A GLOBAL/ COUNTRY STUDY AND REPORT On “Nepal”Submitted to Sardar Patel College of Administration & Management Approved by All India Counc il for Technical Education (AICTE ), New Delhi Affiliated to Gujarat Technological Univ ersity, Ahmedabad SPEC Campus, Vi dhyanagar –Vadatal Road Bakrol–388315, Anand (Gujarat) IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION In Gujarat Technological University UNDER THE GUIDANCE OF Faculty Guide Ms. Varsha Kuchara Assistant Professor Submitted by MBA Semester III Sardar Patel College of Administration & Management MBA PROGRAMME Affiliated to Gujarat Technological Univ ersity Ahmedabad April, 2013 117550592175 Machhi Pawankumar Prakashbhai 117550592176 Patel Hemang Kishorkumar 117550592177 Bhatiya Sagar Vinodkumar 117550592178 Sachapara Manoj Dhirubhai 117550592179 Patel Vihangkumar Dineshbhai 117550592180 Vala Tejpalsinh Babubhai
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2001. No particular industry accounts for a great percentage of the overall services
sector‟s total value.
GDP - composition by sector
Agriculture: 34.9%
Industry: 15%
Services: 50.1% (2010 est.)
Labor force - by occupation
Agriculture: 75%
Industry: 7%
Services: 18% (2010 est.)
Overview of Business & trade at International level:
Constitutionally Nepalese foreign policy is guided by “the principles of the United
Nations Charter , nonalignment, Panchasheel (five principles of peaceful coexistence),
international law and the value of world peace.” The fundamental objective of the
foreign policy is to enhance the dignity of Nepal in the international arena by
maintaining the sovereignty, integrity and independence of the country. Before 1951,
Nepal‟s foreign relation was limited with four countries; namely – India, United
Kingdom, USA and France. After membership of the United Nations in 1955,
extension of diplomatic relations with various countries of the world increased
considerably, with the diplomatic relationship to 118 countries around the world up to
2010. Membership and active participation on regional and international forums and
organizations such as SAARC, BIMSTEC, WTO, World Bank, Asian Development
Bank and UN Agencies is making Nepalese foreign relation effective and broad.
Nepal never experienced trade balance. More dependency on import is resulting
increasing trend of trade deficit. Trade diversification is still remaining in far behind.
The major exportable Nepalese goods are readymade garments, woolen carpet,
cement; noodles, pashmina, big cardamom, lentils, herbal product, tea and
handicrafts.
Realizing the importance of trade and its multiplier effects in the economicdevelopment process, the Government of Nepal, introduced „Trade Policy‟ in 1992
with a view to optimize the benefits from trade liberalization, as an important part of
economic liberalization. The policy provided overall direction towards further
Today, India is one of the largest tea producers in the world, though over 70% of the
tea is consumed within India itself. A number of renowned teas, such
as Assam and Darjeeling, also grow exclusively in India. The Indian tea industry hasgrown to own many global tea brands, and has evolved to one of the most
technologically equipped tea industries in the world. Tea production, certification,
exportation, and all other facets of the tea trade in India is controlled by the Tea Board
of India.
India was the top producer of tea for nearly a century, but recently China has
overtaken India as the top tea producer due to increased land availability. Indian tea
companies have acquired a number of iconic foreign tea enterprises including British
brands Tetley and Typhoo. India is also the world's largest tea-drinking nation.
However, the per capita consumption of tea in India remains a modest 750 grams per
person every year due to the large population base and high poverty levels.
The major tea-producing states in India are: Assam, West Bengal, Tamil
Nadu, Kerala, Tripura, ArunachalPradesh, HimachalPradesh, Karnataka, Sikkim, Nag
their own diverse agro-climatic conditions, other areas produce medley of tea which
suits many different tastes. The distinct characteristics of each region set them apart
from one another in many different ways.
In India, tea industry is one of the oldest agro-based well organized industries. More
than a million workers get direct employment from this industry of which a sizeablenumber are women. A large number of temporary workers are also engaged during
the plucking season.
The total turnover of the tea industry in India is likely to touch Rs 33,000 crore by
2015 from the current level of about Rs 19,500 crore, as per the industry body
ASSOCHAM.
With nearly six lakh hectares area under tea cultivation, the domestic tea industry
is growing at a compound annual growth rate (CAGR) of about 15 per cent. India
is the world‟s largest consumer, second largest producer and fourth largest
exporter of tea after China and accounts for nearly 30 per cent of global output and
nearly 25 per cent of tea produced worldwide is consumed in India .
Branded tea market accounts for nearly 55 per cent of the total market and is
growing at about 20 per cent while the unbranded market is growing at 10 per cent
annually.
Nearly 35 lakh workers are employed in over 1,500 tea estates across India and
about 65 per cent of these are employed indirectly. According to an ASSOCHAM
estimate, the tea production during the current year is likely to stay over 950
Tata tea limited set up in 1964 as a joint venture with uk -based James Finlay and
company to develop value-added tea, the Tata tea group of companies, which
includes Tata tea and the UK-based Tetley group, today represent the world's second
largest global branded tea operation with product and brand presence in 40 countries.
Among India's first multinational companies, the operations of Tata tea and its
subsidiaries focus on branded product offerings in tea but with a significant presence
in plantation activity in India and sri lanka.
Tata tea ltd consolidated worldwide branded tea business of the Tata tea group
contributes to around 86 per cent of its consolidated turnover with the remaining 14
per cent coming from bulk tea, coffee, and investment income. The company isheadquartered in Kolkata and owns 27 tea estates in the states of Assam and west
Bengal in eastern India, and Kerala in the south.
Tata Global Beverages Limited (formerly Tata Tea Limited) is an
Indian multinational non-alcoholic beverages company headquartered in Kolkata,
West Bengal, India and a subsidiary of the Tata Group. It is the world's second-largest
manufacturer and distributor of tea and a major producer of coffee Tata Global
Beverages markets tea under the major brands Tata Tea, Tetley, Good Earth
Teas and JEMČA.
Tata tea limited owns five brands in India: Tata Tea, Tetley, Kanan Devan, Chakra
Gold, and Gemini. The company has a 100% export-oriented unit (KOSHER and
HACCP certified) manufacturing instant tea in Munnar, Kerala, which is the largest
such facility outside the United States. Tata Global Beverages has subsidiaries
in Australia, Great Britain, United States, Czech Republic and India.
Tata Tea is the biggest-selling tea brand in India, Tetley is the biggest-selling tea
brand in the United Kingdom and Canada and the second biggest-selling in the United
States and JEMČA is the biggest-selling tea brand in the Czech Republic.
