value chain/ market analysis of the orthodox tea sub ... - Nepal Trade

EXECUTIVE SUMMARYThe Nepal Economic, Agriculture, and Trade (NEAT) Activity is a USAID funded projectintended to promote economic growth, reduce poverty, and improve lives in Nepal. Underproject component 2- encouraging competitiveness and exports in selected agricultural andnon agricultural commodities or services, NEAT has identified four agricultural commoditiesfor intervention including orthodox tea,. NEAT subcontracted the Asia Network forSustainable Agriculture and Bioresources (ANSAB) to conduct a study of the orthodox teasubsector in Nepal. The study included market visits, interactions with stakeholders,consultations with traders, processors and exporters, and validation of information throughprivate sector dialogue meetings.Tea is a popular drink around the world. It is one of the major export commodities of Nepal,and it makes a significant contribution to the national economy. Orthodox tea, grown mostlyin the eastern hills of Nepal, is known for its aroma, appearance, bright liquor, and slightlyfruity flavor. An estimated 90 percent of orthodox tea is exported, mainly to India. Ilam is theleading district of orthodox tea production, followed by Panchthar, Dhankuta, andTerahthum. Despite high global demand, the production of organic orthodox tea is still low inNepal. The cost of production for green tea leaf is approximately 19.55 Nepali Rupees (NPR)per kilogram (kg). The cost for organic tea production is 39.43 to 52.20 NPR per kg. Theaverage price for organic leaf is 40 to 55 NPR/kg, and for conventional leaf is 20 to 26NPR/kg; however, the price varies depending on flush and leaf quality. The estimatedaverage manufacturing cost is 140 to 200 NPR/kg for conventional tea and 260 to 300NPR/kg for organic.In all cases, the cost can vary significantly due to use of fuel, damage, or damage to rawmaterials. Usually, Nepalese exporters sell tea to Indian importers and commission agentsbased in Kolkata and Siliguri. From India, a high percentage of Nepali tea is then exported tooverseas markets, especially Germany.Some of the major constraints to the orthodox tea sector are the following:· High use of pesticides;· Low quality and high cost of available inputs;· Absence of commercial nurseries;· Problems with irrigation;· Shortage of labor;· Low productivity;· Limited knowledge on proper plantation methods;· Inadequate harvesting and post-harvest handling activities;· Limited technology access and inadequate technical manpower;· Inadequate collection centers and lack of central warehouses;· Low entrepreneurial orientation among farmers;· Difficulty in obtaining financial services;· High cost of certification;· Inconsistent quality of made tea;· Insufficient product diversification;· High cost of packaging materials;· Political and labor strikes;Value Chain/Market Analysis-Orthodox Tea 1