Tea exports plunge by a third in the first half of the fiscal year

Traders blame the fall on Indian policy discouraging the Nepali product in response to lobbying by Indian tea producers.
Nepal's tea exports plunged by a third in the first half of the fiscal year which traders blamed on Indian policy discouraging the Nepali product in response to lobbying by Indian tea producers.

The Trade and Export Promotion Centre said shipments in the first six months of the fiscal year (mid-July 2021 to mid-January 2022) amounted to 6,590 tonnes worth Rs1.85 billion, down 33.28 percent from the 8,780 tonnes worth 2.77 billion exported during the same period of the last fiscal year.

Nepal exported 11,920 tonnes of tea valued at Rs3.79 billion in the whole of the last fiscal year.

According to Indian media reports, last November the Tea Board of India threatened tea importers to cancel their import licences if it was found that they were importing cheap teas into the country. The board has also laid down certain rules and restrictions which importers must follow.

India is a major buyer of Nepali teas which are blended with Indian Darjeeling tea as the two are very similar in terms of quality, a government report said.

Indian tea producers say Darjeeling's tea industry has been hurt by the entry of cheaper Nepali teas. Orthodox tea, imported from Nepal and commonly known as Himalayan tea, is similar to the Darjeeling variety in taste, aroma and flavour.

However, Nepal tea is more than 50 percent cheaper than the tea from the hills of northern Bengal. Industry officials allege that buyers, primarily operating in the loose leaf market, have been procuring this tea.

Reports say it is difficult to ban Nepali tea because India has a free trade agreement with Nepal.

Deepak Khanal, director at the National Tea and Coffee Development Board, said that "unauthentic rumours" about the quality of Nepali tea were spreading in India, which could be one of the reasons behind the decline in exports.

“Knowingly and unknowingly, Nepali tea is being stopped at different border points under different pretexts,” Khanal told the Post.

"India has adopted a policy to discourage buyers from importing Nepali tea," he said. Around 20 cargo trucks carrying tea were recently stopped at Kakarbhitta on Nepal's eastern border with India, according to Khanal.

“The Indian government has asked for double verification of the quality of Nepali tea or to conduct a double lab test,” Khanal said. “We are surprised by the change in policy overnight. This left 6,000 tonnes of ready-to-export tea stranded in Jhapa a month ago,” Khanal said.

"When we asked for the reason, the Indian side said they had adopted a verification policy for Nepali tea," Khanal said. "The Indian side has also halted the export of Nepali tea to third countries via India," he said. “Domestic traders and producers are obviously discouraged.”

Nepal’s tea exports had swelled despite the Covid-19 pandemic in 2020-21.

Nepali tea reaped a bonanza following a drop in output in the key growing countries—India and Sri Lanka—and increased demand in the global market in mid-2021.

Shiva Kumar Gupta, secretary-general at the Nepal Tea Planters Association, said that the Indian Tea Board had curbed imports from Nepal citing quality and hygiene issues recently. The restriction was lifted three weeks ago following talks between the Nepal government and the consul general for India in Kolkata.

“India has new rules and its tea buyers seem to be less interested in Nepali tea. It appears the Indian side is making policies to encourage domestic production and discourage imports,” Gupta said.

According to Gupta, the price of crush, tear, curl (CTC) tea has dropped sharply this year.

"CTC tea was being exported at around Rs250 per kg last year, the price has now dropped to Rs150 per kg," he said.

"Prices had increased last year due to panic buying on shortage fears due to the uncertainty of the coronavirus pandemic," he added.

Nepali teas, both orthodox and CTC, had good value when the pandemic started. Export costs have gone up sharply after the Covid-19 pandemic.

“Traders are saying that transportation charges have surged by around 40 percent after the pandemic,” Khanal said. "After transportation charges rose, traders became disinclined to export tea as there is little benefit for them.”

According to Khanal, tea production has also been declining because the acreage has not expanded, productivity has not increased as expected, the tea plants in the tea gardens that have been operating for many years are getting older, and there is less replacement of old plants with new ones.

"Small farmers have little confidence that growing tea will provide a good return," he said.

Nepal produces more than 25,000 tonnes of tea annually. Of the total production, CTC tea makes up 19,000 tonnes, as per the Tea and Coffee Development Board.

Commercial tea production is being expanded to Lalitpur, Lamjung, Nuwakot, Kaski, Bhojpur, Sankhuwasabha, Kabhre, Ramechhap, Dolakha and other districts, the Ministry of Agriculture and Livestock Development said.

As per Khanal, 60 percent of the total output of CTC tea is consumed domestically and 40 percent is exported. Similarly, 90 percent of orthodox tea is exported and 10 percent is consumed domestically.

Of the total exports of Nepali tea, both CTC and orthodox, 80 percent goes to India; and the remaining 20 percent, consisting only of orthodox tea, is exported to third countries.

Nepal exports most of its tea to India, Germany, Russia, Japan and the Czech Republic.

“We have been writing to the related government body regarding the frequent halts in the export of Nepali tea by the Indian side. The government needs to think seriously about s long term policy on tea trade,” Gupta said.

Nepal's orthodox tea got its own trademark on September 22, 2020, which is 157 years after the country started growing it. The trademark is expected to help Nepal brand and market its tea, which has been facing an identity crisis for over a century in the international market.