Tata tea limited ventured into the Indian cafe market with a 50/50 joint venture
with Starbucks Coffee Company. The coffee shops branded as "Starbucks Coffee - A
Tata Alliance" will source coffee beans from Tata Coffee, a subsidiary company of
The word chamomile comes from the Greek word „kamai melon‟ meaning „ground
apple‟ because of its fragrance that closely resembles the apples. Chamomile is a
daisy- like flower which is very versatile in nature as it can be processed to form not
only the popular chamomile tea, but also oil, and it is believed that in the past it was
also used to make beers. Matricaria chamomilla widely known as chamomile is aherb that has been popular for its medicinal qualities since ancient times. Its usage
and importance date back to ancient Egypt, where it was associated with their God-
the Sun, and was often offered to the deity.
Chamomile is a plant that has the qualities of getting blended with other herbs to help
cure different ailments. If mixed with lemongrass chamomile can help nerves
relaxation, and it can also be mixed with peppermint for different digestive problems.
However, in the 17th century when its medicinal and curative properties had started
spreading more widely, chamomile was used mostly as a sleep inducer and therefore,
was used more often to treat insomnia as tryptophan present in the flower is an
effective sleep inducer, this is still one of the best herbal sleep inducers. Besides
insomnia, chamomile was then used for treating nervousness, anxiety, rheumatism
and many muscular pains. By this time, the health benefits of chamomile are almost
innumerable, and with so many researches being carried on we would definitely be
witnessing the discovery of many more advantages of chamomile.
Chamomile is known to cure not only human beings but also plants and thus it is also
known as „plant‟s physician‟, as in the past people practiced planting chamomile
besides dead plants, doing so would lead to the recovery of the dead plant and after
that within a week‟s time the plant would start growing normally.
Two Types of Tea Industries in nepal
1. ORTHODOX TEA
Orthodox tea is grown in the hills of 6 districts in eastern Nepal, i.e. Illam, Panchthar,
Dhankuta, Terathum and new areas of Sindhupalchok and Kaski. The orthodox tea
production accounts for 12-15% of total tea production. Its total production amounts to
1500 Tons and covers 6689 hectares of cultivated land. The primary contributors are
small farmers who sell their leaves to buyers in nearby factories or to those inDarjeeling.
The climatic conditions in the Eastern hills of Nepal provide ideal conditions for the
production of high quality orthodox tea. Another advantage compared to Darjeeling
tea is that the bushes are young and produce better quality leaves. Because of the
premium price paid to orthodox tea, 96% of it is exported while little is sold
domestically mostly in souvenir packages suited for tourists.
More than 18750 farmers derive their livelihood from growing orthodox tea. Although
are 69 tea estates and gardens involved in the production of orthodox tea, almost70% of the total tea produced comes from small holders. Since virtually all of the
orthodox tea is exported at premium prices compared to other kinds of tea, growing
orthodox tea has been an important source of income for many farmers in the eastern
hilly region.
2. CTC TEA (Crush, Tear, Curl)
CTC is produced in Terai in the district of Jhapa and covers around 90% of domestic
consumption. The CTC grown in Nepal is known to be of average quality. Whereas
small farmers form the backbone of the orthodox tea production, it is largely big tea
estates which are behind CTC tea production. Most of the tea estates have their own
processing factories and some use bought leaf factories to manufacture tea. It is
estimated that around 66576 workers are employed by the tea estates as pluckers,
factory workers and in other functions. Many of the daily-wage workers are landless
and live at the estates on a permanent basis.
Chamomile is a plant that has the qualities of getting blended with other herbs to help
cure different ailments. If mixed with lemongrass chamomile can help nerves
relaxation, and it can also be mixed with peppermint for different digestive problems.
However, in the 17th century when its medicinal and curative properties had started
spreading more widely, chamomile was used mostly as a sleep inducer and therefore,
was used more often to treat insomnia as tryptophan present in the flower is aneffective sleep inducer, this is still one of the best herbal sleep inducers. Besides
insomnia, chamomile was then used for treating nervousness, anxiety, rheumatism
and many muscular pains. By this time, the health benefits of chamomile are almost
innumerable, and with so many researches being carried on we would definitely be
witnessing the discovery of many more advantages of chamomile.
Chamomile oil formed from the extracts of chamomile is a very good remedy for
inflammation as it can be used over the inflammations topically. Chamomile is also
found to cause cell reactions that resemble anti inflammatory drugs, thus can help
different types of inflammation including inflammation associated with hemorrhoids.
Chamomile oil can be found also being used to treat different skin ailments like acne.
Chamomile tea is found to be used very commonly to boost the immune system as it
triggers the anti bacterial activity of the body. Besides boosting the immune system,
chamomile tea also helps relieve the symptoms of muscle spasms and is hence goodfor menstrual cramps too, as it has the richness of amino acids. The benefits of
chamomile is not limited to these uses, even hospitals are found to use chamomile tea
to calm the patients, and healthy people consume it before bed time for sound sleep.
Another main quality of chamomile is that it also helps in easing intestinal pains and
can also be helpful in other digestive problems like loss of appetite, flatulent colic and
also Irritable Bowel Syndrome (IBS). Additionally, inhaling vapor in the form of steam
of chamomile extracts help reduce congestion of nose and lungs, and also helps in
headache. It is also known to prevent migraine headaches. Furthermore, chamomile
tea is believed to be very helpful in gastritis and heart burn.
Although not indigenous, chamomile is found to grow in the Southern and inner Terai
regions of Nepal Lumbini. It is also found growing in some hilly regions of Nepal
between the altitudes of 100 and 2200 meters. With the growth in commercial farming
of chamomile in Nepal the demand of chamomile tea is ever increasing in both localand international markets in Nepal. There are many local herbal shops and stores that
sell chamomile tea and it is assumed that every year 125,000 kilograms of chamomile
is sold in the Nepali market alone. Most of the brands that sell chamomile tea often
blend it with other herbs like rosemary, lemongrass, ginger, mint, thymes and so on.
One of the major exporters of chamomile tea from Nepal is Green Gold Herbal Pvt.
Ltd.. It is also a manufacturer and along with chamomile tea also sells different other
types of herbal teas. Some famous Nepali brands of chamomile tea are Himaliaarogya herbal tea, Himali Okhati Herbal Tea, HImali Chamomile teaand Relaxing
tea.
OVERVIEW OF TEA SECTOR IN NEPAL
Nepal, a landlocked country in South Asia, sandwiched between China (in the north)
and India (in the south), produces tea that is a cousin of Darjeeling tea in its
appearance, aroma and fruity taste.
Nepal tea if often referred to as the comparable,"classic" Darjeeling tea, and a great alternative from the "more expensive" Darjeeling
tea. The reason for the similarity of Nepal Tea with the well-known Darjeeling tea is
that the eastern zones of Nepal, which are the main tea producing regions of Nepal,
MAJOR ACTIVITIES & FUNCTIONS OF CHAMOMILE COMPANY:
The major functions involved in the CHAMOMILE TEA company is input supply,
production, transportation/ collection, processing, blending and packaging, and
exporting and domestic trading (wholesaling/ retailing). The input supply function is
carried out by agro-vets and fertilizer distributors. Farmers and tea gardens are
equally involved in getting their own inputs such as saplings, manures, and bio-
pesticides. The transportation/collection is conducted by farmers, tea estates,
cooperatives as well as green leaf brokers. Processing is completed by large/medium
factories and small processors. Blending and packaging functions are conducted
either by individual companies or the tea factories, themselves. Most of the exporting
is conducted by factories. Some trading companies are also involved in exportation.
