Nepal’s tea industry in crisis as Indian policy halts exports

Kathmandu – Nepal’s historic tea industry is in a severe crisis due to new policy barriers in its primary export market, India. With tea sales stagnant during the peak production season, tea estates and factories in eastern Nepal have shut down.

Facing issues in exporting and selling processed tea, the Ilam-based Orthodox Tea Producers Association Nepal has closed its 53 member industries from today, directly affecting around 3,000 farmers in the region.

Jhapas’s tea industries, which also primarily target the Indian market, have been similarly affected, leading to the closure of CTC tea factories there as well.

Indian SOP leaves 1.2 million kilos of tea stranded

The Indian Tea Board’s new ‘Standard Operating Procedure’ (SOP), effective from May 1, mandates that tea quality testing must be conducted solely in government laboratories. This has severely impacted Nepali exports. Previously, exports were facilitated through private laboratory testing, but the new cumbersome process has left over 200,000 kilos of tea, already cleared by Nepali customs, stranded in warehouses across various Indian cities, according to Ilam Suryaodaya tea entrepreneur Buddha Tamang.

Within Nepal, more than 1 million kilos of processed tea are stored in factories, creating storage issues for new production due to limited capacity.

Of the 7 million kilos of orthodox tea exported annually from Nepal, 90 percent is destined for the Indian market. This disruption poses a significant financial threat to both entrepreneurs and farmers.

Nepal’s tea industry, initiated in 1920 by Badahakim Gajaraj Singh Thapa with plants from China, is now a victim of commercial interests and government indifference.

In 2000, the government sold 65 percent of Nepal Tea Development Corporation Limited’s shares to the Triveni Shanghai Group, leasing the estates for 50 years, leading to corporate monopoly in the sector.

The management’s focus on profit-making, without preserving the environment or physical infrastructure, has escalated conflicts between local governments and private management.

Local government and Shanghai Group in ‘tug-of-war’ and tax dispute

The dire state of the estates, failure to plant new bushes in place of dead ones, and the disappearance of historic British-era processing machines have exposed the management’s irresponsibility.

According to Ilam Municipality Chief Kedar Thapa, despite repeated requests to pay property, land revenue, and business taxes as per the Local Government Operations Act following federalism, the Shanghai Group has ignored these demands.

Claiming that all taxes should be paid by the federal government since the land is leased, the corporation’s refusal to pay taxes has undermined the constitutional authority of local governments.

Obstruction in beautification campaign and threatening letter

In an effort to preserve the historic tea estates, Ilam Municipality initiated a campaign to plant tea in vacant areas and deployed municipal police for estate protection and beautification. However, the Shanghai Group warned against these actions.

On Jestha 10, using the corporation’s letterhead, a letter was sent to the municipality, labeling its actions as ‘unnecessary interference’, prompting strong objections from Mayor Thapa.

He stated that the private group, focused solely on profit and loss, has turned the estates into ruins, while they, in their governmental capacity, are striving to preserve local heritage.

Diplomatic efforts and ‘Tea Museum’ plan

Despite urging the government for diplomatic efforts to resolve this historic crisis, industry stakeholders have yet to see any concrete results.

However, Ilam Municipality plans to expand the historic estate into a ‘Tea Museum’ and collaborate with the Tea Alliance to certify it as organic and connect it to international markets.