C 290 F 812506477501897

Government of Nepal
Ministry of Agriculture and Cooperatives
Department of Agriculture
COMMERCIAL AGRICULTURE DEVELOPMENT PROJECT

Project Management Unit
Biratnagar, Nepal
FINAL REPORT
PRODUCT CHAIN STUDY ORTHODOX TEA
October 2008
Submitted by:
FBC
Full Bright Consultancy (Pvt.) Ltd.

199/53, Maitidevi Marg, Maitidevi, Kathmandu, Nepal Tel: 44 33149 and 44 11780 Fax: ++ 977-1-44 13331
E-mail: fbc@mos.com.np
ABBREVIATIONS
ADB ADBL CAA CADP CAF CDO DDC DOA EDR FGD FNCCI LDO MDG NTCDB NTDC VDC
Asian Development Bank Agriculture Development Bank Ltd. Commercial Agriculture Alliance Commercial Agriculture Development Project Commercial Agriculture Fund Chief District Officer District Development Committee Department of Agriculture Eastern Development Region Focus Group Discussions Federation of Nepalese Chamber of Commerce & Industries Local Development Officer Millennium Development Goal National Tea and Coffee Development Board Nepal Tea Development Corporation Village Development Committee
TABLE OF CONTENT
CHAPTER I: INTRODUCTION ..................................................................................................... 1 1.1 BACKGROUND ..................................................................................................................... 1 1.2 RATIONAL OF THE STUDY................................................................................................... 2 1.3 OBJECTIVE OF THE WORK ................................................................................................. 2 1.4 SCOPE OF WORK ................................................................................................................ 2 1.5 APPROACH AND METHODOLOGY ....................................................................................... 2 1.5.1 Technical Approach............................................................................................... 3 1.5.2 Methodology Adopted ........................................................................................... 4 CHAPTER II: AREA AND PRODUCTION ................................................................................. 6 2.1 GENERAL BACKGROUND .................................................................................................... 6 2.1.1 Government Policies ............................................................................................. 6 2.1.2 Rationale of the Crop ............................................................................................ 7 2.2 AREA AND PRODUCTION .................................................................................................... 7 2.3 PRODUCTION MANAGEMENT ............................................................................................. 9 2.3.1 Inputs Supply Situation ......................................................................................... 9 2.3.2 Credit Supply Situation ......................................................................................... 9 2.3.3 Garden Development .......................................................................................... 10 2.4 TEA PROCESSING ............................................................................................................. 11 2.4.1 Processing technology ........................................................................................ 11 2.4.2 Sorting and grading ............................................................................................. 11 2.4.3 Packaging ............................................................................................................. 11 2.5 COST OF PRODUCTION .................................................................................................... 12 2.5.1 Plantation and Maintenance (Garden) ............................................................. 14 2.5.2 Harvesting and post harvest handling .............................................................. 14 CHAPTER III: MARKETS AND MARKETING ........................................................................ 17 3.1 GREEN LEAVES................................................................................................................. 17 3.2 MADE TEA ......................................................................................................................... 17 3.3 TRADERS ........................................................................................................................... 18 3.4 PRICING ............................................................................................................................. 19 3.5 IMPORT AND EXPORT OF TEA........................................................................................... 20 3.6 INSTITUTIONAL INVOLVEMENT.......................................................................................... 21 CHAPTER IV: VALUE CHAIN ANALYSIS .............................................................................. 22 4.1 INTRODUCTION.................................................................................................................. 22 4.2 VALUE CHAIN MAP ........................................................................................................... 22 4.3 VALUE CHAIN ANALYSIS AND PRICE MARGINS ................................................................. 24 CHAPTER V: SWOT ANALYSIS............................................................................................... 26 CHAPTER VI: MAJOR ISSUES AND FINDINGS ................................................................... 28 6.1 PRODUCTION ................................................................................................................ 28 6.2 PROCESSING ................................................................................................................ 28 6.3 MARKETING ................................................................................................................... 29 6.4 SUPPORT SERVICES .................................................................................................. 29 CHAPTER VII: CONCLUSION AND RECOMMENDATIONS .............................................. 30 7.1 CONCLUSION ................................................................................................................ 30 7.2 RECOMMENDATIONS ................................................................................................. 30 7.3 ACTIONS TO BE TAKEN ..................................................................................................... 31 ANNEX
