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India on Tuesday lifted an 11-month-old ban on blending Darjeeling tea with other teas, raising the spirits of the Nepali tea industry which greatly depends on exports to the southern neighbour.
Nepal's Rs5-billion tea sector was badly hit as shipments plunged after India issued the restriction last November in a bid to protect its domestic industry.
Indian tea producers can now mix Nepali tea with their product, but they are not permitted to use the name “Darjeeling” on the mixture.
This Geographical Indication label is a symbol given to items associated with a specific place or origin, and it cannot be put on tea not cultivated in their gardens or manufactured by the standards outlined in the code of practice, according to reports.
The Tea Board of India said it would take stern action if any Indian seller was found using the Geographical Indication label for mixed teas, the Indian newspaper The Telegraph said.
Bishnu Prasad Bhattarai, executive director of Nepal’s National Tea and Coffee Development Board, said they had not received any official notice about the move to unban foreign teas.
“We had made efforts to resolve the problem after India moved to restrict Nepali products last year,” he said.
The Indian directive to restrict foreign teas proved to be counterproductive as domestic buyers such as Tata Consumers Products Ltd largely remained absent in auctions to procure Darjeeling tea which is blended in their popular Tata Gold pack, according to media reports.
An estimate suggests that Tata buys about 1 million kgs, accounting for about 15 percent of Darjeeling’s annual production.
Nepali manufacturers and traders were greatly worried following reports about India’s potential move to stop Nepali tea. India is the largest buyer of the product.
On August 9, frantic tea producers met with Prime Minister Sher Bahadur Deuba to apprise him of the possible consequences of such an action.
“I have seen the Indian media reports. It’s a welcome decision for Nepali tea traders,” said Mahesh Aryal, treasurer of the Suryodaya Tea Producers Association in Ilam. “We are relieved. The move may ease exports of our products to India now.”
India’s parliamentary Standing Committee on Commerce in June recommended that the Indian government apply stringent norms for certification of tea that is exported from Nepal to India, in addition to duties.
According to reports, the committee also pointed out that the entry of low-quality products from the neighbouring countries was jeopardising the Indian tea industry, and asked that anti-dumping duty ranging from 40-100 percent be imposed.
The panel has also asked that the Indo-Nepal Treaty of 1950 be reviewed.
Following the development last July, the Tea and Coffee Board in Nepal had written to the Ministry of Industry, Commerce and Supplies about the Indian parliamentary committee's decision.
Indian media reports said that Nepali tea, which resembles Darjeeling tea because of similarities in terrain, had been making steady inroads as they were cheaper than the Darjeeling product.
“The latest decision is positive; but in the long run, Nepali authorities need to make efforts to export Nepali tea to third countries by establishing its distinct identity,” said Aryal.
“If the market expands to multiple countries, any country will think twice before taking any stringent action on trade.”
The Nepali private sector has been actively involved in producing organic tea and branding it, but Nepali tea has remained unknown in many parts of the world, tea producers say.
Nepal exports around 90 percent of its orthodox tea and 50 percent of its crush, tear and curl (CTC) tea to India.
Nepal produces around 7,168 tonnes of orthodox tea annually in the hills. It also produces 15,654 tonnes of CTC tea, known for its strong and bright appearance, in the lowlands of the Tarai.
According to the Agriculture Ministry's statistics, Nepal shipped 12,494 tonnes of tea worth Rs3.43 billion in the last fiscal year ended July 16.
Tea producers say that Nepalis consume nearly Rs2 billion worth of tea annually.
Dilli Ram Shrestha, chairman of Shree Laxmi Tea and Mechi Valley Tea of Ilam, one of the largest exporters of orthodox tea, said they hadn't expected that the decision would come in Nepali exporters’ favour.
“It’s a sudden decision and hard to believe,” he said. “That’s a great respite for Nepali producers and exporters.”
Shree Laxmi Tea and Mechi Valley Tea produce a combined 550 tonnes of orthodox tea in a season.
The Indian government's move has also ended the controversy which has been going on for several years.
Years ago, the Darjeeling Tea Association had requested the then Indian president Pranab Mukherjee to stop the import of Nepali tea by submitting a memorandum when he visited Darjeeling.
There have been several attempts in Darjeeling to stop the import of Nepali tea.
Indian producers have been alleging that Nepal’s tea is substandard and that the prices too are lower which is hurting India's tea production. Nepali tea consignments have been stopped time and again by the Indian side under different pretexts.
Nepali tea, according to traders, is in big demand globally apart from India, but measures like Sanitary and Phytosanitary (SPS) are a barrier to Nepali exports.
Importing countries have been expressing concern over pesticide residue in the tea traded from India and Nepal, according to a South Asia Watch on Trade, Economics and Environment report.
"European countries have set a slew of quality standards, but Nepal does not have an appropriate lab to check its products," Aryal told the Post in a recent interview. “There is a huge market for Nepali tea globally, but the government should help producers to make Nepali tea acceptable globally.”
Nepal grows two types of tea: Camellia assamica or CTC tea which grows at lower altitudes and in the hot and humid plains of Nepal, primarily in Jhapa district. This tea accounts for almost 95 percent of domestic consumption owing to its lower cost of production.
Camellia sinensis or orthodox tea is grown at altitudes of 900 to 2,100 metres. Four districts in the eastern hills are known for producing quality orthodox tea—Ilam, Panchthar, Dhankuta and Tehrathum.
Orthodox refers to a traditional production process where the plucked tea leaf is partially dried (withered), rolled and then fermented to give a light colour, unique aroma and fruity flavour. It usually fetches a higher price than CTC tea in view of its quality, demand in the market and higher cost of production.
Nepal has a long history of growing tea. The first tea estate, Ilam Tea Estate, was launched in 1863 in the hills of Ilam district.