Nepali Times Asian Paints
Our cup of tea


Until a decade ago, virtually all you heard about Nepali tea revolved around the inefficiency of the state-run Nepal Tea Development Corporation (NTDC). In the 1990s, the trouble entered Phase Two: labour disputes and nasty battles between political parties over privatisation. The government privatised the NTDC last year and there is finally room for real business talk.

Nepal produces two types of tea: CTC, processed from leaf harvested in gardens in the plains, which is granular, fine-cut tea (crushed, torn and curled) that produces thick liquor. The other, finer, variety is "orthodox tea" from shrubs grown in the hills, which produces a lighter, more fragrant liquor with distinct seasonal flavours. Nepal already has 11 factories producing orthodox tea, and CTC production in Nepal is also expanding. "We'll be able to produce enough CTC for domestic consumption in three or four years," says Muktiraj Sharma, executive director of the National Tea and Coffee Development Board. Nepal currently imports 3 million kg of tea annually. Nepali teas on the market include Uday, Muna, Upahar, Mechi, and Tinpate, all produced in the factories of Jhapa and Ilam.

Clearly there's room for more, and not just here, but even overseas. So much, in fact, that tea growers say they can do better with their product than even the carpet industry did. All they want is a little help from the government.

The tea grown in Nepal's eastern hills adjacent to the more famous Darjeeling gardens, is possibly the best in the world. The climate is just right and because the bushes are young, the produce is world class. Tea growing has already spread from Ilam and Panchthar in the east to Kaski, southwest of Kathmandu. Almost every stretch of barren slope
in between can be used for growing tea.

This is what the Nepal Tea Development Policy 2000 says is possible and needs to be done in Nepal:

Tea growing can be expanded from the present 10,000 hectares to 40,000 hectares.

Output can be increased from the present 6 million kg to 46 million kg.

Over 60 million seedlings need to be planted for a cost of Rs 2 billion.

Such expansion would provide jobs for 80,000 people

Getting to this point depends on one simple factor: investment. Tea growing needs continuous investment over four to eight years, which is money most growers-even large industrialists-don't have. And because returns from tea only start to really add up after seven or eight years, it takes growers anywhere between nine and 14 years to pay back loans, while still pumping in more money into their business.

The Agricultural Development Bank has loans worth Rs 120 million earmarked for tea growers, but the terms of the loan policy don't match the tea production cycle, and farmers end up with overdue interest in excess of what they actually borrowed. Commercial banks are just not interested in investing in tea-they would rather pay a fine to the central bank for not meeting the minimum level of loans they are required to provide to the priority sector. "If we go to ask them for loans to set up nurseries, they tell us to go set up the nursery first and then apply for loans," says Suraj Vaidya, owner of Guranse Tea Industries, the leading exporter of Nepali orthodox tea to Japan and Germany. "There has to be a mechanism to make borrowing easy."

Tea growing is investment intensive-you need land, labourers, fertilisers, irrigation and even trained extension workers. The up side is that it grows on slopes where other crops do not thrive and is labour intensive, helping generate employment-on average about three labourers per hectare. A study in the hills of Ilam, Panchthar, Dhankuta and Tehrathum threw interesting light on how the tea economy helps rural families: 80 percent of the 65 families surveyed were literate, 90 percent had administered their children all three doses of the polio immunisation course and 65 percent had drinking water systems in their homes. "Tea has the potential of bringing about an economic revolution of sorts. I don't understand why we're not doing the minimum to enable that to happen," says Vaidya.

Nepal's tea growers are individual farmers, farmer groups and large corporate growers. The government classifies people farming on less than 18 hectares as small growers. Those cultivating over larger areas are either tea farmers (operations that don\'t have factories) or tea gardens that have in-house processing facilities. It makes economic sense to set up factories in areas where the plantations can cover around 150 hectares, but growing tea on individual farms can also be a viable proposition if there are processing centres nearby to sell the produce. In fact, many tea factories in east Nepal don't even own tea gardens-instead, they process the leaf grown by small farmers. Three of the 11 factories that produce orthodox tea rely entirely on leaf supplied by small growers. Nepal has 29 tea factories, all in the country's east-18 in Jhapa and 11 in Ilam, Panchthar and Dhankuta. The reason tea cultivation has not spread to other parts of the country where it is feasible is the lack of processing facilities. But, of course, few growers means there\'s no real call to set up processing factories. This pattern will be difficult to break without real incentive.

Expanding plantations isn\'t the only problem planners need to address: there\'s also the issue of access to the export market, especially to major tea auctions, and meeting transportation costs. Darjeeling, for example, has lower transport costs and easier access to the Calcutta auction. But this doesn't have to mean Darjeeling tea has the monopoly on fine leaf from South Asia. Seventy-four tea gardens in Darjeeling used to supply 10 million kg of tea to Germany. This suddenly increased to 40 million kg, and it emerged later that tea from other gardens in India was being passed off as the "champagne of teas". German buyers filed a complaint with the Indian tea board, and the quota for Darjeeling exports was reduced to the earlier ceiling. "That's the market vacuum we should be aiming at-it is within reach," says a Nepali official who did not want to be named.

The private sector made a move in the right direction some weeks ago. At the Tea Event buyers from Japan and Pakistan committed to purchasing 250 and 2,000 tonnes of tea respectively. Now the industry and government need to get their act together and build on this incentive. Fast.

(11 JAN 2013 - 17 JAN 2013)