We have to expand tea market to third countries

Udaya Chapagain

Coordinator, 3rd International Tea Festival 3018

Nepal is a country that produces some of the finest tea in the world. Its share in the international market is gradually increasing – from a nascent export size about two decades ago, the country now exports 5.5 million kilos of tea annually. Lack of technology, government support and international promotion are some of the hurdles faced by the tea industry in Nepal. In this context, with the aim of branding Nepal Tea in the international market, the private sector and the government jointly organised the 3^rd International Tea Festival this week.

Against this backdrop, Modnath Dhakal of The Rising Nepal talked with Udaya Chapagain, coordinator of the festival. A tea entrepreneur for the last three decades, Chapagain exports Nepali orthodox tea in the international market. He has involved himself in the development of the tea sector for long and leads the Himalayan Orthodox Tea Producers Association (HOTPA). Excerpts: 

What significance does the International Tea Festival hold?

The festival's main objective was branding of Nepal Tea. Orthodox tea is at the centre of this festival, but CTC (cut-twist-curl or crush-tear-curl) has also been included. Nepali tea has a different character from the tea of other countries. It is grown in a Himali climate, virgin soil, has a young bush, and more than 18,000 smallholders nurture the bushes as their children. I would say, these four pillars are our ornaments. I am sure that the space of Nepali tea will increase in the regional and international market because the Indian Tea Board said that Nepal is leading in the tea sector in South Asia as it has craftsmanship and quality. They have assured to include Nepali tea in the auction in Calcutta if the government takes the initiative. International experts have suggested us to go for quality and consistency rather than quantity.

The first International festival was held in 2001 and the second in 2006, and you are organising the third in 2018. Why this gap?

The first festival was organised to inform the world that Nepal is also a tea producing country. Then there was expansion and extension in plantation, manufacturing, production and marketing. The second conference was to give emphasis to the theme of the first festival and promote Nepali tea in the domestic and international market as well as create a linkage among the various stakeholders. The third festival is being organised to make aggressive moves in the international market and diversify our products. We have been preparing all these years. Nepal produced only 500,000 kilos of tea in 2005, and there were only 12 tea gardens, now there are 2 dozen large and 100 small private tea gardens.

You unveiled the new logo 'Nepal Tea' during the festival. Why do you need a national brand?

We export more orthodox tea than the traditional leader, Darjeeling. We export about 5.5 million kilos a year, which is almost double in comparison to Darjeeling. Our tea has reached China, Europe, America and Australia all under different brand names. Therefore, it's high time we created a brand for our product. We want to take our products to the international market as 'Nepal Tea', and we have asked the government to support us in it. We prepared the code of conduct, bylaws and other necessary documents, and the Himalayan Orthodox Tea Producers Association (HOTPA) reached the Department of Industry to register the brand. We signed a Memorandum of Understanding (MoU) with the Nepal Tea and Coffee Development Board (NTCDB) for the brand. We got approval from the department after five years in 2017.  A final report was prepared in collaboration with all the tea stakeholders and was approved by the Tea Board and the Ministry of Agriculture Development.

Though some 'middlemen' tried to fail us, we launched the national tea logo 'Nepal Tea' at the Everest Base Camp. Some middlemen, who are buying tea from the small holders at cheap price and selling it in their own brand, never wanted this.

What benefit does a common logo bring to Nepali tea products? How does it help in tea promotion in the international market?

To expand any business, you need to create and strengthen markets, and you need a strong branding to push into a new as well as traditional market. Take an example of Ceylon tea, Darjeeling tea and Assam tea, they have a distinct reputation in the preference in many markets around the globe. But our political leadership and bureaucracy have never been proactive in creating a brand and promoting it.

We are not doing it for ourselves. My own brand 'Sundarpani' has a very good market in Europe, especially Germany. The branding will benefit the smallholders.

How do you assess the tea sector's development in Nepal?

