox tea Similar to the packing plant outlined in (4) above for the CTC teas.000 US$ 59. @ . preserving the big leaf size to be processed in Nepal under conditions acceptable to them in premises that comply to ISO 22000 and HACCP standards.

The NTCDB is already having the basic idea of getting it’s own website developed. new types of packaging. approved lists. different laboratories and staff for Agronomy. banned items. It already has most of the infrastructures required like one or more large buildings to house the various divisions associated with such research. 7) Establishing an information system for the tea industry. The Pakribas Agriculture Centre (PAC) under NARC (Nepal Agriculture Research Council) is already undertaking some very basic research works on tea.6) Setting up of a full-fledged sector specific research station and training school Although the targets have still not been achieved according to the tea policy of 2000. seed stock varieties. Paripatle Horticulture Farm. Financial news for all concerned with focus on exporters on insurance risk covers in the event of defaults. Packing requirements in different countries. and results of work done in this aspect. All types of information required to the farmers such as clones. This would be advisable and ideal. the program was to increase land area to 40.30 million. The information available should include: a) b) c) d) e) Field information of plant types. it is a very important aspect that has to be addressed if Nepal is to be independent” in their future developments in the industry. facilities available globally for export assistance. yields and such detailed statistical information. which areas are best suited etc. As the board is also looking at coffee. Page 66 . A scientific information base. unless the website is done for tea only.875 ha and employment in the sector to 79. which would incur a very high cost. It would be opportune to design one with inputs from stakeholders. Physiology. Whilst the establishment of an independent Tea school will cost in excess of US$ 3 million. The Government has ambitious plans for the tea industry and the need for a fully-fledged Tea Research Station and a Tea Training Centre or Tea School will be a necessity for the future. Chemistry. Details of correct processing. it will not be completely sector specific.310 persons. This would be a new venture. A Tea Training Centre or Tea School could be established at Dhankuta by utilising the premises and resources of existing infrastructures or institutions like Pakribas Agriculture Centre. their usefulness. Tea Development Centre of NTCDB and the private sector tea estates with processing facilities. residential quarters for the various grades of staff. new developments in machinery and methods. strengthening the PAC to do full research in the area of tea only will cost about US$ 0. Information regarding uses of agricultural inputs. areas under cultivation. Pathology. This is a project that will take some time to raise funding and implement as it will be prohibitive for the Governmnet alone and donor funding will be required. However. This Centre could be strengthened with additional staff and devoting full time on tea research and extension activities in collaboration with NTCDB. An area in a tea-growing district such as Dhankuta would be very appropriate for this purpose. Uttarpani Vocational Training Centre. Nursery development and Botany and other physical facilities. Extension Services.

selection of best nurseries. processing.000 50.500 US$ 2.000 once every 2 months monthly bi-annually 12 02 US$ 3. This project is a priority. nursery practices Simplified. WTO. marketing. processing. GMP.000 for different teams to work for a period of six months.500 US$ 1. on production.000 Page 67 . production. illustrated information on a few Units p/a 02 03 05 Frequency bi-annual every months 4 Est Cost US$ 3.000 Technical manual approximate 200 pages Handbooks Leaflets 30. production and processing Technical and practical information on production and processing GAP. Given below is a total system suitable for a complete information system for the industry at an estimated cost of US$ 135. Commencement of this early will benefit the industry. marketing.000 US$ 22. processing. exports. value addition.f) g) Full details of overseas buyers in various countries with addresses and contact details to enable exporters to access and get into direct contact. nursery management.500/00. USAID etc for data and statistics as well as scientific and market information. The radio presentation can also be incorporated into the information development program as they are interlinked. Incorporate the details of Nepali exporters for an annual fee on the site. technical and practical information.000/Data collection is essential to feed into the site and a project should be undertaken to spread out teams to look into above areas and collect information and data.000 National competition and award ceremony 01 annually US$ 4. processing Policies. as it will be one of the main contributors to developing and improving all aspects of the industry. logo.000 50. Programme for Information System Event/Medium Promotional/educational seminars at national level Educational workshops at district level Education workshops at commune level Training programs at field and workshops District competitions Contents Policies. currenet position Policies/technical information. CoC.000 sold at subsidized rate sold at subsidized rates distributed free by US$ 33. fields.000 US$ 4. Above are some of the subjects that should be presented on the website and designing of such a detailed one would incur a cost of around US$ 15. Illustrated information on production. and special contributions to the industry Scientific and practical information. both coming under aegis of the NTCDB. The total cost are estimated at US$ 35.500 US$ 3. Assistance can be sought from organizations such as FAO. factories and extension services Recognize winners of production. locally and internationally.