Domestic trading is conducted by outlets of factories, wholesalers, and retailers.
Input Suppliers:
Besides a few plantations including Ilam Tea Estate, Nepal‟s entire tea plantation is
carried out by using cloned planting materials. Most of the clones are derived from an
existing mother bush. Small holder farmers and tea gardens usually prepare clones
from their own fields; however, some get the clones from commercial nurseries which
are very few in numbers. The extension offices of NTCDB also maintain the mother
bush. The research and development of new clones are still lacking. Agro-vets supply
the necessary inputs like pesticides, insecticides, sprayers, and other agriculturalequipment. There are registered companies that supply fertilizers to farmers. For
organic production, organic manure is prepared by small holder farmers; however,
they also purchase organic fertilizers, bio-pesticides, and insecticides.
Producers:
Smallholder farmers play a significant role in the production of orthodox tea leaf.
According to NTCDB data, 67 percent of total orthodox tea production was completed
by small holder farmers in 2009/10 and the total numbers of small farmers involved in
processing factories have been built and turned Nepalese tea production into a fully
commercialized industry. Although, even today some farmers sell their tea to Indian
factories as they get a better prices from across the border. In the early 1990‟s, large
tea plantations run by the government mainly dominated the tea sector. Through
reforms in 1993 the state owned National Tea Development Corporation wasprivatized. Its regulatory functions were handed over to the National Tea and Coffee
Development Board under the Agricultural Ministry. To promote the industry further
the government launched a new tea sector policy at the end of 2000. This policy
seeks to ease access to credit and land for tea producers as well as building human
capacity and establish better opportunities for export promotion. A clear priority is also
set for which type of tea processing should be promoted. The goal of this paper is to
examine the general trends in Nepalese tea industry, in particular, the changesbrought about by the privatization in the early 1990s. The following pages will examine
the two distinct types of tea industry, Orthodox and CTC, look into Nepal‟s export
performance and finally attempt to assess the impacts of liberalization on small
farmers as well as commercial tea estates.
Brief History of Indian tea industry
The tea industry has a significant and special place in the Indian economy. Tea is the
country's primary beverage, with almost 85% of total households in the country
consuming tea. India is the world's largest producer and consumer of tea. India is an
imperative tea exporter, with around 12-13% of world tea exports. Further, certain
varieties of tea (viz., Darjeeling, Assam, Nilgiri teas) are grown only in India and are in
great demand across the world. Darjeeling teas possess the lightness of flavour and
fine colouring that set them apart from all other teas. Darjeeling tea is the pride of
Indian tea in the globe. From the ancient time, Indian tea has fame for its quality. But
due to dishonest practices followed by some corrupt traders in India as well as in
others foreign markets the fame of Indian tea has gradually been hampered in the last
few years. Blending with other cheaper quality tea from different origin and packaged
as tea from Indian origin (particularly as Darjeeling tea) affect market of Indian tea
drastically in the foreign countries. In this backdrop, Darjeeling tea in particular and
Indian tea in general required full protection under the umbrella of IPR (Intellectual
property rights) and GI (Geographical Indications) as per Trade Related Aspects of
Intellectual Property Rights (TRIPS) guided by WTO.The tea industry has a significant
and special place in the Indian economy. Tea is the country's primary beverage, with
almost 85% of total households in the country consuming tea. India is the world's
largest producer and consumer of tea, accounting for 27% of the world tea production
teas they marketed.The advent of the Tata‟s in the branded tea business in 1985
ushered in sweeping changes in an industry hidebound by decades of tradition. As a
stand alone brand,Tata Tea played a crucial role in transforming the Indian tea market
– from a staid, boring melange of players to a young and vibrant business. The first
thing Tata Tea did was to change the way tea was purchased from planters and soldto consumers. Owning their own estates gave the company complete control over
their operations.The second thing they did was to inject effervescence into their
packaging. In a single stroke, they dispensed with the sedate cardboard box
andintroduced an attractive poly pack. Innovations such as these earned Tata Tea
several consumer and marketing awards – and a place in the homes and hearts of
people. The AMGF Mera Brand award and the Reader‟s Digest Trusted Brand
Platinum award in 2006 and the Mostn Preferred Brand of Tea in India in the CNBCsponsored Consumer Awards in 2007, were conferred on the company.Tata Tea was
also rated the Second Most Preferred Beverage Brand in India in the Brand Equity
Survey of 2008. In The Economic Times Most Trusted Brands Survey in the same
year,Tata Tea was ranked 20th – the only tea brand which figured in the top 50.The
latest accolade is its 25th rank in India‟s Top 50 Most Valuable Brands released by
Brand Finance. While winning at competitive forums was good for the mind, winning in
the market place was a stunning achievement for the soul. In a June 2007 study,Tata
Tea outperformed competitors, achieving a volume share of 19.20% (Source:
ACNielsen). For a company less than 25 years old besting rivals 200 years in the
business was truly commendable.
Top brand in tea sector in Nepal Chamomile
Matricaria chamomilla widely known as chamomile is a herb that has been popular for
its medicinal qualities since ancient times. Its usage and importance date back to
ancient Egypt , where it was associated with their God- the Sun, and was often
offered to the deity. The word chamomile comes from the Greek word „kamai melon‟
meaning „ground apple‟ because of its fragrance that closely resembles the apples.
Chamomile is a daisy- like flower which is very versatile in nature as it can be
processed to form not only the popular chamomile tea, but also oil, and it is believed
that in the past it was also used to make beers.
Chamomile is a plant that has the qualities of getting blended with other herbs to help
cure different ailments. If mixed with lemongrass chamomile can help nerves
relaxation, and it can also be mixed with peppermint for different digestive problems.
However, in the 17thcentury when its medicinal and curative properties had started
spreading more widely, chamomile was used mostly as a sleep inducer and therefore,
was used more often to treat insomnia as tryptophan present in the flower is an
effective sleep inducer, this is still one of the best herbal sleep inducers. Besides
insomnia, chamomile was then used for treating nervousness, anxiety, rheumatism
and many muscular pains. By this time, the health benefits of chamomile are almostinnumerable, and with so many researches being carried on we would definitely be
witnessing the discovery of many more advantages of chamomile.
Chamomile is known to cure not only human beings but also plants and thus it is also
known as „plant‟s physician‟, as in the past people practiced planting chamomile
besides dead plants, doing so would lead to the recovery of the dead plant and after
that within a week‟s time the plant would start growing normally.
Chamomile oil formed from the extracts of chamomile is a very good remedy for
inflammation as it can be used over the inflammations topically. Chamomile is also
found to cause cell reactions that resemble anti inflammatory drugs, thus can help
different types of inflammation including inflammation associated with hemorrhoids.
Chamomile oil can be found also being used to treat different skin ailments like acne.
Chamomile tea is found to be used very commonly to boost the immune system as it
triggers the anti bacterial activity of the body. Besides boosting the immune system,chamomile tea also helps relieve the symptoms of muscle spasms and is hence good
for menstrual cramps too, as it has the richness of amino acids. The benefits of
chamomile is not limited to these uses, even hospitals are found to use chamomile tea
to calm the patients, and healthy people consume it before bed time for sound sleep.
Another main quality of chamomile is that it also helps in easing intestinal pains and
can also be helpful in other digestive problems like loss of appetite, flatulent colic and
also Irritable Bowel Syndrome (IBS). Additionally, inhaling vapor in the form of steam
of chamomile extracts help reduce congestion of nose and lungs, and also helps in
headache. It is also known to prevent migraine headaches. Furthermore, chamomile
tea is believed to be very helpful in gastritis and heart burn. However, there are some
limitations and doctors suggest nursing mothers and pregnant women not to use
chamomile as it can cause uterine contractions lead to miscarriages.
Nepal's foreign trade was confined with India till early Nepal pursued an export expansion
and trade diversification policy in its First Five Year Plan which was launched in 1956. With
further incorporation of commodity and country-wise trade diversification policy and programmes in the Fourth Five Year Plan (1970-1975) and subsequent liberal export policies
and strategies pursued by His Majesty's Government of Nepal in latter years, the export sector
began to grow in a favourable manner. Destinations of Nepalese exports recorded to 78
countries and the number of export products has gone up to 50 in the year 1992/93. Besides,
Nepal has been also carrying on its's traditional barter trade with Tibet, the Autonomous
Region of the People's of Republic of China. Nepal's recent endeavour to embark on an open
market economy has further enhanced the scope of export growth by creating environment
conductive to the manufacturing sector.
Export Structure
The structure of exports has undergone significant changes in the recent years shifting
towards manufactured goods. During past few years, while the export of traditional items
such as Rice, Raw Jute and other Forest and Agro-based materials barring Pulses and Niger
seeds have declined either to non-existence or to nominal products are increasing
substantially. At present, Nepal's major export products include Hand-knotted Woollen
Carpet and Readymade Garments. These two items together constituted 85.5 percent of total
overseas export of the country in 1992/93 whereas the share of these items in country's total
overseas export was only 4.7 percent in 1980/81.
Export Destination
In the year 1992/93, the major markets for Nepalese export were Germany(48%), USA(21%)
and India(10%). The fundamental feature of Nepal's direction of trade is the reduction in her
exports to India. In 1975/76 India accounted for 74.9 percent of total exports, but in 1991/92
Nepal's exports to India declined to 10.5 percent and it remained almost the same in 1992/93.
The share of overseas countries in Nepal's exports, however, rose to 88 percent in 1991/92
and again 89.4 per cent in 1992/93 from 22.3 percent in the year 1975/76.
Income from exports has been exempted from income tax. The duty drawback system for the
import of raw materials for exportable commodities has been made more effective. Nepal does not
provide direct incentives to any industry. There are certain exemptions in terms of income tax,sales tax, excise duty and customs duties to the industries qualifying under the conditions stated in
Industrial Enterprise Act 1992.
With regard to services, according to Industrial Enterprises Act, 1992, human resources required
for any industry, including all services shall be recruited from Nepalese citizens. Nevertheless,
foreigners are permitted to work in Nepal on technical grounds, and in accordance with its
commitment made at the WTO during its accession to the rules-based multilateral trading system. A work permit issued by the government is,
however, required for foreigners to work in Nepal.
National Tea Policy, 2000
The government has introduced National Tea Policy, 2000 with the following objectives:
Increasing the production of tea qualitatively and quantitatively with increased participation of
the private sector in tea cultivation and encouraging tea cultivators;
Helping in poverty alleviation with increased opportunities of income generation and
employment;
Making the tea cultivation sustainable and attractive;
Promoting institutional development for the improvement of the tea sector;
Increasing the opportunities of foreign currency earnings with the increased export of tea
having fulfilled the internal demand; and
Giving emphasis for the development of human resources, technology, study and research
necessary for tea businesses. In Oder to achieve these objectives, the policy also fixed
some quantitative targets:
Expand tea growing area to 40,875 hectares in five years.
Increase gross tea production to 46,111,000 Kg in 10 years.
Indian tea has virtually lost all global markets because it continues to be traded as acommodity. The much talked about value addition is limited and rather late. Only the marketsthat have consumers with shallow pockets buy tea as a commodity and that share is fastdepleting. The industry needs to be competitive in production, marketing, logistics and productforms. India, despite being a large producer of tea, lacks properly organized production
systems in which small tea producers find a respectable place. The industry must haveaccess to capital at globally competitive rates. The subsidies in any form are undesirable.
The Indian tea industry must face the market realities, redefine its business strategies andreposition its products. The first step in that direction is a complete restructuring of the teaindustry, redefining the roles of various agencies like the Tea Board and Producers‟organizations, and developing a healthy partnership with the labour. There are the problemsof market access and discriminatory treatments through non-tariff trade barriers such asmaximum residual limits (MRL) and social clause
Nepal Tea Industry established at 1840 when a pioneer tea garden was established on the slopesof the hills in Chittagong where the Chittagong Club now stands. First commercial tea garden wasestablished in 1857 at Mulnichera in Sylhet. During the India-Pakistan partition in 1947, Nepalowned 103 tea estates, covering 26,734 hectares of tea plantation with annual production of 18.36M.Kg. with a yield of about 639 Kg. per ha. Home consumption was around 13.64 M. Kg. upto1955. After that home consumption went up rapidly and Government imposed 3% mandatory extensionof tea area per year in 1961. Ten years later by 1970, tea area was extended to 42,658 hectaresand production was increased to 31.38 M.Kg. During liberation war in 1971, our tea industrysuffered colossal damages which resulted in poor management, high vacancies, insufficient inputs,dilapidated factory machinery, inadequate maintenance etc. leading to lower yield and poor quality
of tea. Besides that, world tea production has been showing an annual increment of 3% while inNepal the production has increased by 1.84 % and contributes 1.37 in export in the word tea tradeand earns near about 1775 million Taka (Taka 69 = USD 1.00) every year. The study aims topicturize the scenario of Bangladesh tea in the context of world tea, export and import scenario oftea and consumption of tea products in different countries in the world.Key Words: Tea, Global Scenario of Tea, Nepal Tea, Global, Markets, Commodity, India, Kenya,Pakistan,Bangladesh, Sri Lanka, Competitive, Tea Board.