As I said earlier, the government had its role in introducing tea plantation and production in the initial days, and it was the private sector that developed the tea industry. Then Prime Minister Junga Bahadur Rana had brought tea plants from China, and the Administrator of the Eastern region, Gajraj Thapa, planted them in Ilam. Many years later King Birendra announced the tea sector, gave leverage on land ceiling and provided subsidies on interest rates, which supported in the development of tea sector. But in the recent times, farmers and entrepreneurs have no facilities and subsidies from the state even though it’s among the very few agricultural products in which the country is self-reliant.

Tea has created rural employment. About 18,000 families are involved in it. If you take an average of 5 members in a family, it makes about 90,000 people in tea farming. Similarly, there are 2 dozen large tea industries which have created more than 100,000 direct and indirect employment. Annually Nepal exports tea worth Rs. 3 billion and produces tea worth Rs. 24 billion. It's eco-friendly business with full domestic labour and raw materials.

What specialties does Nepali tea have over that of other countries?

Tea making is an art – CTC is science and orthodox is art. It’s a culture and it’s a passion. As I said earlier, the Himali climate, virgin soil, young bush and smallholder farmers are unique characteristics of Nepali tea. Another reason for the quality product is that orthodox tea is hand plucked. We can diversify hill products into black tea, organic tea and specialty tea while lowland tea can be used in producing CTC tea.

The government, private sector and tea entrepreneurs say that Nepali tea has a huge potential, but the country produces only 24 million kilos of tea a year and exports 5.5 million kilos. What is holding Nepal back?

You are right that Nepali tea has a huge potential, and it's been proved in the last two decades as the market is consistently growing. Although tea plantation and production were initiated by the government, there has been no government support such as subsidy in technology transfer and establishing a compost fertiliser industry. You will be surprised that the banks and financial institutions (BFIs) mobilise auto loans at 8-10 per cent but charge 12 per cent interest rate to the tea entrepreneurs and farmers. The government has announced agricultural loans will be provided at lower interest rate, but the tea sector has not been able to use this facility so far. Do you think it is fair?

The tea farmers are utilising the land that would have been barren and useless otherwise and thus helping in soil conservation, increasing the natural beauty and, on top of it, earning foreign currency by exporting tea. The farmers and entrepreneurs deserve better.

We have to expand the market to third countries as the price in the second country (India) is comparatively low. More than 80 per cent of the exported 5.5 million kilos goes to India. We want to reverse the situation and take 80 per cent of the tea to third countries.

It seems that Nepali organic tea has great potential in the international markets such as China, Europe and India. But the country produces only a small amount of organic tea. What should the government and entrepreneurs do to increase organic tea production?

If the tea farmers were to use chemical fertilisers, about 2-3 workers can manage a 100-ropani tea garden, but if they use organic fertilisers, they need about 200 workers. So the cost goes up with the adoption of orthodox measures. Though the orthodox tea draws comparatively higher returns, it's not satisfactory. So far as government support is concerned, it should support us in technology transfer and provide subsidy in loans and exports. Darjeeling tea is faring well because of government support. I would like to assure you that we will make greater contribution to the government coffers than the subsidies it provides to us. In Bangladesh, entrepreneurs are getting 13 per cent subsidies in exports. India and Sri Lanka have also implemented a subsidy policy, but we don't have any of such facilities.

What kind of technology transfer do Nepali tea entrepreneurs need to advance the business and produce quality products?

We have to adopt automation now. In China and Japan, even the plucking is done by machines while we are facing a shortage of workers here. But we have difficulty in using machines to pluck tea as we had not envisioned it while planting tea, and we have a difficult geography. On the other hand, machine plucking might reduce the quality of tea. So we need semi-automation. Tea industries have also been troubled by trade unionism. Therefore, office automation is another necessity. The government should provide subsidy in export and value addition, establish a compost fertilisers industry with 70-30 public private investment and in rainwater harvesting. Though small, a mail order system will also support us to promote Nepali tea. Similarly, developing online payment gateway is another need of the time.

Despite tea tourism having a huge potential, this by-product business has not gained momentum. Is it due to lack of innovative ideas, business model or investment?

There are many good ideas, but implementation is poor. Home stay in a tea garden, resort, tea making observation, trekking are some of the activities involving tea tourism. I think we need to develop some strategies and mobilise investment to develop these areas. 

Published in The Rising Nepal daily on 9 April 2018.