Nepal’s tea industry: A cup of reality

Nepali tea has great international market potential as colleagues of FES Nepal learned during a recent visit to Jhapa (Eastern Nepal). However, challenges remain to fully realize the potential for Nepal’s tea sector due to the lack of certification and testing, branding issues, and poor working conditions and limited access to social protection for tea workers.

Last month the governments’ analysis of the budget indicated an economic deficit for Nepal. For a country whose economy is largely dependent on agriculture and remittances, this is not a big surprise. However, tea is in demand because well-made teas from Nepal taste as good as mid-grade Darjeeling and cost much less than that from neighbouring countries. Nepal is making a yearly income of around 8 billion USD from tea production, according to Birtamod section of National tea and coffee development board, Jhapa.

According to Harka Bahadur Tamang, central president of Tea Cooperative Federation, Jhapa, 50 per cent of the tea produced is being exported to India and third countries via India, while 50 per cent is being consumed in the internal market.  Ninety-five per cent of the tea produced in Nepal comes from Province Number 1, mainly from Jhapa and Ilam districts.

According to Indra Prasad Adhikari, chief of the Birtamod section of National Tea and Coffee Development Board (NTCDB), “There is a high demand of high-quality tea also in the Nepali market, which is still largely imported from India.” 

Nepali tea can be divided into two categories based on their processing techniques: cut, tear, and curl (CTC); and orthodox. CTC tea is primarily produced in an industrial capacity while Orthodox tea is named after the traditional methods of producing tea, which include withering, rolling, oxidation and drying. Half of Nepal’s CTC tea is destined for India, where most of it is blended and resold. But Nepal also ships sizeable quantities of orthodox tea, which is used in blends.

Challenges in accessing global markets

European countries have set many quality standards, but Nepal does not have appropriate laboratories to check its products to meet those. As there is a market for Nepali tea globally, the government should help producers to make Nepali tea pass the required quality standards. In addition, the lack of tea-testing labs in Nepal forces the country to use labs in India, leaving them to decide on the costs and the quality.

There is also a demand from the tea sector to have a tea-auction centre in Nepal according to the members from NTCDB. Tea factories must currently contend with fluctuating tea prices and rely on middlemen for sales. However, an auction centre would permit tea farmers to get appropriate prices for their tea and boost their incomes by eliminating the commissions pocketed by middlemen.

Despite the potential of Nepali tea to turn into a profitable sector, numerous problems continue to challenge Nepal’s tea industry, ranging from certification, labour shortages and high cost of organic farming, to branding, failure to identify new export markets, and a lack of updated technology and expertise. Farmers continue to struggle with inputs for organic tea even though demand is on the rise and it has the potential to fetch higher prices. To be able to fix the price for their produce, farmers and entrepreneurs need adequate support from available state mechanisms. In addition, there is a gap between what consumers are paying as the final price and what farmers are receiving at their end. Most farmers employed in tea are smallholder farmers and are, therefore, deprived of the economies of large-scale production.

The issue of lack of certification is considered by tea entrepreneurs to be the primary reason for the failure of Nepali tea to command fair prices in the international market. Even the certification that was started of late is mainly carried out through third-party organic certification. The high cost of organic certification also poses a big challenge to tea growers, along with procurement of organic fertilizers and bio-pesticides in required quantities.

While there is an urgent need to reduce the cost of organic certification, the state should put in additional efforts to put effective mechanisms in place for product validation and credible certification. As certification alone may not be enough, timely initiatives should be taken to secure a trademark for all varieties of tea. Likewise, specific research on branding initiatives to identify niche markets and segments becomes an imperative.

Shortage of skilled labour, and poor working conditions

For a long time, due to lack of Nepal's own independent home brand names, most of the tea that was exported to India has been sold under other brand names. Of late, Nepal has started production of specialty tea, albeit on a limited scale, commanding high prices in the international market. But the non-availability of skilled human resources is hindering the scaling-up of such operations.

At the same time, those who are working in the tea sector suffer from poor working conditions. Around 70.000 workers are directly employed in Nepal’s more than 160 tea estates. Until recently there was no social protection scheme for its workers. However, workers at government-owned tea gardens are now finally being added to the contribution-based social security fund. In addition, the Labour Act 2017, Labour Rules 2018 and Contribution-Based Social Security Act 2017 also have clear legal provisions for workers in the tea sector. While this is certainly good news, the social security provisions cover only the permanent workers. However, permanent workers occupy only a limited share of the workforce with the increasing informalization of work in the tea sector. It is estimated that only 30 per cent of the tea plantation workers in Nepal are formal workers. Trade unions have been protesting and asking for better pay and inclusion of all workers under the social protection scheme, however so far not successfully.

Around 80 per cent of the tea plantation workforce in Nepal are women, but the plantation fields, where most women work, are not woman-friendly. Female workers struggle with hygiene-related issues during menstruation, maternity, and childcare. Due to lack of proper childcare, women have to carry their children while at work, says Sita Sapkota, Central committee char of tea worker union, All Nepal Trade Union Federation (ANTUF), Jhapa. Nutrition during pregnancy and post maternity is inadequate, causing children to suffer from malnutrition and stunting. Women are bound to carry heavy loads of tea leaves even during the periods of pregnancy and post-maternity, she adds.

There are no provisions of proper toilets and washrooms in the plantation fields, due to which many women workers have to take days off from work during menstruation, causing income loss. There is also an issue of the gendered division of labour; women are restricted to plantation fields with little possibility of advancement towards the managerial level, according to Sapkota.


The way forward

The government needs to ensure the implementation of the declared national minimum wage for all workers, both formal and informal, in all tea gardens, not just government-owned. Efforts should also be made towards ensuring a living wage for workers. The tea boards and labour-related authorities in Nepal must monitor the effective implementation of social protection measures, such as provident funds and gratuities. With the increasing informalization of work in the plantation sector, it is vital for workers’ unions to prepare strategies to expand their membership to irregular and seasonal workers in the industry. It is also equally beneficial for smallholder farmers to join plantation unions to have a collective voice in pricing green leaves, and plantation unions are to take the lead in organizing them.

Samira Paudel is Project Coordinator at FES Nepal office.

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The views expressed in this article are not necessarily those of FES.

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