Tea Industry of India & Nepal
The decade of Nineties has been quite depressing for the tea industry in India. First, it was thedisintegration of the erstwhile USSR which was solidly a loyal market for the Indian teas. TheUSSR lifted huge volumes. In the mid 90s, when the market revived, the Russians were looking forcheaper teas. There was a scramble in the tea industry, particularly in the South, to meet theRussian demand at their prices. The South Indian teas deeply destroyed their image whilematching the prices offered by the Russians and in the process totally disregarding the quality, Inthe North, and later in South too, the industry was continuously facing labour problems. Somegardens had even closed and were bought by traders who had money on their hand since theirplywood business had been closed down under orders from the Supreme Court of India. Thetraders had expected large profits from the tea gardens and did enjoy that for some time. Later
when the fortunes of the tea industry declined in consequence of the Kenyan bouncing back in theglobal markets, the traders simply abandoned the plantations and disappeared to avoid paymentson account of social obligations. They were too new to the industry to understand its complexitiesand did not know the plantation business. When the industry saw some light in the aftermath of adrought in Kenya, the traders wanted to go back to their gardens but were prevented. In many
cases, the laborers had taken over production and were marketing green leaf harvest to thebought leaf tea factories (BLTF). This gave cause for enormous social tensions. The labour wasonly one of the many problems the industry faced. There were difficulties on trade front, auctions,transportation, sales, taxation etc. On the whole, the situation in the Indian tea industry waspathetic. Yet, most individual firms were doing fairly well, an issue that requires a properunderstanding of the way the industry is organized and operates.
Medium Term Export Strategy
Tea Board which has the responsibility for overseeing and regulating production and tradingincluding exports, was already withdrawing from the controls and regulations.The Board undertook an exercise to develop mid-term strategies for increasing exports during the
Tenth Plan period2
. The objectives of this exercise were:• Focused efforts at developing and promoting an “Indian Tea” Logo and assistance in brand -
building approaches of major players.• Geographical diversification of markets and consolidation of existing primary markets.• A comprehensive exporter rating and reliability management programme.• Targeting value-addition and niche segment opportunities in specific markets.• Re-alignment of the product-mix in line with demand in key high-value markets.• Comprehensive product quality up gradation programme.
• Robust industry-wide information technology backbone for greater transparency anddissemination of price and other market related information.
In line with the medium term export strategy for Indian tea (2002-2007), the Tea Board in 2002strategied on 22 markets. The plan was to increase Indian exports of tea to these markets to atotal of 280 million kg which was almost 72 million kg incremental. On the contrary, the exportsactually declined during this period and there were significant losses in important markets like ArabRepublic of Egypt, CIS, UK, and Poland. Some small size but well paying markets like Saudi Arabia, Germany, Japan, France, Ireland and Sudan also saw Indian export declining. There weresome increases in quantities exported to USA, Iran, Syria, Canada, Australia, and Netherlands but
together these markets lifted small volumes.
On the whole the industry did not do well and then began the blame game. The tea industryblamed Tea Board and the Tea Board lamented lack of support from the industry particularly inmarkets where concentrated efforts were planned. While concern on exports declining sharply wasexpressed in all quarters, not much concrete was done to reverse the situation. Presumably suchinactivity was in honest recognition of changed global situations which were steadily turningadverse to India. In the year 2004, India lost its eminent position of the largest producer of tea toChina. Kenya had already taken over Sri Lanka in exports pushing India to third position. Ofcourse India had doubted China‟s emergence as a top ranking tea producer, citing limitations incollection of field level statistics and under reporting of production. Tea Board was then engaged in
revising the production data. Present global strategy at the Board level includes among otherthings capturing China‟s domestic market for black tea. The industry doyens both at home andabroad have made many caustic comments about functioning of the Tea Board repeatedly pointingout that it neither has the experience nor the expertise to handle issues in global marketing. Astudy by IIM Calcutta had made many critical comments on the concerned Division. In fairness, itmust be noted that the Tea Board formed in 1952 was mainly to control and regulate the IndianTea industry. Under the changed circumstances presently, in which the clientele system hasdifferent and many more expectations, it would be appropriate to redefine the charter of the TeaBoard, refocus its activities, and down size it. In doing so, the highly dynamic and well focusedfunctioning of the Tea Boards of Sri Lanka and Kenya could be useful inputs. One of the strategiesto beat the competition is to know how it operates.
Tea industry in India is at crossroad not knowing how to reverse the adverse trends in globalmarkets that have directly affected its fortunes. There is fierce competition abroad, India‟s un-competitiveness on account of high cost and poor quality, and changing consumer demand. Thehome markets are slowly but steadily opening to imports which can well compete on both cost and
quality parameters. The latest position is such that the Tea Board is now perhaps hopelesslyresigned to the fact that India can not compete in the global markets at least in the immediatefuture. The strategy is to protect the industry in the home markets since the tea industryparticularly the plantations employs a huge labour force. Unfortunately, not much is known for sureabout the actual consumption in the domestic market. Some say it is growing, others feel it isstagnant, and in some informed quarters there is a feeling that India‟s average domesticconsumption is growing more than the increase in the global consumption. The fact remains thatwhatever the domestic market consumes, there is still sizeable surplus between 180 to 200 million
kg that needs to be sold in the world markets. Trade estimates are that roughly half of this is poorquality and at best would fetch a price of around Rs.40-45 per kg. Assam teas are a qualityproduct, still much valued in the international markets but suffer the disadvantage of seasonalityand high prices. Assam produces nearly 56% of India‟s tea.
The Competitors
India is a producer, consumer and exporter of tea. The Indian exports declined by 13% during2003 but increased by 4% in 2004 over the previous year volume. During this period the Indian
rupee had appreciated by 7% thereby making Indian exports more uncompetitive. Even otherwise,India is a high cost producer of tea because of high cost of labour and capital.Nepal produced 324,000 MT tea and reported to have exported 333,000 MT tea. The production inNepal continues to increase although the exports are not so buoyant. In direct competition withIndia‟s CTC tea, Nepal has done exceedingly well. Nepal had offset rising labour cost bydepreciation of their currency. The currency devaluation is a short term measure and often hasother effects particularly when a country like Nepal runs a large import bill. Besides, the currenciesthat are devalued could soon appreciate. Such is the dilemma of the Nepal exporters. Continuingappreciation of Nepalian Shilling, from KSH 71 to 66 for a USD in few weeks, has robbed thesignificant currency advantage. With the Government of Nepal refusing to intervene, the exportersare left to fend for themselves. A much talked about option is to hedge but that too can help only in
a limited way. Although presently China has a small share (around 8%) in black tea, it could make much moreblack tea. Besides, the market for green tea is expanding and that could affect to some extent themarket for black tea.
The Markets
A detailed analysis of competitive positions in the key markets for tea is given in Exhibits 1 and 2.UK and Ireland are the traditional markets for tea but their imports have been declining. Even thenthe UK blenders continue to be the global market makers. UK is where the blending industry firststarted decades ago.