EXECUTIVE SUMMARY
1. Agriculture plays an important role for the sustainable development contributing the poverty reduction of the country. 2. Given where they are and what they do best, promoting agriculture is imperative for meeting the Millennium Development Goal (MDG) of halving poverty and hunger by 2015 and continuing to reduce poverty and hunger for several decades thereafter. 3. Tea is an important beverage and popular all over the world and it is one of the most important industrial cash crops in the country. 4. Two distinct species of tea plant (Camellia sinensis.) are generally in practice - the small-leafed China (sinensis) and the large-leafed Assam (assamica). 5. The leaves from the crop are processed into made tea one of the most popular hot drinks in the world after coffee. The crop can be grown in a wide range of agroclimatic conditions and in different geographical locations. 6. The agro-climatic conditions prevailing in the eastern districts of Nepal are highly conducive for growing the crop Terai plains for assamica and the Hills for sinensis. 7. Nepal produces both Orthodox and CTC type of tea. The total area under tea in the country is about 16420 ha with small growers' share of 45% and it produces some 15168 Mt of made tea (both orthodox and CTC) with small growers' share of 38%. Out of total tea production, the country produces some 13% of orthodox tea and rest is CTC 8. Green leaves are the primary outputs of tea plantation. And their marketing is one of the major problems facing by tea growers in the hills. The problems are more pronounced in the district of Ilam, where area and number of tea growers are significantly high. 9. The finished product of a tea processing factory is called Made Tea. The tea produced may be of different grades and qualities. Marketing of this tea in particular is very challenging job, because the demand for orthodox tea in domestic market is very low. It is learned that almost of 90% of orthodox tea is exported and almost 99% of the total export (official and unofficial) is through India 10. The formal export/import statistics showed that Nepal exported some 3493 Mt of tea during FY 2063/64. It is learned that almost 90% of orthodox tea produced in the country is exported. Total export volume of orthodox tea is about 1779 Mt and the rest of the consignments are CTC tea. 11. An over-dependency on Indian markets makes Nepal Tea marketing highly vulnerable. Frequent imposition at the border and stopping of imports of orthodox made tea and green leaves by India causes complete stoppage and sharp price decline. A very small consignment of Nepal Orthodox tea is exported directly to overseas markets Japan, Germany and other European countries.
12. The marketing of tea is carried out by processors themselves. There are very few organized sectors that engaged in tea exports. 13. Green leaves, produced in small farmers' level, are collected by village level mobile traders in their farm gates and transfer them to either road head collection points designated by the processing factories or directly to the factory itself. 14. There are some road head traders in Fikkal area engaged in collecting green leaves at road heads and transfer to Processing Factories. In fact, these collectors are involved not only in trading green leaves, they provide credit services as well in off seasons. 15. Price of green leaves varies according to plucking seasons and level of demands for it. Usually, green leaves produced at the beginning of the season - summer flush in particular fetches comparatively best price, followed by autumn flush. Rainy flush produced during Monsoon season attracts the lowest. 16. Tea cultivation begins with the management of seeds/seed materials and other inputs associated with it. Improved seeds are always brought from across the border, whereas the clones (cuttings) are usually used from the established tea garden close to small tea growers. 17. Tea processing begins right after a green leaf is plucked. The quality of tea depends among other things on the types of leaves plucked and the way of handling of them before they reach the factory. 18. The margin attributed to the farmers/growers' share is comparatively smaller than those of processors along the value chain. Total production cost calculated at the beginning of the plantation is Rs.11.21 per kg of green leaves. At the first year of plantation, inputs constitute major portion (almost 65%) followed by labour 35%. With the post production cost included, the total farm level cost is around Rs.18.00 per kg of green leaves. 19. The processors on the other hands also support value chain by converting the raw green leaves into products made orthodox tea. The margin calculated for them is Rs.45 per kg. 20. Exporters are the last lot of the value chain. In fact, processors themselves play a vital role of exporters. They are, in fact, the backbones and most sensitive lots of a value chain. They usually get a margin of around Rs.28 per kg depending on season and international markets.