000 US$ 15. Page 68 . statistics. developments.000 US$ 12. shortages and problems facing it. The observations and recommendations outlined in this document will assist in evolving a strategy for the overall improvement and development of the industry.000 free distribution monthly distributed by hand/post free distribution monthly US$ 3. There has been unplanned expansion resulting in lower quality products not able to find suitable markets and at remunerative prices.7 Conclusion Nepal tea industry is now at a crucial juncture poised to take off to be an important industry for employment generation for the rural masses as well as a key export income earner. it is imperative that Nepal focus their attention on a program covering all aspects of the industry to meet the setbacks.000 12 US$ 1. market information Global market trends. With the demand globally increasing.000 30.000 6.000 Television Website through internet 12 accessible nationally and at districts monthly daily updates US$ 25. current market information. current affairs. Exporters A complete set of relevant data on industry.000 US$ 3.000 Bulletins Radio 1. with monthly competitions of practical value Farmer/factory outreach program. prices etc hand/post 30. new developments Farmer outreach programs.Posters/Calendars Newsletters aspects of tea industry at a time Illustrated with tea news Information on current trends. better quality and well presented commodity items.

Discussions on data obtained. Discuss shipment routes.1030 hrs June 17 -1500 hrs June 18 th . medium and large farmer and factory associations.Director – Danfey Tea Processing Company A Parajuli – Director –Parajuli Tea Industries Visiting 03 farmers and observing their field practices including plucking. pesticide levels.1400 hrs Activity Arrive Kathmandu – Meeting with Chief Officer – Bimal Nepal and Officiating Executive Director – Narayan Prasad Shrestha Meeting with Executive Director – Binoy Kumar Mishra of the Nepal Tea and Coffee Development Board together with Ishu Shrestha –acting Regional Chief /Tea Expert. Financial difficulties. Nursery development. Export orders and pricing. Blending plant. Rescheduling of the activity program due to unexpected unrest in planting areas Activities and problems relating to CTC tea farmers. Nepal Tea Planters Association B Shrestha O Sarawagi D Towdel H Patel S Rijal –Chamber of Industries Morang Visit to 2 new and one old CTC factories and a blending and packing plant. transport of green leaf Adherence to HACCP standards and ensuring the product is within the accepted parameters of MRL. fungal. Current work. Bottlenecks. MRL problems. value addition. Technical expertise from June 21 st -1030 hrs Buttabari Tea Processing Factory – K Giri – Managing Director Observe the work in progress at factory which is HACCP certified. Tasting of samples. Need for research work. machinery. State of Laboratory. availability of finances Observation of premises.1100 hrs June 20 th -1130 hrs June 20 th -1300 hrs June 20 th -1500 hrs June 21 st -0830 hrs Meeting with Jhapa Chamber of Commerce and Industries R Gimre – President and about 15 representatives from the small. factories and exporters. product quality and ethics. How green leaf inyake is controlled. the laboratory was inspected and work conducted at this border area discussed. Discussed the shortcomings in their division. processing and exports. Inspect bushes to gather information of their population. Tasted samples. limitations in conducting tests and research. and training of farmers under the Tea Commercial Development Program. Need for donor funding. Food Quarantine Office – Kakarbhitta K Dhittal – Food Research Officer Plant Quarantine Office – Kakkabhitta – S D Mainali – Plant Quarantine Officer Inspected laboratory and observed work done Tokla Tea Estate and Factory of the National Tea Development Corporation in Jhapa. Manager and Senior Factory Staff June 21 st -1200 hrs June 21 June 21 st -1300 hrs -1430 hrs st Page 69 . Usage pattern of inputs. insect. work being done on various agricultural export products. shipping difficulties at border.Chairman K M Mainali –Board B P Neupane S K Rai Nirota –Farmers rep Gyendra Gurung _ M M Dept of Food Technology and Quality Control U K Bhattari – Executive Director J P Lama – Deputy Director Tea and Coffee Department of the Ministry of Agriculture D K Saraf –CEO Surendra Rijal Dr Ramesh Munankami –National Expert of ITC Justification Introduction and background information on Nepal Tea Industry and work schedule Gather preliminary information and discuss the program of activity and the tea policy 2000 Ascertain information on the orthodox tea production.Annex I: Timetable of Meetings and Activities: The following activities were carried out between 16/06/2007 to 31/07/2007 Date and Time th June 16 -1600 hrs June 17 th . Problems of farmers. and other root diseases and controls. work in progress. delays. Working of the privately managed entity which was earlier under state ownership. pest. future programs and funding Meeting with HOTPA/HIMCOOP Representative body of the orthodox tea producers and their marketing cooperative Present: U K Chapgain. G P Pokharel. need for improvement. cleanliness. Work related to Tea. brand image June 18 th -1630 hrs June 19 . Activities.