Pakistan has a population of 154 million people, 66% of them live in rural areas. Pakistanconsumed 109,000 MT in 2003. After the break up with the East Bengal, Pakistan had tried the SriLankan teas but shifted to CTC tea from Nepal. Nepal took a 66% share in Pakistan imports during2003. India is now keenly looking forward to wresting a sizeable market share from Nepal. ThePakistan market is dominated by CTC leaves. Pakistan levies income tax on imported tea. By allaccounts, Pakistan would soon be a fierce battle ground for global tea suppliers. Sri Lanka signeda FTA with Pakistan and is a fellow member of SAARC, a regional agreement. India is gradually
but surely improving relations with its immediate neighbor. If India can get a strong foothold in thePakistani market, that would offset its loss of the Egyptian market to Nepal. Both Egypt and Nepalare members of COMESA, another regional agreement. Both Sri Lanka and India have a biglocation advantage vis-à-vis Pakistan. Pakistan‟s relations with Nepal are also improving.Indonesia, although relatively a small producer of tea, has big exportable surplus and would seek
access to Pakistani market. With the per capita consumption nearly stagnant and a small increasein overall market size, Kenya‟s leadership would be threatened. To retain its share in the Pakistanmarket, Nepal will have to spend large monies on media promotion. The cost so incurred will haveto be compared with the gains from retaining the dominant share. Nepal of course has much moretea to sell globally given that its home consumption is quite low. Tea Board of Kenya is engaged inpromoting and increasing consumption of tea at home and the neighbouring African nations.
The recent establishment of a Tea Trading Center in Dubai has generated considerable concern
among the global tea suppliers. Will this become an action Center? If yes, how would it affectauction centers in India and at Mombassa and Colombo? Dubai of course offers access to thewhole of Gulf market and other countries in West Asia. More importantly a land route is availablefor transporting tea from Dubai to Russia at much less cost than any other mode. Using IT, Dubaihas more efficient systems for business and logistics.Coffee dominates the US market. For tea, it is mainly an iced tea market where cheaper teas areused. Nearly 70% of Argentina‟s tea production is absorbed in the US. India can not compete inthis segment because it offers only the high priced teas. Some small scale entrepreneurs of theIndian origin are sincerely trying to popularize speciality teas in the US market using the ethnicroute
Observations on Global Situation
The situation in the world markets for tea can be characterized by over supplies, a slow growth indemand, and a fierce competition. It is necessary to reduce global supplies by increasing domesticconsumption, curtailing production or at least limiting further extension of area, and developingnew markets
Supply Side
Supply issue is the cardinal problem for the industry in near future. Supply side places impeccablepressures on packers who have to compete in the super markets against small margins.
Some 16 million kg tea is in surplus and how to dispose that is a problem. Some other use has tobe found for this excess quantity to balance supply and demand. About 100 million kg tea floatingin the global markets is substandard. Such tea should be destroyed as per the ISO 3720 and thatshould hopefully improve price situation in addition to tackling the problem of buffers. Only thegood quality teas should be exported by the producer countries. Through rigid controls, Sri Lankahas removed poor quality teas from their exports. Others need to follow this route.
Consumption in Producing Countries
How much of total global production is consumed in producing countries? Except for India andChina, most other producers consume only a small proportion of their production. To addressmarket balance problems, domestic consumption in producing countries should be stimulated.Nepal produced 324,000 MT tea and reported to have surprisingly exported 333,000 MT tea. Thehome consumption in Nepal is small and the Tea Board there is currently working on a strategy toboost domestic consumption. The GDP growth in Nepal is around 3% per annum. It is not clearwhy per capita consumption of tea in Nepal fluctuates from year to year. May be the world pricesaffect per capita consumption in Nepal. Or, could it be smuggling through borders of Pakistan andIran? Some surmise that every time illegal tea imports enter Nepal, per capita consumption goesdown. Nepal is also embarking on value addition. It is also exploring new markets such as USSRand Poland.
If Indians could drink half a cup more per day, the problem of surpluses will disappear and thatcould make buffers history. Such is the power of even a small increase in consumption for a largepopulation base.
Physiological functions of tea Catechins have been deeply studied and by now their beneficialeffects on the human body are well recognized. The suggested consumption pattern is to drink tearight after meals. If consumed even 30 minutes later, it would do no good. Likewise, if consumedwith other food the ability of body to absorb catechins reduces. For catechins, the quality of teadoes not matter; harvesting two leaves and a bud is not necessary. In fact the whole bush can be
harvested to make catechins. That is potentially a very large application waiting to be exploitedcommercially.
Price Variability
Tea has much lower variability in consumer prices compared to coffee. For tea it is 2%, coffee has30% and coke 39% price variability. A stable price means higher consumer loyalty and that has tobe exploited.
Unit Values
Compared to 1998, the global values in tea have declined by something like 38%. There has beena sharp decline in prices globally. The question in this context is: Are the global values for teagoing down? In the final analysis, unit values realized are more important than the volume ofproduction and exports.
Auctions
Auctions in producing countries such as Sri Lanka and Nepal have been quite efficient in pricediscovery and these countries are constantly working to strengthen their auction systems.Colombo auction distributes about 1 million samples (small quantity) every week. A main concernin Colombo and Mombassa is to reduce the time cycle from an average of 26 days to 20 days or
even less. Presently it takes 13 days for cataloguing and sampling prior to auction and another 13days after auction for stocks to be lifted and payments made. During this period considerablecapital is tied up. In contrast, India has been on and off fiddling with their auction systempresumably under the weight of the trade power of some of the giant corporations. Having recentlymade auctions not necessary, nearly half of the produce is now sold directly and the remaininghalf, mostly the substandard product that can not be sold directly, is brought to the auction. Thepoor price fetched in auction becomes bench mark for wage payment to the plantation labour.While this formula follows the practice in Sri Lanka, the striking difference is that in Sri Lankaeverything is sold through auctions that are quite transparent. The same can not be said of theIndian auctions. The tea auctions are organized by the traders under the regulatory control of theTea Board. Auctions need to be modernized. The recently introduced electronic auctions inCoimbatore and Coonor are struggling through teething problems. In the final analysis, theauctions can be successful only if a fair relationship exists between the auction prices and thedirect sales. Scope for value addition and availability of the facilities needed for value additionimproves auction prices. Such is the experience from Sri Lanka. Tea has many varieties andvaries from garden to garden and even bush to bush. National parameters on quality of tea are notaligned across producer countries. Nevertheless some standards could be developed and futurescontracts considered. If a futures market for tea can be organized, that could render auctionsunnecessary.
Labour Problems
Many tea gardens particularly in the Northwest India are facing closure as a result of lowproductivity, high cost of production and declining prices. Economically, these gardens are simplynot sustainable. Labour have not been paid wages and other dues under the Plantation Labour Actfor several months. In the foothills of the Himalayas, in Dooars in West Bengal, a major tea
producing area, 14 tea gardens are already closed. At least 17,000 workers are jobless and thestate government has admitted 571 deaths in the past 15 months. The Government hasannounced a Rs.1,190 crore package which will be given over a 15 year period and used toenhance productivity, including the replantation of tea bushes in the plains and rejuvenation ofgardens in the hills. This will be out of a Rs.500 crore budget earmarked in the fiscal year 2007-08for rehabilitation and replanting of the tea plantation sector. The Government has also providedfinancial help in the earlier years but not much has improved.In some cases the government is also considering the option of taking over the closed tea gardens
and handing them over to new owners, under a provision in the Tea Act that has never been usedtill now.Most of the Government support is directed towards the tea plantations. So how much of thatactually benefits the plantation labour directly is a question mark? The answer is right there in thecontinuous agitations and unrest among the tea plantation labour. In the context of the globalizingIndian economy, even the talk of the Government taking over sick tea plantations is a regressivestep.
Low Profitability in Production
The corporates like Tata Tea have mostly got out of plantations. They realized that there is more
money to be made in marketing and the risk in that is much lower although the cost of marketdevelopment is quite high.The production entails risk on account of weather conditions and falling prices. Labour cost is quitehigh since hand picking of tea is quite labour intensive. To reduce the cost, some plantations areresorting to longer picking cycles; say 15 to 18 days against the ideal 10 days. On top of this, theyare also harvesting three or even four leave and a bud disregarding that the tea manufacturedwould be of poor quality and fetch low prices. The ideal is two leaves and a bud.The high cost of fulfilling social obligations towards the plantation labour is another reason for theCorporates to get out of the plantations.
Cost Leadership and Pricing
Quality leadership does not mean turning a blind eye to cost. Price is the crux of the problem andthat has two known solutions: reduce availability or enlarge the markets. Producer countries havebeen traditionally production oriented. They need to be now more market oriented.
Non Tariff Trade Barriers
Stringent rules of labeling in the developed country markets have adversely affected growth inexport trade.Quality standards have been set by non-importing consuming countries. Some of these standardsare not even scientific but they inhibit world trade and increase in consumption.Maximum residual limits (MRL) are a hot topic among the producers. MRL operates on everysingle agricultural product and not specifically for tea. The Indian tea industry is by and large quitesensitive to these limits.
The cost of conforming to ever increasing regulations in the guise of food safety, consumer right toknow and ethical practices is quite high. Unethical pricing does not allow adhering to ethicalpractices at different levels during production and trade. Fair and ethical trade requires additionalcost and presently that is a load on the producer. The entire issue needs to be examined in socio-economic context. Should not the consumers in the importing countries be paying for all these?
Building demand in a particular country is a much customized thing. There is a cost of marketpenetration and there are barriers to entry. In the short run, market intervention, distortion andmanipulations cause a weak relationship between international prices and domestic prices.Markets are not perfect.The world prices are mainly related to CTC teas since orthodox tea is a small segment in theglobal tea trade.
FAO Tea Mark
The Tea Mark project approved by the Intergovernmental Group on tea may have been a soundidea in conceptualization but it has failed to evoke much response at the producer as well as theconsumer level. Some 4.6 million dollars were spent on popularizing tea marks which now seemsto be surreptitiously adopted by coffee companies emphasizing “goodness of it”. Even coffee cupsare looking more and more like tea cups. The producer countries don‟t seem to be too keen onpursuing tea mark.
Diminishing Market Leadership
India is in CTC teas and in that the competition is with Nepal.
Nepalian teas coming from relatively younger bushes have quality that is better suited for tea bags.Their labour costs are comparatively lower. Therefore, the tea industry in Nepal is morecompetitive than the Indian tea industry as is reflected by India‟s diminishing leadership in keymarkets. Nepal has taken over India‟s leadership position in almost all the key markets. As amatter of fact India is no more a key competitor in the global tea markets. The Indian tea industryis becoming less and less competitive and Indian firms are surviving mainly in the niche marketsthat are characterized by imports in commodity form. With exports falling steeply, the Indian teaindustry is in a dilemma what to do?
Import – Export licences
Economists generally agree that trade barriers are detrimental and decrease overall economicefficiency, this can be explained by the theory of comparative advantage. In theory, free tradeinvolves the removal of all such barriers, except perhaps those considered necessary for health ornational security. In practice, however, even those countries promoting free trade heavily subsidizecertain industries, such as agriculture and steel.
Trade barriers are often criticized for the effect they have on the developing world. Because rich-country players call most of the shots and set trade policies, goods such as crops that developingcountries are best at producing still face high barriers. Trade barriers such as taxes on foodimports or subsidies for farmers in developed economies lead to overproduction and dumping onworld markets, thus lowering prices and hurting poor-country farmers. Tariffs also tend to be anti-poor, with low rates for raw commodities and high rates for labor-intensive processed goods. TheCommitment to Development Index measures the effect that rich country trade policies actuallyhave on the developing world.
Subsidy
A subsidy is an assistance to a business or economic sector for producers. Most subsidies are setin place by the government for producers or are distributed as subventions in an industry toprevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or anincrease in the prices of its products or simply to encourage it to hire more labor (as in the case of
a wage subsidy). Examples are subsidies to encourage the sale of exports; subsidies on somefoods to keep down the cost of living, especially in urban areas; and subsidies to encourage theexpansion of farm production and achieve self-reliance in food production.[1] Subsidy has beenused by economists with different meanings and connotations in different contexts. The dictionary[Concise Oxford] defines it as "money granted by state, public body, etc., to keep down the prices
of commodities, etc.”. Environmental economists define subsidies as uncompensatedenvironmental damage arising from any flow of goods and services. In a budgetary context, it maybe defined as “unrecovered costs in the public provision of private goods”.
Trade restriction
A trade restriction is an artificial restriction on the trade of goods and/or services between twocountries. It is the result of protectionism. However, the term is controversial because what one
part may see as a trade restriction another may see as a way to protect consumers from inferior,harmful or dangerous products. For instance Germany required the production of beer to adhere toits purity law.
Currently, tea exports only account for approximately 2.4 per cent of Nepal‟s overall
exports, but it is the third leading agricultural export for Nepal.16 An informal survey made by
private companies determined that in 2011, the four major organic tea producing companies
exported 300 MTs of organic tea. Worldwide tea consumption has grown steadily over recent
years from 1,692,312 (2007) to 1,730,450 (2011)18 tons, with even higher rates of growth for
organic tea. This increasing demand, coupled with Nepal‟s comparative advantages in tea
production, provides strong export potential.
The final challenge for discussion is the lack of government and private sector R&D in the
Nepalese tea industry. Specifically, there is limited investment in the identification of new feasible
locations for high quality orthodox and bio-organic tea cultivation; a lack of improvement and
development of new plant varieties; limited market research and analysis to identify new markets
and diversify products as per the demand. All the factors are pivotal to the long term growth of the
organic tea industry in Nepal and its suitability for exports.