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CHAPTER I: INTRODUCTION
1.1
BACKGROUND
Agriculture in Nepal is still subsistence but with the right policies and supportive investments at local, regional and national levels, agriculture offers new opportunities to move out of poverty. Pathways out of poverty open to Nepal by means of agriculture include smallholder farming and animal husbandry, employment in the new agriculture of high value products and entrepreneurship. Agriculture plays an important role for the sustainable development contributing the poverty reduction of the country. Majority of the population are living in the rural areas. A recent data show that about 30.4 percent people are living below poverty line and about 76 percent people are depends on agriculture, which is also the major source of livelihood for the majority of the people. Given where they are and what they do best, promoting agriculture is imperative for meeting the Millennium Development Goal (MDG) of halving poverty and hunger by 2015 and continuing to reduce poverty and hunger for several decades thereafter. Agriculture alone will not be enough to reduce the poverty in Nepal, but it is uniquely powerful for that task. In Nepal, agriculture and its associated industries are essential for the economic growth, reducing mass poverty and food insecurity. Using agriculture as the basis for economic growth requires a productivity revolution in smallholder farming. Given the very poor rural infrastructure and poorly placed institutions, this revolution must be different from the so called Green Revolution. With number of associated efforts in the past, the success is limited and the challenges are getting bigger with changing situation of liberalization and globalization. On the above background, the government of Nepal with the grant assistance from the Asian Development Bank (ADB) is implementing Commercial Agriculture Development Project to address the issues of livelihood and poverty by promoting and linking Nepalese agriculture to national and international market. CADP is in operation since August 2007. Ministry of Agriculture and Cooperatives is the Executing Agency and Department of Agriculture is Implementing Agency. The project covers 11 districts of the Eastern Development region (EDR) including 5 hill districts (Udayapur, Terhathum, Dhankuta, Ilam and Panchthar), 5 terai districts (Siraha, Saptari, Sunsari, Morang, Jhapa) and 1 mountain district (Taplejung). The Commercial Agriculture Alliance (CAA) will implement agriculture investment (Component 1), whereas the other components Inclusive Development of Stakeholders, Market Information Dissemination, Project Partners Capacity Enhancement and Project implementation Support is implemented by the Department of Agriculture (DOA/CADP).
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1.2
RATIONAL OF THE STUDY
The project facilitated key agricultural stakeholders (farmers, traders, and processors) to work together to increase commercialization in agriculture. The project through CAF will finance i) community based market infrastructure investments, and ii) non infrastructure investments. Only the DDC are eligible to apply for community based market infrastructure investments. Farming communities, through their village development committee will identify needs in a participatory manner, and the DDCs will screen VDCs requests before submitting the proposal to the CAA. Similarly CAF will provide financial assistance for non infrastructure investments of farmers groups and cooperatives, traders, and processors, which are the general members of the CAA. To assist in identifying the investment opportunities this study project identified key constraints and opportunities and suggested the areas of investments required for successful commercialization of agriculture in the EDR. 1.3 OBJECTIVE OF THE WORK
The principal objective of this assignment was to understand the functioning and dynamics of the value chains; identifying key players and proposing possible initiatives for CADP program would undertake to promote increased enterprise income and employment. 1.4 SCOPE OF WORK
The overall scope of this assignment was to carry-out product chain study of ten high valued commodities: vegetables (Cole crops cabbage, cauliflower; beans, tomato), fruits (banana, mango, citrus), cash crops (cardamom, ginger), and others (tea, nuts). The study project identified 10 potential commodities (for Eastern Development Region) and proposed investment priorities for the identified value chains. The following were the details of the scope of work: Collect, compile and review available secondary data/information Develop and administer data collection tools, primarily interview schedules, checklists and questionnaires Develop value chain map Identify chain actors from input suppliers to retailers Identify factors affecting the performance of the value chain Availability of service providers and their linkage/relationship Key constraints to and opportunities of the value chain Possible solution to key constraints for the effective development of market oriented value chains
1.5
APPROACH AND METHODOLOGY
The method adopted in the study relied on semi-structured informal interviews with key informants and a number of participants at different stages of the market chain including the producers of the studied commodity. The interview approach provided the survey team with an opportunity to gather required information from several market chain actors, working on production in question. The methodology was applied for (1) gaining a view of how the commodity is produced, organized, operates and performs; (2) identifying various
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constraints and opportunities; (3) identifying specific market chains that are most appropriate for a client group and investor; and (4) prescribing interventions in the organization, technology and management of the commodity. The study also focused on identifying the best points of leverage within a market chain by investing to improve market chain performance. Such leverage may focus on technology, specific chain actor performance, improving business development services and changing policies. 1.5.1 Technical Approach
The major objective of the study were to identify the potential value chains, identify their constrains/bottleneck and suggest the improvement measures. To achieve the set objective, the consultant adopted the following technical approach in accomplishing the research study: Stages of Study Implementation Stage 1- Identification and mapping of commodity value chains: During this stage all potential crops were first listed and ten commodities were selected for the study . For each of these commodities, the value chains from producer to consumer were mapped, including traders and commission agents. Stage 2 - Analysis of key constraints: For each value chain constraints and bottlenecks to achieving competitive advantage were also identified. Constraints were categorized in terms of cross cutting across all value chains, value chain specific, and related to specific categories of products such as tea or ginger etc. Stage 3 - Options for Improving Performance: The options for addressing the constraints identified in Stage 2 were assessed at this stage. The project identified and proposed intervention strategies for improving the performance of the value chains. Identification and mapping of commodity value chains: During the Inception Phase of the study, a long list of commodities was identified for further review and potential incorporation into the study. This list was based on the review of secondary data and discussions with key stakeholders in Government, private sector and donor organizations. A series of criteria for selecting the value chains was identified and based on these criteria 10 most potential commodities were selected for detail value chain analysis. These criteria were: Does EDR have a competitive advantage in producing this product? Is there significant scope for growth? Will the commercialization of this product have a positive impact on rural poverty? Is there scope for significant value added? Can reasonable progress be made to commercialize this product during the lifetime of the Project? Is there an existing human capital base in Nepal to build on for the commercialization process? Based on the selection criteria the potential commodities were shortlisted and 10 commodities were finally selected for the detail study.
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Mapping the Value Chains The proposed mapping methodology drew primarily on secondary data supplemented with field interviews with enterprises through the value chain. The value chain maps have been presented in a conventional format with the key stages in the value chain identified on the left of the map and associated enterprises at each stage to the right. The study differentiated between enterprises that engage in one stage of the value chain e.g. primary production, and composite enterprises that engage in more than one stage of the value chain e.g. production and processing. Identifying Bottlenecks and Constraints in the Value Chain The study team reviewed secondary information, organixed semi-structured interviews with enterprise managers at each stage of the value chains and interaction with stakeholder in order to identify the major constraints to achieving competitive advantage, commercialization, diversification and increased value added. Intervention Options for Improving Supply Chain Performance Following the detailed analysis of constraints to carry out in Stage 2 of the study, intervention strategies were developed for improving the performance of value chains. 1.5.2 Methodology Adopted
For the study a combination of field survey and literature review were conducted. The primary informaiton served as the critical framework for analysis while the secondary information provided important inputs for undrstanding the context and rationality behind the status of subsector. This combination has provided rich context-bond information that lead to explaning the situation more concretely. Study activities were carried out both at the central, regional and district level. The study project met and interacted with all possible value chain agents including public and private sector, I/NGOs, input suppliers, service providers and so on. At the central level tools like stakeholder meeting, interaction and analysis of secondary information were used for the study purpose. At the field level, the consultant held meeting with stakeholders, conducted key informant interview and group discussion. Following are the details of the activity carried out by the study team: Review of the existing information on the selected value chains All the available documentation was collected and reviwed. The review work was carried out during the inception stage and based on the review outcome the field work was accordingly planned. Questionnaire and checklist used A semi-structure questionnaire was developed and used that dealt with issues specific to the respective value chain. An effort was made to incorporate into the questionnaires questions pertaining to key issues identified during the interaction with the project officials. In addition, checklists were developed and used for producers, traders, and other stakeholders. In most cases though, interviewees were asked to rate the perceived quality in a particular relationship by providing a verbal assessment. The work also covered the qualitative research including: the listing of constraints, and future opportunities. The checklists and questionnaires used for the interview have been given in the Annex 3.
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Sampling of chain actors The farmers, traders, service providers formed the focus of this research. Actors involved in the marketing of the respective products were also intensively interviewed and interacted. The details of the persons interacted has been given in the Annex 1. Interview of key chain agents/stakeholders An in-depth interview was also held with value chain agents including input suppliers, producers, collectors/local traders, road side traders, transporters, wholesalers, processors, retailers, service providers, representatives from cooperatives, commodity associations and networks, development boards etc. Identification and selection of such stakeholders were done in consultation with the officials at the district and regional level. The interview and interaction was mainly focused on the value chain performance, constraints and opportunities, cost and margins, prices in different markets, trends and perspectives, growth potentials etc. In depth meeting and interacion were held with government organizations, research institutions, INGOs, national NGOs, local NGOs. The organizations visited has been given in the Annex 2. Key informants were: Tea grower farmers Tea processors (individuals and organized sectors) Wholesalers, collectors and retailers Traders NGOs Extension service providers Tea nurserymen Heads of administrative and development organizations (CDO, LDO, ADBL) Input suppliers Transporters Managers of cooperatives Chiefs of Chamber of Commerce and Industry (District and FNCCI) CADP Officials CAA officials Officials of Agricultural market centers
FGD with concerned stakeholders Focus Group Discussions (FGD) was held with concern stakeholders specially the producers, traders, input suppliers. The major issues covered in the FGDs are: value chain performance, constraints and opportunities, profitability, efficiency of the value chain, prices, trends and perspectives, growth potentials etc. Similarly, it also covered the issues identified at various level of interaction. SWOT Analysis In depth discussion with key actors of value chain was made on strengths, weaknesses, opportunities and threats of the respective value chains.
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CHAPTER II: AREA AND PRODUCTION
2.1
GENERAL BACKGROUND
Tea (Camellia sinensis.) is an important beverage and popular all over the world. It is one of the most important industrial cash crops in the country. The made tea1 is derived from the tender or young leaves and unopened bud of evergreen tea plant. Two distinct species of tea plant are generally in practice - the small-leafed China (sinensis) and the large-leafed Assam (assamica). Tea species named Combod (cassamica sp.) is popular in some parts of East Asia. The leaves from the crop are processed into made tea one of the most popular hot drinks in the world after coffee. The crop can be grown in a wide range of agro-climatic conditions and in different geographical locations. The agro-climatic conditions prevailing in the eastern districts of Nepal are highly conducive for growing the crop Terai plains for assamica and the Hills for sinensis. The history of tea cultivation in Nepal is almost one and half century old - the present day Ilam Tea Estate being the first tea garden of the country. The 1960s saw the advent of the private sectors' involvement in the tea industry as a result of land reform program introduced in the country. With the establishment of Nepal Tea Development Corporation (NTDC) in 1966 AD, commercial cultivation of tea began in a full swing. Realizing the importance of the crop, in the beginning of 80s, the then government of Nepal has declared five districts of EDR the Tea Zones and launched several Tea Area promotional programs to attract farmers with small land holdings. The districts under the tea zones are Jhapa, Ilam, Panchthar in Mechi and Dhankuta, Terhathum in Koshi zones. Lately, tea cultivation has been initiated in adjoining district of Sankhuwashabha and the districts like Sindhupalchowk, Dolakha and Kavre. 2.1.1 Government Policies Women plucking tea leaves
The Government policies towards tea development have been always positive. It has formed National Tea and Coffee Development Board to look after and promote tea sectors in the country. National Tea Act 2057 and Implementation Directives 2058 have been developed and launched to manage tea sectors.
Made tea is a term used to describe the tea manufactured from a factory and ready to use.
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2.1.2
Rationale of the Crop
The tea industry as such has been contributing a lot in changing socio-economic and environmental scenario in the project area. Some of them can be listed as follows: Employment generation (tea cultivation is a labour intensive project requiring huge labour hands) Back migration (realizing the importance of tea, people migrated to urban areas are gradually returning to their original places) Import substitution (huge sum of money involved in importing tea from abroad can be saved) Revenue to the Government (in the form tax) Area development (development of different activities related to the industry) Improvement of environment (green mass of tea garden itself produce positive impact in the local environment not to speak about its role of controlling soil erosion in hills)
2.2
AREA AND PRODUCTION
Nepal produces both Orthodox2 and CTC3 type of tea. The total area under tea in the country as stated in the table below is about 16420 ha with small growers' share of 45%. Likewise, Nepal produces some 15168 Mt of made tea (both orthodox and CTC) with small growers' share of 38%. Out of total tea production, the country produces some 13% of orthodox tea and rest is CTC. Table 2.1: Area under Tea Plantations in Nepal, (From FY 2055/56 to 2063/64) Ha)
Private NTDC Company 1998/99 (2055/56) 6073 938 1999/00 (2056/57) 6073 938 2000/01 (2057/58) 8179 2001/02 (2058/59) 8179 2002/03 (2059/60) 8321 2003/04 (2060/61) 8869 2004/05 (2061/62) 8912 2005/06 (2062/63) 8912 2006/07 (2063/64) 9001 NTDC Nepal Tea Development Corporation privatized in 2001 Fiscal Years in AD & BS Small Growers Farmers Area 2860 2050 4915 3239 5310 3818 5575 4186 4314 12647 6252 6143 6854 6989 7154 7100 7593 7409 Total 9061 10250 11997 12346 12643 15012 15900 16012 16420
(in
A processing unit located in Barbote area of Fikkal produces a small quantity of Green unfermented tea and exported exclusively to Japan. Total area under tea plantation in Nepal has increased over the years. As shown in the Table 2.1, the area under both the small growers' and private company is in increasing trend. The trend under private company is steadier compared to small growers' who showed an unstable growth.
Orthodox (leaf) tea is derived generally from Chinese bush in the hills and prized for its aroma (flavours). CTC (Crush tear curl) tea is produced mainly from Indian tea bush cultivated in terai plains. The tea so produced is favored for its liquor.
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Table 2.2: Tea Production in Nepal, (From FY 2055/56 to 2063/64)

Fiscal Years in AD & BS Private Company NTDC Small Growers 418 1010 1449 1654 1720 3957 4816 5244 5827
(in Mt)
Total 4493 5085 6638 7519 8198 11651 12606 13688 15168
1998/99 (2055/56) 3778 797 1999/00 (2056/57) 3578 497 2000/01(2057/58) 5190 2001/02 (2058/59) 5865 2002/03 (2059/60) 6478 2003/04 (2060/61) 7715 2004/05 (2061/62) 7790 2005/06 (2062/63) 8444 2006/07 (2063/64) 9341 NTDC Nepal Tea Development Corporation privatized in 2001
The Table 2.2 related to country's total tea production over the years showed a steady growth trend. The contribution of the Nepal Tea Development Corporation (NTDC), privatized in 2001 has been reflected in private company. Despite in slow growth area, the production figure is increasing due to gaining in full maturity of tea bushes. There are altogether 125 registered private companies engaged in tea cultivation in the country. The area under these companies is about 9011 ha. Small growers with a number of 7593 cover an area of 7409 ha. Out of total area under tea in the country, the contribution of orthodox tea is about 45%. And in the production front it's about 13% of the total.
Box-1: Mr. Kajiman Kagate based in Siddhigaun, Kanyam 1 is one of such entrepreneurs. He has been operating the unit for quite a long time. He has currently updated his unit with the processing capacity of 200 to 300 kg of made tea per day. The accessories necessary for processing are made of locally available materials, and low cost local housing materials are used for the shed. He sells his product locally (20-30%) in Fikkal/Birtamod and through dealers (60-70%) in Kathmandu. Mr. Kagate is promoting Nepal Tea as "Bharat ko Chiya Astaundo Ghaam, Nepal ko Chiya Udaundo Ghaam"
Likewise there are altogether 41 full fledged processing factories operating in the tea growing areas of the country. Out of those, 16 factories are located in the hills with 15 specializing in orthodox tea and one - green tea. Furthermore, there are a number of semi mechanized processing units operating in the area where there are no processing facilities in hand. The product obtained from these units is known as handmade tea. This type of tea is also getting popularity among local/domestic markets. Table 2.3: Area and Production of Orthodox and CTC Tea in Nepal, FY 2063/64
Orthodox Particulars
No. of projects/ farmers Area (ha) No. of project s/ farmer s Productio n (Mt)
CTC
Productio n (Mt) Area (ha) No. of projects / farmers
Total
Area (ha) Producti on (Mt)
Garden 10 (Reg. company) Small Growers 6722 (Farmers) Processing units 16 (Factories) Total Percentage out of total Source: NTCDB 2008
2904 4520
657 1320
115 871 25
6107 2889
8684 4507
125 7593 41
9011 7409
9341 5827
7424 45%
1977 13%
8996 55%
13191 87%
16420
15168
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In fact, the tea cultivation is no more confined into the EDR it is taking its roots in other development regions as well. Moreover, during last few years, the people in the developed country are gradually turning into organic foods. Preference to organic tea is also gaining momentum accordingly. Nepal can cash in this potential by converting present tea industry into organic. Lately, organic tea is fetching a high price compared to traditional ones. Table 2.4: District wise Area and Production of Tea in Nepal, FY 2063/64 (2006/07)
SN District Reg. Company Area, ha Prodn, Mt 6107 1347 382 219 23 933 9011 8684 470 84 47 5 50 9340 Small Farmers Nos. of Area, Prodn, growers ha Mt 871 2889 4507 4907 3705 1050 835 312 331 337 7593 433 158 135 89 7409 132 69 37 33 5828 Total Area, Prodn, ha Mt 8996 13191 5052 1520 815 377 158 1022 16420 216 116 42 83 15168
1 2 3 4 5 6
Jhapa Ilam Panchthar
Dhankuta Terhathum Others Total Source: NTCDB 2008
2.3 2.3.1
PRODUCTION MANAGEMENT Inputs Supply Situation
The initiation of tea cultivation begins with the management of seeds/seed materials and other inputs associated with it. Most of the small tea growers use seedling/saplings produced in commercial nurseries or in some instances bring them from tea outreach program maintained by NTCDB in the districts. Improved seeds are always brought from across the border, whereas the clones (cuttings) are usually used from the established tea garden close to small tea growers. Commercial tea nurseries have been once a thriving enterprise in tea growing areas. The venture has been discontinued with the decrease in tea plantation in recent years. The other inputs like fertilizers, plant protection materials, nursery accessories are supplied by suppliers based locally and/or from Birtamod and Siligurhi (India). 2.3.2 Credit Supply Situation
Picture of credit supply situation is rather bleak and a bit contradictory. The financing institutions Agriculture Development Bank in particular has invested a sufficient fund in tea development in the project area. The interest charged on tea credit is comparatively cheaper (10% per annum). On the top of that Nepal Government on its part has contributed a lot by providing interest subsidy through the Bank. According to the bank, the performance of the credit, however, is not very satisfactory. The bank expressed a great concern over non payment of credits in stipulated time forcing it to put the tea credit in its bad portfolio. As per directives of Nepal Rastra Bank, financing institutions cannot invest on portfolios that fall under 'bad' category. Due to this, some of the farmers/growers interacted during the field visits, spoke of lack of credit supports for new plantation/expansion. Almost all tea growers, be it individual growers or big companies are using ADBL credit facility in one way or others.
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2.3.3
Garden Development
The tea plant in its natural stem grows into small or medium-sized tree, but in commercial plantations, it is pruned and trained to form a many-branched low bush and is encouraged to produce vigorous vegetative growth by adopting an appropriate schedule of fertiliser applications. Nursery The cultivation of tea begins with the establishment of nursery. The nursery beds of convenient size are prepared. Tea is generally propagated by seeds, but in recent years the use of high-yielding clones (cuttings) have become popular. The plants are initially raised in nurseries. The planting material is obtained from the vegetative propagation of selected cuttings from especially grown tea mother bushes each with a leaf and an internode. Planting The area intended for planting is first cleared of wild growth and levelling of the land is carried out. Planting lines are traced and pits of convenient size (generally 30 - 40 cm deep and 24 cm wide) are dug. The spacing of 105cm X 75cm X 75cm (double hedge system) accommodates about 15000 plants per hectare. The soil is heavily mulched during initial one or two years. Weeding It has been recognised that weeds compete with the tea plants for nutrient, and weed control is an important cultural practice in tea plantations. Weed control has been done manually as well as by using chemical weedicides. Pests and diseases are effectively controlled with chemicals. In some areas, organic farming system is practised by introducing organic pest control mechanism. Manuring A systematic manuring schedule is followed right from the nursery stage up to maturity. Training, pruning & plucking The tea plant is initially trained into small bush by centering low within a few months of planting, or at the nursery stage itself, by removing the central leader stem in order to encourage a quick development of lateral branches. The lateral branches are cut to a convenient height of 40-50 cm, and the growth above this height is periodically plucked. Thus a small compact bush is formed. The bush is plucked or harvested at regular intervals depending upon the growth made, and after about 4-5 years from planting, a formative prune is given, cutting the main branches at about 35-40 cm from the ground level. New shoots developing on the frame are allowed to grow unhampered and primary shoots are tipped leaving a growth of 20-30 cm above the pruning cut, depending of the kind of cut. Thereafter, the crop is harvested at regular intervals. Pruning and skiffing are done periodically to keep the height of the bush at a convenient level for the pluckers to operate and to encourage vegetative growth. The pruning cycle extends over a period of 4, 5 or 6 depending on growth. After a series of pruning cycles, the