Director 150MT capacity but under utilized Winrock/SNV project for Training of Technical people to advise Farmer groups under the Tea Services Development Sector by “Agritec” – A Dutch INGO. This company operates 3 out of 4 factories (1 non functional) 2 CTC and 1 orthodox. Markets to Germany Himalayan Shangrila Tea Producers (P) Ltd Factory Member HOTPA and HIMCOOP K R Mainali.Sales and Marketing Visited a large supermarket and interviewed the manager regarding their tea displayed on the shelf. Manufacture tea product by separating the leaf from COC and non COC farmers to control MRL levels.1400 nd -1600 hrs June 23 rd -0930 hrs Ilam Chamber of Commerce and Industry st T P Baidya –1 VP P Siwakoti –President District Tea Producers Association P Gyamar –Head of Tea Extension Project –Mangal Bare R Shah-Ilam Municipal Council B Shrestha. Discussed the overall activities covered by them. and 1 each in Terathum.Provides technical advice and distributes leaflets on usage instructions. Panchthar (2).June 21 st -1600 hrs Small Tea Growers Association -Jhapa M Kharel C Jhapa M P Regmi NTCDB –Tea Extension Program Office in Fikkel. Green leaf prices low and not related to market of a formula. Execute field programs. tasted their full range of products. Also on Bio.Work in progress.Jasbire Kanyam Tea Factory PP Dhakal – Manager N Chhetri –Dep Manager Processor of orthodox tea tasted full range of grades and invoices prepared that day and before.Fertilizer Visit to a tea field of 07 ha tended to by an experienced farmer in the area. Inspected their laboratory to conduct basic soil tests.Head of Tea Extension Office . The lack of processing capacity and need for new factories. The Indian stoppage of leaf movement across border compelling them to sell very low or destroy leaf. Have had problems on this earlier. June 23 rd -1500 hrs June 23 rd -1700 hrs June 25 June 25 th -1000 hrs -1100 hrs Nepal Tea House K J Mainali – Director. Not running at capacity. Collect information regarding the problems of the farmer community. Work on the farmer trainer program and continuation of this work once the above project is completed in December. Work with COC farmers and supervise their activities. Diseases encountered in the area and controls Nepal Small Tea Producers Factory D Rai – Chairman P Rai – Manager In the process of obtaining HACCP certification. Observed the pricing structure. marketing Setbacks and problems faced by small tea growers.Ilam Chamber D Sigu. Adopt strict control methods to ensure MRL within accepted parameters.His premises also is a green leaf collection center for a factory and observed the transaction and leaf selection. Leaflets distributed. Seminars and field advice conducted. The difficulties faced with factories . Dhankuta and Jhapa. He also operated a small factory turning out hand made tea of about 10 kgs per days sold in the local market. Very strict controls on cleanliness and leaf intake. June 22 nd 930 hrs June 22 nd -1000 hrs India . marketing and interaction with the private traders . Observed the workings and studied the extensions work being done within very limited facilities and finances. Tasted their full range of teas. Distribution of instructions and information on field practices to farmers. June 22 nd -1200 hrs Observed processing procedure. M N Lapcha of Ilam. the assistance he has obtained from the extension services. A T Tamang –Advisor Bio Development and F Sharma Visit to a Private Trader for agricultural inputs . Imported and high priced June 22 nd -1300 hrs June 22 hrs June 22 nd . Mother bushes. sales in progress. Leaf control methods adopted Regional Office of NTCDB in Bhadrapur Ishu Shrestra – Chief Regional Officer Overlook work in the regional office and substations in Ilam (3). Collection of data to feed head office. 05 demonstration plots maintained. Labor problems. Encourage the work of the “Agro Import Association’ –the only one in Nepal based in Jhapa to help farmers in obtaining good quality inputs Observed the full range of retail sales products available at this exclusive tea shop. th Page 70 . To observe how the private trade and farmer community develop a relationship in getting good quality inputs Discuss the commencement of his farm. To observe the activities and controls in a cooperative establishment. Different varieties of clones and seed stocks. Factories taking 06 months to pay. Difficulty in access to finances.

Inspected the laboratory with their full range of equipment and their plans to expand to meet the anticipated future requirements. Discussed World Bank project on Agricultural Commercialization and Trade now in the pipeline. Owner of Khanchanjanga Tea Estate which is certified for organic tea under USDP/JAS/Fair Trade Interview with WINROCK International –an INGO C B Subba – Team leader. Reasons for the formation of HIMCOOP under HOTPA. lack of government support. Financial support. Staff of 32 qualified and trained scientists and technicians who are highly skilled Meet with Sri Lanka Tea Board.Agri-business Policy Ministry of Agriculture and cooperatives S K Verma – Joint Secretary M Karki. future programs for Research and Development. The tea policy of 2000 and future development program. Tea Association of Sri Lanka and the Ceylon Chamber of Commerce Analysis of data collected. June 26 th - 0930 hrs Meeting with private exporter A AgrawalPresident-Nepal Tea Association CEO –Shakun Tea Industries Agro Enterprise center Dr D Shakya – Executive Director K R Pandey – Director. participation in trade fairs and promotional work. The need for a sector specific research Station Discussed macro level policies of the government .Global Development Alliance (TCDGA-SMIG) Working actively in the industry pushing the concept of CoC and it’s implementation to gain global recognition of a good brand image for Nepal tea.Planning Division S K Adhikary – Agriculture economist - June 26 th -1100 hrs June 26 th -1200 hrs June 26 th -1400 hrs June 26 th -1600 hrs National Cooperative Federation of Nepal Member of the International Cooperation Alliance in Geneva D P Baskota – Executive Chairman and former State Minister for Home Affiars. Discussed current work.pricing and movement of goods. To ascertain information on the types of equipment needed to operate a laboratory to meet the requirements as set down by international food quality standards. shipping difficulties Discussed the current situation. Discussed the historical development of the industry and current problems. Leave Kathmandu to Sri Lanka Visit SGS Office and Laboratory in Colombo to obtain information on the equipment available and the ability to provide the necessary reports on tests conducted for agricultural export products from Sri Lanka with particular emphasis on tea which is their main user. Work being done with international agencies Apprised them of the drawbacks facing the industry as observed during the filed visits and interviews. cost of finance. June 26 -1800 hrs th June 29 -1000 hrs th July 2 -0900 to 1200 hrs th th July 5 to 30 July nd To be updated on the Sri Lanka tea industry and current developments Report Writing Page 71 . special Nepal orthodox tea not selling fast now due to dearth of foreigners who are the main buyers. Discussed the problems in the industry. The need for all tea growing countries to reach a consensus on how to approach and develop a common program to achieve the improvement ion quality as expected in the international markets in the future.Senior Agriculture Economist – Chief of Foreign Aid Coordination Section.

Annex II: geographical distribution of tea cultivation Page 72 .

3 0.4 0.8 2.5 1.4 0.4 0.4 1 1.9 0.1 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Kg Per Capita 1.3 0.4 0.6 1.46 0.4 1.0 0.86 2.8 1.5 11.2 0.9 1.4 0.2 0.06 0.86 1.8 0.Annex III: Potential grade-wise export markets for Nepal Tea Grade preferences Country Uzbekistan Azerbaijan Kazakhstan Krygistan Turkey Russia Ukraine Belarus Moldova Latvia Estonia Lithuania Syria Iran Jordan UAE Saudi Gt Britain Kuwait Libya Iraq Yemen Egypt Pakistan Tunisia India Afghanistan Holland Europe Germany Australia N Zealand Chile Israel Kenya USA France Finland Lebanon Sri Lanka Malaysia Czech Rep Singapore China Poland Hong Kong Austria Portugal Total Consump 2000 MT 10000 22000 4200 180000 180000 20000 8000 1500 1400 600 1600 29000 100000 14800 50000 15000 128000 5000 18000 50000 10400 77000 140000 9300 757000 35000 7500 82000 21000 13500 4000 20100 3000 10600 100000 14055 1322 1800 28000 14940 2450 860 651000 31000 9740 1360 650 0.4 0.3 0.0 0.3 0.2 0.8 2.6 2.5 0.4 1.6 1.5 X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X SFTG FOP X TGF OP X GF OP X X X X X F OP GF BOP G BOP F BOP G OF CTC Dust CTC BOP CTC BP 1 CTC PF1 Page 73 .5 0.2 0.0 1.5 0.7 0.2 0.25 1.1 1.9 0.2 0.

Netherlands and Hong Kong include re-exports Note 2: Refer to page19 under leaf grade nomenclature for descriptive details of grades.2 X X X X X X X X X X X X X X X Note 1:¨ Quantities shown against UAE.Belgium Canada Japan 2150 18000 150000 0.2 0.5 1. Page 74 .

Jodia Bazaar. 80540 Tel/Fax: 0225-921422. Aisha Noor Mohd Bldg. Hamburg AschauerStr 18. Karachi MR 6/40. Mohd Feroze Street.pk Tel. Karachi Sharif Manzil. Karachi. Virje Street. Jodia Bazaar. 2430874 Fax: 2415747 Tel: 2442235. Karachi MR 6/26.80787915 Tel: 089-21350.4945644 EM: bpl@cyber. Adamjee Road. Mr Zahid Samad Peracha Abdul Samad & Sons Mr Ali Akber Mr Ali Mohomed Peracha Germany Mr Kolthoff J Bunting GmBH & Co MR 5/136.net.2417319 Tel: 2418653.net.Annex IV: List of contacts in main two potential markets Address Pakistan Bantuwalla (P) Ltd-.244262. AA Rahman Street. Thanai Lane.2442262 2426656 2411010. 7/12.2414939 Tel: 2417230. Moers Rudolf Diesel-Ring 21 82054. MR 1/34. Karachi 22. M Feroze Street. 5820909. Karachi MR 6/19.5874757 Tel: 21411956. Jodia Bazaar.pk Tel: 2441979. Karachi MR 5/136. Saya Bldg Mohd ferz Str Jodia bazaar. 5th Gizri Street. Jodia Bazaar. 80331. A Jabbar Traders Mr Quayyum Peracha A Quayyum & Sons Mr Iqbal Kakhu. Leer Brandstocken 16 22549. Munchen Zurn Schurmannsgraben 24 47411.pk Tel: 2432411/2 Fax: 2419501 EM: hashem@cyber. 53340.2436552 7/12. Munchen Heidstr 26. Faiz Mohd Khan & Co Mr Saleem Pervaiz.pk Tel: 2442025/2442077 Fax: 2410971 EM: ababil@cyber. Selani Chambers M Feroze Street. Jodia Bazaar Karachi 74000 Flat ½.Thani Lane. Karachi Thanai lane. Abdul Mannan Peracha & Co Mr A Rehman Peracha.921420 Mr H O Grelk Castle Tea Co GmBH Mr R Krapf *** Alois Dallmeyer KG Mr D Reinecke Douwe Egberts Agio M Schmidt *** J Eilles & Co Mr A Gschwendner. Fax: 2426656. Abdul Rehman Peracha & Co Mr Idrees Janoo Idrees Corporation Mr Abdul Basit Razak. Mr Haji Abdul Razak International Tea Traders Mr H Saeed Khawaja Mr Rafiq Kudia Abdul Sattar Shakoor Kudia Mr faiz Mohomed Khan. Fax: 2135167 Tel/Fax: 02841-18030 180359 Tel/Fax: 081 048050. F 11. Karachi Tel/Fax Nos Tel:244223.2414876 Tel: 2417996.net. 26789. Jodia Bazaar. Jodia Bazaar. D H A. Sauerlach b. A B Corporation Mr Ghaffar Usman. Meckheim Tel: 2413952 Tel: 2411083.2436301 Teehandelhaus Tel/fax: 0491-80-80 808-109 Tel/Fax: 040-8078790. Virjee Street. Haribhai Paragjee Bldg Jodia Bazaar. Abdul Rehman Peracha & Co. Dada Mansion. Karachi Shop no 09.net. Abbas Tea Traders Mr A Mannan Peracha. Karachi Brunnenstr. *** Der Tee Laarden Gebr Geschwendner Page 75 . Karachi 3rd Floor. Aisha Noor Mohd Bldg. Jodia Bazaar.net. 37. Noorani Center.2413442 EM: map@cyber. A G Usman & Co Mr Abdul Jabbar. Jodia Bazaar. Virji Street.pk Tel: 2412453 Tel 2417996 Tel: 2442655. Ist Floor. Karachi 1st Floor.2417546 EM: assons@digicon. Gizri Avenue. Jodia Bazaar.

