Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S2010Cost and Quality of Infrastructure: High costs of electricity and fuel are major problems, as are thetransportation facilities used for carrying tea leaf from farm to processing unit are bad, which are negativelyaffecting the quality of product.Efficiency of Domestic Supporting Industries: All required inputs are easily and abundantly available. Manypeople are even complaining of indiscriminate and overuse of inputs. The production of tea leaf far exceedsthe processing capacity of the existing factories, and farmers are selling their leaf to Indian factories acrossthe border.Domestic Demand: No industrial uses of tea were reported. However, there are a number of tea blenders whoare diversifying their activities, resulting in a very high demand for processed tea.Business Environment: The overall business environment is considered as average. But export is made costlydue to lack of certification and test reports on the products from accredited laboratories or authorities. Oneissue that has been raised in the past about the Nepalese sector is the lack of an auction system for tea,which would allow international buyers to source tea direct from one source. Tea from different small-scaleproducers could be graded, increasing the transparency for buyers who prefer to source from one place onlyrather than from a variety of small-scale producers.Government Initiatives and Donor Involvement: There are several government-backed authorities, privateassociations, and international donors assisting the tea sector. The government grants a number of incentivesand assistance to the tea industry like exemption of land ceiling; exemption of 75 per cent of land registrationfee and land revenue; leasing of public land for up to 50 years for tea cultivation; priority lending; low interestrates for land consolidation; free technical service to small and cooperative tea farming; capital grants forirrigation; establishment of research and training centres in collaboration with the private sector; incentivesto ancillary industries, and some export promotion activity support.HIMCOOP has been formed to provide a one-stop agency for tea sales. It is funded by SNV and its marketingstrategy has been structured with the assistance of GTZ and WINROCK International. Efforts are made tobrand Nepalese tea in the international market as ‘Quality from the Himalayas’. HOTPA is also implementing,in cooperation with several donor agencies, a code that will bring the sector up to international standards.This includes the introduction of environmentally friendly and socially accountable practices.Prospect for Domestic Supply Conditions: Tea cultivation has been extended to different districts from Jhapain the Terai to Ilam, Panchthar, Dhankuta, Terhathum, Sankhuwasabha, Bhojpur, Dolakha, Ramechhap,Solukhumbu, Sindhupalchowk, Nuwakot, and Kaski in western Nepal. Production has increased very fastand more promising as most plantations are still young and yet to start yielding harvest, which suggests thatproduction is set to increase even further. There is a large potential to expand the cultivated area, butadditional processing facilities will be required to help increase Nepal’s tea export. Organic certification andhigh quality teas are the further differentiating factors.Index 4: Socio-economic ImpactCurrent Employment and Job-Creation Prospect: The job creation impact of this sector is very high comparedto other sectors. This sector seems to be a strong engine for farmers’ income generation and poverty reductionas orthodox tea gives higher returns compared to other crops. This sector is also likely to have a high impacton total employment compared to other sectors, especially female employment, as estimates suggest that italready accounts for around 100,000 people (ITC, 2007a).The FTEE is high for this sector. Over 30,000 people are directly involved in the industry, with a large percentagebeing rural women.NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT49