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

1. INTRODUCTION1.1 BackgroundANSAB is an independent, non-profit, civil society organization that has been working inSouth Asia since 1992. ANSAB is committed to biodiversity conservation and economicdevelopment through community-based oriented solutions. ANSAB is the pioneer indeveloping and applying new approaches to promote natural product-based enterprises andvalue-chain interventions in Nepal. With its exemplary track record, competent team, andwide networks, ANSAB has designed and successfully completed hundreds of relatedprojects including value chain studies of commercially important products with tangibleresults. It has also provided different expert services to stakeholders working in Nepal andother neighboring countries. In this context, ANSAB was awarded an assignment underNEAT to conduct a value chain/market study of selected agricultural commodities includingorthodox tea.Agriculture in Nepal has long been based on subsistence farming, particularly in the hillyregions where farmers make earn their livings from fragmented plots of land cultivated indifficult conditions. The economic well being of Nepal is very closely bound to naturalresources arable land, water, and forest areas. Although only comprising about 21 percentof land area, agricultural land is the major determinant of economic activities and the nationssocio-political identity; it provides employment opportunities to 66 percent of the totalpopulation and contributes about 36 percent in the GDP 1 . Most of the agriculture householdsare smallholders. About 45 percent of the farming households have less than 0.5 hectares (ha)of land and poverty is widespread. Poverty is much more severe in rural areas (35 percent)compared to the urban areas (10 percent) (CBS 2004). Farming remains primarilysubsistence-oriented and only a small portion of farms use modern production units.Agricultural growth in Nepal is constrained by poor infrastructure, weak institutions, andinadequate technical support for commercialization and supply chain development.Nepal's foreign trade is in a deficit. There is a domestic increase in demand every year forforeign goods as well as high consumption with a static trend in export growth. In thiscontext, the National Trade Integration Strategy (NTIS), 2010 has prioritized 19 commoditieswith export potential, among them, tea is one (MoCS, 2010).In Nepal, the history of tea cultivation began in 1863 with the establishment of the Ilam TeaEstate in the hills and later in the mid hills of Soktim. The first tea plantation in the privatesector was Budhhakaran Tea Estate which was established in 1959 in the plains of the Terai.With the establishment of the Nepal Tea Development Corporation (NTDC) in 1966 by theGovernment of Nepal, the commercial cultivation of tea increased. In 1982, the governmentrealized the potential of tea as a viable crop and export commodity. The GON declared fivedistricts - Jhapa, Ilam, Panchthar, Tehrathum and Dhankuta as Nepals Tea Zone andprovided support to the tea growers and processors.The growth and development of the tea sector increased after the economic liberalizationprocess which was initiated in 1991 and the private sectors and small holder farmersparticipated actively towards commercial tea cultivation. In 1992, the Nepal Tea and CoffeeDevelopment Act was introduced and the legislation paved the way for provisions on the1 http://www.moac.gov.np/Value Chain/Market Analysis-Orthodox Tea 3