As the price of Darjeeling tea quadrupled and with the tea in short supply, Nepal has sent as much as 2.5 million kilos of tea across its southern border in the past few weeks.
To reduce the cost of acquiring tea for blending, India has a free trade agreement with Nepal. This means gardens in Nepal (some owned by Indian companies) do not pay an import duty. Nepali gardens need only to secure an Indian agent who is responsible for paying the 5 percent government services tax (GST). The result is a flood of processed tea (and since India does not track orthodox allotments, the total is likely greater than estimated).
An open question is whether the influx of teas is being passed off as Darjeeling. Auction prices are running Indian Rupees (INRs) 2,000 per kilo ($30) in Calcutta, and rising to as much as INRs 2,500 per kilo ($40) when available, but supplies of the first and second flush are gone. Direct sales, which account for 75 percent of volume, bring as much as 10 times that price for orthodox, rare and certified teas.
Side-by-side comparisons reveal very little difference as Nepal shares the same weather and topography. S.S. Bagaria, former chairman of the Darjeeling Tea Association, believes much of the Nepali tea is being passed off as Darjeeling. Indian producers follow the Plant Protection Code and the tea is certified by the Food Safety and Standards Control Organization, the produce from Nepal was not, and this raised questions on its quality and effects on health, he said.
“This is where it hurts Darjeeling tea,” Bagaria told The Times of India.
Prices of Darjeeling tea are at least 60 percent more than those of the Nepali variety. The import of Nepali tea surged from INRs 105.50 crore ($16.5 million) in 2012-13 to INRs 111.84 crore ($17.5 million) in 2014-15 and is now INRs 140.89 crore ($22 million) in 2016-17, according to reports in the Business Standard.
Sources in Nepal confirm that growers in the high-altitude regions are racing to harvest and process as much second flush and monsoon tea as soon as possible. How the tea is eventually retailed is not a great concern, but demand is now so great it could conceivably impact Nepal’s stock of fine tea. Nepal produced 24 million kilos in 2016 valued at INRs 2.4 billion ($23 million). Of that total 6 million kilos is orthodox (handmade loose-leaf teas) for export.
The National Tea and Coffee Development Board (NTCDB) in association in Nepal along with the Trade and Export Promotion Center will complete the process of registering “Nepal Tea” as a collective trademark. The trademark for Nepali orthodox tea will be registered in the U.S., Germany and Canada. The board began the process in 2015.
Use of the trademark for Nepali tea guarantees the organic practices in production process, production environment, processing and packaging of the farm product, according to the Kathmandu Post.
Only a fraction of the 8.2 million kilos of Darjeeling will make it to market this year following a labor uprising and general strike dating to June 9. More than 100,000 tea workers have been idle for the past two months. Bushes are overgrown with weeds, leaves are hardened, the plucking plane is no longer uniform and will require extensive pruning. It will take the short-term labor of 300 workers a month or more to return the bushes to the point where one can maintain the normal yield of 400 to 450 kilos per hectare (the national average is 1,800 kilos per hectare and workers in Assam harvest an average 2,000 kilos per hectare).
Binod Mohan, Darjeeling Tea Association Chairman, told The Business Line, “The season had been completely a washout and the 87-odd gardens were staring at a revenue deficit. We need to meet the expenses of around [100,000] workers till the next flush,” he said, adding that the estimated deficit would be in the range of INRs 350 crore ($54 million). He also said, “Now, we have to see how the government through the Tea Board responds to our demand.”
India needs to back Darjeeling in this time of need, says Mohan, or the export market could be lost and replaced by crops from other countries like Nepal.