Expert Speak: Tea Industry | Nepal Economic Forum

Mr. Neeraj Rathi
Managing Director, Himal Tea Industries Pvt. Ltd.


Nepal, a nation with a never-ending passion for HOPE – of a better future and RESILIENCE – to accomplish it,is suddenly looking at a catastrophe unlike any before. The Pandemic has not only created havoc in the population’s physical and mental health but is also diminishing all economic progress made in the last decade in addition to drying out the foreign reserves and its major sources. Life, through and after the pandemic, will be a constant fight for survival, for most of the populace. On the other hand, standing in stark contrast to this struggle, is the country’s undying strength, to prevail in the face of uncertainty. An agro-based platform that can effectively take advantage of this strength, in today’s status quo, to truly achieve transformative development from the grassroots with its larger footprint and mature infrastructure, is the Nepalese Tea industry.

This optimism comes from the reality that
Nepal produces teas that are amongst the best in the world, surrounded by an
expansive community driven (predominantly small farmers based bought leaf
production model) value chain that spans from tea pluckers to packaged products,
for consumers, in a world where tea is the second most consumed beverage after
water (with steady growth in demand). Add to this the fact that Nepalese tea,
which is merely scratching the surface in production potential, is net export
positive, i.e., self-sufficient in tea production and exports 95% of its hill-grown
plus about 50% of its plains-grown produce. These factors when combined, points
to an operating environment, which if reinforced with appropriate support plus
coordinated planning could generate exponential value for communities,
industries and country while steadily being developed into a High-Value
agricultural ecosystem.


Now, despite the rosy positivity, Nepal’s tea industry has seen continued hardships in the past 2 decades and it is important to delve on major ones to understand the slow progress: starting with the establishment of CTM order 2000 and initiation of Geographic Indication for Darjeeling tea by India. Which, made it difficult for Himalayan tea to find a market until that point, Nepal’s teas were essentially being bought through forwarding contracts and sold hassle-free by international buyers, simply as Darjeeling due to latter’s brand significance. Although the situation did gradually recover, the distribution channel was forever disrupted with most Nepalese teas heading to India for value addition rather than the west. The civil unrest in Nepal further impeded growth and led to a massive migration of labour from the tea growing regions. This caused a substantial shortage of experienced workers in the upkeep and harvesting of tea farms as well as the processing of tea leaves, leading to degradation in quality and quantity of fresh tea leaves and hence the final product. Absence of skilled workforce also resulted in more use of pesticides and chemical fertilizers, bringing about major limitations in productivity, competitiveness and marketability of Nepalese tea in those years. These issues were gradually improved by shaking up women and marginalized groups in the community, with “the whole family approach” while initiating processes for integrated pest management and organic certifications.

Conversely, while prevailing deficiencies were being ironed out, another major challenge arose for high mountain teas of Nepal – an international project called the Unnati Challenge Fund came into being. While the fund was launched to resolve major upstream challenges in the tea industry with key portions to be devoted to the grassroots, the fund managers in Nepal changed course at the last moment to invest in building more processing units for small farmers and middlemen or increasing production capacity of micro units. This act basically tripled the production capacity but did nothing for the expansion in plantation area or yield of fresh green leaf, leading to cannibalistic competition among existing factories, which resulted in sheer degradation of the quality of tea leaves and ready teas. Moreover, the lack of expertise of the added processing units in tea production, market knowledge and logistics added to the woes and exacerbated the whole supply chain. Natural market corrections progressively ensued, as more than half of the new production units closed while many are on the verge of shutting down or changing hands.


Today, fresh on the heels of the tea industry’s efforts to survive, comes the new COVID-19 pandemic. While there have been numerous opinions of a lesser effect on tea and other beverage industries, questions are already being raised due to ensuing lockdowns and restrictions being placed on the mobility of people and logistics. Big shortfalls in tea production in the primary season (also known as first or primary flush, which gives the best returns to producers and farmers) coupled with limitations of movement both nationally and internationally to deliver finished goods has caused additional insecurities. This situation has been further aggravated by the nationalistic approach that many countries have taken to protect their own industries. Case in point being the recent intensification of voices by the Indian tea Industry to pressure the Government of India to block all imports of tea from Nepal. Consequently, allegations of creating deterrence to prohibit the entry of Nepalese teas into India is also rife, which if asserted, would be an establishment of non-tariff-based trade barrier by the government of India on Nepalese teas, violating the treaties and commitments to support the huge imbalance of trade, especially on agricultural produce. This is gradually looking to become the transitory norm around the world, until, as has always been the case with international trade, better senses overcome shortsightedness.


Despite the reservations, there are some supposed bright silver linings for Nepal’s tea industry and the country, amidst the pandemic. Firstly, it is observed that the overall net demand for tea this year will rise, given the loss in production across all tea growing countries and majorly the world’s highest tea exporting region, East Africa, that has also been badly affected by locust infestations and unusual weather conditions. Secondly, the returning migrant workers could fill back the gap created earlier, to enormously help the tea industry in producing a higher quantity of good quality teas. An example of this was observed in the primary flush in the hilly regions (Production in the Terai was nominal due to the enforced lockdown), where, even after relative delays in harvesting, the yield and quality of green leaf was far superior due to the addition of motivated labour in the farms. Now, just combining the above factors with Nepal’s strength of ‘Hope’ and ‘Resilience’ provides adequate encouragement to resolve issues on various levels, but this pandemic today offers a window of opportunity to go one step further – the reset of the tea industry.

The essence of this fresh start would have to begin from the grassroots by mobilizing all groups in the community including all returning migrant workers for a larger catalyzing effect throughout the value chain. This action would support the initiation of necessary conversion to organic or similar natural practices of agriculture; allow better agri-practices for upkeep and harvesting, promote efficient land / organic input utilization to boost yields and generate finer quality fresh tea leaves, to afford better prices to farmers. Accordingly, larger quantities of superior (organic / bio) Himalayan teas would lead to increased demand and higher prices while unlocking access to new markets that were earlier under the control of traditional suppliers (countries with a larger magnitude of produce or brand significance). Which would give rise to higher brand awareness and consumer perception, resulting in added competition and greater demand for better quality green leaves plus wider cultivation of tea, augmenting economic benefits and overall wellness of communities. This, in turn, would invigorate the steady transition to high value agriculture. The realization of which will allow actual value addition at source and further market driven investments for innovation throughout the value chain while generating environmental resilience, biodiversity and economic sustainability that could be replicated ubiquitously. The enlarging circle would progressively lead to continual development, multiply employment opportunities, increase government revenue and foreign currency reserves while stabilizing the balance of trade.

However, as with all transformations, it is important that all stakeholders play their part and this is where the government of Nepal becomes mandatory. The success of any ecosystem is wholly dependent on the prosperity of that ecosystem, to create an ecologically and economically sustainable model. Therefore, it is imperative for this once in a lifetime ‘Reset’ to be favourably supported by the Government of Nepal (unlike other tea producing countries that are prized and supported by their respective governments, Nepal’s tea industry lacks the support of the government) via financial and technical resources from the ground up. Likewise, in an era where other countries boast of Ministries of tea and Ambassadors of Tea in their respective embassies, it would be vital for Nepal to at least create an endearing Public-Private partnership by forming a strong Tea board that would not just touch on all aspects of the tea value chain but be fundamental in dynamically linking the government and private enterprises with one single mission, the way to Nepal’s first export centred Billion Dollar Agri-based industry.

The above Expert Speak edition is written by Mr. Neeraj Rathi. He is the Managing Director of Himal Tea Industries Pvt. Ltd.

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