A recent report has highlighted that over 88% of Nepal’s orthodox tea exports are directed to India, with only a small portion reaching third-country markets. The report suggests that diversifying exports to countries such as Japan, China, and Russia could improve price gains and reduce market dependency.
Nepal produces approximately 7,838 tonnes of orthodox tea annually, with exports to third countries accounting for 11.4% of the total. Orthodox tea is processed using traditional methods, including plucking, withering, rolling, oxidation, and drying.
The report from Nepal Rastra Bank identifies opportunities for Nepali organic orthodox tea in markets such as Japan, China, the Netherlands, Canada, Russia, Poland, Turkey, and South Korea. However, challenges such as market access, fair pricing, credit facilities, and a shortage of skilled labor remain barriers to expansion. Additional difficulties include limited technical assistance, insurance, and incentives for organic production.
According to a study conducted by Nepal Rastra Bank’s Biratnagar office, multiple factories export organic orthodox tea worldwide. Seven factories export to Japan, four to China, two to the United States, and eight to other markets. The study, which surveyed 84 orthodox tea factories and 42 tea growers, examined the sector’s economic contributions and challenges.
Nepal’s orthodox tea industry has seen developments in branding, including the introduction of a trademark in September 2020 under the label “Nepal Tea: Quality from the Himalayas.” Koshi Province currently houses 100 orthodox tea processing factories, 21 of which are organic-certified.
The cost of production varies, with organic-certified orthodox tea costing Rs45.16 per kg to produce, compared to Rs24.72 per kg for uncertified tea. Farmers engaged in organic-certified production earn an average of Rs75.52 per ropani, while uncertified farmers earn Rs48.44 per ropani. Certified organic farmers also secure higher prices in the green leaf market due to their certification status.
During the fiscal year 2022-23, Nepal’s domestic market sold 128 tonnes of organic-certified orthodox tea valued at Rs120.86 million. Additionally, 523 tonnes were exported to India, generating Rs306.16 million, while 179 tonnes were shipped to third countries, generating Rs257.65 million. Organic-certified exports have reached markets such as France, Germany, the United States, and Denmark.
Industry representatives have pointed out the high costs associated with organic certification. Gobinda Dahal, founder chairman of the Central Tea Cooperative Association in Ilam, stated that obtaining certification for a hectare of tea gardens can cost between Rs500,000 and Rs1 million, making it challenging for small-scale farmers and entrepreneurs. Additionally, tea producers face a 27% tax burden, including VAT, income, and service taxes.
Other logistical challenges include the high cost of air cargo for sending samples and the absence of a dedicated tea testing laboratory in Nepal.
According to the report, investments in Nepal’s orthodox tea industry total Rs3.68 billion, with 36.4% sourced from bank loans and 63.6% self-financed. Only two factories have foreign direct investment.
The average purchase price and production cost for green leaf tea is Rs54.93 per kg, with orthodox tea leaves sourced from individual farmers, farmer groups, and cooperatives. Organic-certified tea leaves have an average purchase price of Rs87 per kg.
The cost of production for organic-certified orthodox tea is Rs695.62 per kg, yielding a profit of Rs151.87 per kg. In comparison, uncertified organic tea production costs Rs336.74 per kg, with a profit of Rs64.55 per kg. While production costs for organic-certified tea are higher, the report notes that profits are also comparatively higher.
The domestic price of processed organic-certified orthodox tea is Rs941.60 per kg, while the international market price is Rs801.51 per kg. Nepal generates Rs2.57 billion annually from processed orthodox tea exports.
Despite these figures, the report states that orthodox tea factories in Koshi Province operate at an average capacity utilization of 56.21%. Factors contributing to underutilization include raw material shortages, inconsistent electricity supply, a lack of skilled manpower, and fluctuating demand. The report underscores Nepal’s potential to expand orthodox tea exports to international markets and calls for policy measures to support the industry and its stakeholders.
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