Indian Tea Firms Buying Nepal Factories

DARJEELING, West Bengal – Darjeeling growers perplexed by the lack of interest in their spring and summer tea harvest initially discovered that European buyers were purchasing large quantities of similar tea from Nepal growers. Now there is a new twist — several of the Nepal gardens selling this tea are under Indian control.

WTN140811_ART_Chandra Bhushan SubbaSS Bagaria, chairman, Darjeeling Tea Association (DTA) told The Economic Times: “We are feeling the heat of competition from teas from Nepal. We will be shortly meeting the Union Commerce Minister Nirmala Sitharaman to discuss this issue. We want all imports from Nepal registered with the Tea Board so that we can get an idea what volumes are entering the country.”

Citing Sri Lanka as an example, Bagaria explained that the origin of any imported tea must be registered with the India Tea Board. “We want that sort of a model for Nepal tea as well,” he said.

Tea factories in northern India have long purchased and processed Nepal tea but generally in the low to medium grades. Shipments across the border often enter unregistered. In the past it was legal to name the finished product “Darjeeling” so long as 51% by weight was Darjeeling grown. Darjeeling tea brings a much higher price at retail. Nepali tea typically wholesales for $1.65 a kilo while the same grade of Darjeeling brings $5.75 per kilo.

In 2012 India successfully obtained a globally recognized Geographical Indication (GI) mark from the European Union. This means that all tea marketed as Darjeeling must be sourced at the 87 gardens within the GI. Blenders and retailers were granted a five-year transition to deplete their inventory of dilute Darjeeling blends. Since tea has a two-year shelf life the Darjeeling purchased this year and next will reach market under the new rules.

In response, European tea blenders are introducing “Himalayan” tea which contains little or no Darjeeling. To meet their needs some Indian companies began buying low to medium quality Nepal teas on a forward contract through local Nepalese partners. In addition some Indian investors have purchased and taken over the management of a number of tea factories in Nepal’s Ilam region. Balaji Agro, Jayshree Tea and Accord International are just three of the Indian companies that have taken over ownership of tea factories that were running at a loss, according to a report in STiR Tea & Coffee.

WTN140811_ART_Chandra Bhushan Subba2 Chandra Bhushan Subba, managing director, Sandakphu Tea and Tea Direct, told STiR that none of the tea factories now being managed by Indian owners are high end gardens. However, local producers and farmers are concerned that all the Ilam factories may eventually be taken over by Indian companies and are worried about the long-term impacts this may have on Nepal’s tea industry and economy, according to Subba whose factory is located in the Jasbire Village of Ilam.

Image credits: Chandra Bhushan Subba

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Dan Bolton

About Dan Bolton

Dan Bolton edits STiR Tea & Coffee Industry International. He was formerly editor and publisher of World Tea News and former editor and publisher of Tea Magazine and former editor-in-chief of Specialty Coffee Retailer. He is a beverage retail consultant and frequent speaker at industry seminars and conferences. His work has appeared in many beverage publications. He was a newspaper reporter and editor for 20 years prior to his career in magazines. Dan is the founding editor of Natural Food magazine and has led six publishing ventures since 1995. He lives in Winnipeg, Canada.