**** Nur Nature StillenMooseeuracher Mr H Michelssen Ostifriesische Teegesselshaft Laurens Spethmann Mr C Moll Quieta-Werke GmBH Mr H Scheibler J Fr Scheibler & Co Pickhuben 9. Hamburg Tel/Fax: 040-361430. Hamburg Langstrasse 68. 20354. 13-15.171270 Tel/Fax: 08179-5368. *** Haus des Ostens Fr Niebuhr Mr Michelssen WB Michelssen & Co Mr F J Grenzebach.36143245 Tel/Fax: 040-343680. Seevetal Holtzbachstr 2 86012.Konigsdorf Arn Bauhof.504499 Tel/Fax: 0821-501030. 28195.362886 *** = speciality tea dealers **** =speciality and organic tea dealers Page 76 . Ausburg Trotskbrucke 4 20457. 20457.Hamburg Neuer Wall 10.5010320 Tel/Fax: 040-365447.8211 Tel/Fax: 04105-5040.346833 Tel/Fax: 0421-171500. Bremen 82549. 21218.Mr D Scheffler Haelson & Lyon GmBH Mr R Roth.

Annex V: Flow chart Page 77 .

Contaminant Smoke Page 78 . low liquor. wash thoroughly with clean water Smoke Regular checks for leaks on Drying furnace Avoid stacking of coal & firewood close to furnace Controls Ensure temp gauges are in good order Sand Use clean unbroken tiled Grading floor Iron filings Packing machines are in good order Use headgear to cover head Contaminants Use clean.Annex VI: Guidelines for good leaf standards and processing Leaf Quality Poor Leaf Coarse leaf Bad leaf Result Uneven wither Low dhool outturn Dull infusion. poor leaf appearance Stage Withering Prevention Load leaf without switching on fan Full height chimney discharging smoke above roof eaves Sand Withered leaf sifter Microbial Prevent birds/insects from entering chamber Iron filings Stainless steel breaker Rollers chutes Microbial Daily cleaning of rollers Prevent dhools from falling to ground Chemical/oil contaminants Steam cleaning machinery Wash & dry floor Gearbox maintenance Avoid processing soon after repairs Microbial Prevent dhools from falling to Fermentation floor Sand Clean & dry surface thoroughly Use tables/racks Avoid spreading on floor Chemical taints If chemicals used. unbroken tiled Packing floor and headgear Workers to be trained to pick out any extraneous matter from the made tea Source: Extracted from benchmark study conducted by Sri Lanka tea Board.

7 Proteins/Peptides 7.6 Other carbohydrates 4.8 Theaflavins 4.8 3.1 7.8 Lipids 3.1 6.9 3.9 Minerals Potassium 5.9 Flavanoids 1.8 2.8 0.01 5.1 3.8 Organic Acid 2.6 2.5 4.5 4.9 Methyl Xanthins Caffeine 3.9 5.8 7.9 Trace Green Tea Percentage Leaf and liquor properties of tea used as basis for valuation by tea tasters / buyers Black Orthodox Leaf Tea CTC Tea Leaf properties Percentage Percentage Dry leaf appearance 33% 9% Dry leaf grade 19% 13% Dry leaf colour 24% 8% Total leaf 76% 30% Infusion particle size 1% 3% Infusion colour 9% 5% Liquor colour 9% 12% Liquor strength 5% 24% Liquor brightness 8% Liquor briskness 10% Liquor flavour 8% Total liquor 24% 70% Source: Extracts form tea evaluation manuals and brokers/buyers Page 79 .8 Sodium .6 Other polyphenols incl thearubigins 26.1 Carbohydrates Sugars 7.8 Other methyl xanthins 0.7 Other amino acids 3.8 Simple polyphenols 3.8 .01 Other minerals 5.8 3.8 2.4 Amino Acids Theanine 3.Annex VII: Composition of a typical tea beverage Black Tea Chemicals Total Polyphenols 40% Catechins 9.9 Volotile aroma compounds trace Source: Sri Lanka Tea Research Institute Percentage 30.

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