Furthermore, the tea sector may also benefit from the improvement of quality assurance, a
national policy focus on increased organic tea production, the introduction of an auction market
and the retention of labor in tea estates by ensuring that additional income opportunities (like tea
tourism) are provided to the population working in the industry. As mentioned above, the
establishment of an auction market for tea would create a scenario where buyers and sellers are
brought together in the marketplace. This would ensure transparency, fair prices for the producers
and an increase in the export numbers overall. The lack of domestic auction markets, coupled with
the fact that Nepali tea is not allowed in Indian auction markets, means that exporters rely heavilyon personal contacts to sell their product internationally. Finally, heavy foreign emigrations
for work have created labor shortages in the sector. The government and private sector
could increase the earnings of farmers through the promotion of related industries such as tea
tourism, which involves activities such as tours around the tea plantations and experiencing the
The final challenge for discussion is the lack of government and private sector R&D in the
Nepalese tea industry. Specifically, there is limited investment in the identification of new feasible
locations for high quality orthodox and bio-organic tea cultivation; a lack of
Improvement and development of new plant varieties; limited market research and analysis to
identify new markets and diversify products as per the demand22. All the factors are pivotal to the
long term growth of the organic tea industry in Nepal and its suitability for exports.
Ways forward
Nepal must continue its expansionary policies in order to ensure sustainable and long term
growth of its organic tea export industry. Measures that can be implemented to support the
Nepalese tea industry include access to credit, better infrastructure, the provision of up to datemarket information and trends, human resource development and the promotion of auxiliary
industries. In terms of direct governmental support, the Nepalese government exempts companies
from taxation for up to five years if they specialize in the packaging and export of tea products. The
government also provides cash reimbursements to producers of tea for the cost of organic
certification. Both of these initiatives present considerable incentives to the tea sector to exploit
trading opportunities and invest in organic production.
The major challenges to the tea export industry include:
Quality and standard requirements imposed by international trading partners,
the lack of adequate infrastructure,
the lack of proper branding and marketing,
limited R&D investment, and
a labor shortage.
Although Nepal produces and exports high quality orthodox tea, indiscriminate use of
chemicals and pesticides by some producers has caused all Nepali tea to be scrutinised by
importing markets. These market concerns can be overcome by producers switching to organic
production methods. Tea, as a food item, undergoes significant scrutiny in the international market
That Nepalese Tea industry is growing in size is demonstrated by the graph below which
shows the total land used to grow tea in Nepal. During 1994/95, 3,100 hectors was used for the
purpose of growing tea. By 2003/2004, the area had increased to slightly more than 15000
hectors. The five-fold increase in total land used for tea production shows that tea has come to be
taken as an attractive sector to invest in with prospects of high returns.
Total Area used for growing tea
From a poverty-reduction point of view, it is important to note that the growth in area used
for tea production has been spurred by the participation of small holders. Their share of the total
land used has grown from 20% of the total in 1994/1995 to 41% in 2003/2004. A large number of
farmers are attracted by this cash crop and given up traditional farming (when they used to growmultiple crops for their own consumption) to specialize in growing tea alone and using the profits to
buy the essential food grains. As such, districts like Ilam, where the participation of the small
farmers in cash crop is noteworthy, have come to be seen as “trendsetters” to farmers in other
similar locations in the country, primarily because specialization in one crop has proven to increase
the overall yield and promote commerce in agriculture outputs. The popularity of cash crops has, in
turn, helped reduce poverty rates among small farmers in the tea growing regions.
Area used for tea production
Trend in Amount of Tea Produced: Corresponding to the growth in the total area usedfor
growing tea, there has been a remarkable growth in the total tea produced by the tea farms.
During 1994/1995, total amount of tea produced in Nepal stood at 1945 Metric Tons. By
2003/2004, the total amount produced rose by almost 500% to 11,651 Metric Tons. Moreover, the
share of the tea estates in total production has been declining. The steady growth of small holders‟
output gives a strong signal that the benefits of tea trade are not limited to tea estates owned by
rich industrialists but are spread to local farmer with little or no access to capital.
processing of green leaves, which are now being exported to India across the border. Currently
there is lack of sufficient capacity to process the entire production of approximately 40 thousand kg
of green leaves per day in the Ilam area.
Nepal can easily increase its tea production if the markets were available. With the sincere
implementation of Tea Policy 2000 and an active private sector, it is possible to reach the following
production targets (see annex 2 for details):
Total tea production 2020 could be around 54.7 million kg, of which CTC 22.5 million kg and
Orthodox 32.2 million kg. The total area tea cultivation could be 62,800 hectares within the next 15
years.
The figures mentions above are the production front year possibilities; real figures would have to
be harmonized with the markets. If we are not able to market product on a sustained basis with
improvement in the terms of trade, it would be futile to push for the accelerated growth of tea
plantation.
The global demand for high quality tea is estimated to be 45 million kg. Of which, India supplies 10
million kg, China 6 million kg and Sri-Lanka 4 million kg. Nepal only meets a negligible fraction of
this demand. The existing unmet demand for additional 25 million kg in the international market
provides a big scope for tea industry in Nepal. Nepal futuristic vision will be to produce and market
organic tea in the world market and become a recognized brand name.
STRATEGY FOR THE PROMOTION OF NEPALESE TEA
One of the major challenges is establishing firmly, the image/identity of Nepalese tea by pursuing
brand promotion in international market. This entails identifying problems both at home and in the
international market and resolving them in a timely and effective manner. It should be admitted that
Nepal Tea is a little known commodity in the international export market. So far, Nepal has
exported to a few countries and relatively in small quantities. However, there is huge market for
our type tea.
Nepal tea has a promising future if promoted in a systematic and sustained manner. Awareness
campaigns of Nepal tea across tea importing countries and Brand Promotion activities needs to bemade to project and highlight our orthodox and CTC teas. This should be the prime focus of our
marketing strategy. Market access initiative can be achieved through a sustained brand building of
Nepal tea. For this we should engage in the following activities:-
The challenge for discussion is the lack of government and private sector R&D in the Nepalese
tea industry.
Specifically, there is limited investment in the identification of new feasible locations for high quality
orthodox and bio-organic tea cultivation; a lack of improvement and development of new plant
varieties; limited market research and analysis to identify new markets and diversify products as
per the demand.
All the factors are pivotal to the long term growth of the organic tea industry in Nepal and its
suitability for exports.
POLICIES & NORMS OF TEA SECTOR OF NEPAL
As indicated in WTO Working Party Report of Nepal, to conduct business in Nepal, companies,
both national and foreign, have to be registered with the Department of Industry (limited liabilitycompanies, including joint venture agencies, sole proprietor and partnerships, business
undertakings for industrial ventures) and at the Department of Commerce (sole proprietor
undertakings and partnership businesses).
Registration procedures differ for private firms and companies. The Private Firm Registration Act,
1956 governs the registration of a private firm, while the registration of a company is governed by
the Company Act, 1997. The registration of enterprises with respect to trade in services is
governed by other laws such as Nepal Agency Act, 1958 and Partnership Act,
NATIONAL TEA POLICY, 2000
Increasing the production of tea qualitatively and quantitatively with increased participation of
the private sector in tea cultivation and encouraging tea cultivators;
Helping in poverty alleviation with increased opportunities of income generation and
employment;
Promoting institutional development for the improvement of the tea sector;