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bush is rejuvenated by hard pruning removing all cankered and diseased portions of the stem. The economic life of the tea bush is generally 40 to 50 years 2.4 TEA PROCESSING
Tea processing begins right after a green leaf is plucked. The quality of tea depends among other things on the types of leaves plucked and the way of handling of them before they reach the factory. 2.4.1 Processing technology
The shoots (two leaves and a bud) may be prepared in several ways to produce either "black" or "green" tea. To make the former, the leaf is usually withered and rolled or distorted, by rolling in the conventional tea rollers (for manufacturing of Orthodox tea), or is passed through tea machines of later origin, the rotor vane and CTC rollers which exert drastic action on the withered leaves. The juice of the leaf cells is exposed to air to oxidise (fermentation) when important chemical changes take place. When the optimum stage in the chemical change is reached, the action of the enzyme is arrested by drying the fermented leaves in a current of hot air in suitable tea dryers. 2.4.2 Sorting and grading
The processed tea passes through a series of meshes, thus sorting out leaf grades and dusts. Orthodox tea is produced in following major grades: Table 2.5: Major Grades of Orthodox Tea
Leaf (1st Grade) FOP :Flowery range Pekoe STGFOP: Special Tippy Golden Flowery Orange Pekoe TGFOP: Tippy Golden Flowery Orange Pekoe GFOP: Golden Flowery Orange Pekoe OP: Orange Pekoe Broken (2nd Grade) GFBOP : Golden Flowery Broken Orange Pekoe FBOP: Flowery Broken Orange Pekoe GBOP: Golden Broken Orange Pekoe BOP: Broken Orange Pekoe BOP1: Broken Orange Pekoe One BPS: Broken Pekoe Souchang Fanning (3rd Grade) T/GOF: Tippy/ Golden Broken Orange Fanning FOF: Flowery Orange Fanning BOPF: Broken Orange Pekoe Fanning OF: Orange Fanning Dust (4th Grade) FOF: Flakky Orange Fanning FD: Fine Dust
In general, first grade constitutes 80% of total, followed by second grade 10% and fanning and dust 5% each. Table 2.6: Green Tea Grades
Leaf (1st Grade) YH Young Hyson FYH Fine Young Hyson Broken (2nd Grade) GP: Gun powder H : Hyson Fanning (3rd Grade) FH: Fine Hyson Dust (4th Grade) Dust
2.4.3
Packaging
After sorting and grading the tea is usually packed in jute bags with plastic lining or ply chests with tin foil linings. It is ensured that the tea container should be air tight and moisture proof. Moisture content should not exceed 3% while packing.
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2.5
COST OF PRODUCTION
Cost of production of tea varies from one district to others and one locality to others. However, costing based on an average price for one ha tea plantation in the hills come about Rs.99400 and maintenance cost of about Rs. 65000 to 40000 per ha per year. At the given price, the venture for small tea growers with a hectare of tea plantation is not feasible if they use labour from outside. The scenario changes with the increase of plantation size, i.e. cash flow calculated for 25ha of plantation shows a positive figure from ninth and tenth year with debt servicing and from 7th year onwards in case of without debt servicing.
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Table 2.7: Plantation and Maintenance Cost (in 1 ha)

SN A 1 2 3 4 B 1 2 3 4 5 6 7 Inputs Planting materials Fertilizers - Urea Organic Manure Plant Protect Materials Manpower Land preparation/ layout/ staking Holing, Planting/ Infilling, Mulching Weeding & Hoeing Manuring, plant protect Training & Pruning Trails & Drain maintenance Tea Plucking Total Production & Sales Source: Field survey, 2008 20 MD MD MD MD MD MD MD 80 80 80 80 80 80 80 125400 80 90 230 120 30 Kg Kg LS 14 0.5 350 15000 4900 7500 4000 44000 7200 18400 9600 2400 0 6400 58 120 35 35 10 35140 4640 9600 2800 2800 800 47 120 40 40 10 31810 3760 9600 3200 3200 800 41 120 40 55 10 29280 1200 3280 9600 3200 4400 800 100 45 50 10 60 8000 3600 4000 800 4800 29200 24000 45000 500 250 250 50 1200 40000 20000 20000 4000 96000 220000 900000 6000 3000 5000 20640 6000 3000 5000 20560 6000 3000 5000 21280 6000 0 3000 5000 21200 30000 15000 25000 180000 Nos. 5 13000 Particulars Unit Rate, Rs. / unit 1Yr Qty. Amnt 81400 65000 1300 Qty. 2Yr Amnt 14500 6500 650 Qty. 3Yr Amnt 11250 3250 Qty. 4yr Amnt 8000 Qty. 5yr Amnt 8000 Qty. 6-10 yrs Amnt 40000
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2.5.1
Plantation and Maintenance (Garden)
No new plantation of tea is reported during the field survey. Due the instability of green leaf price, the farmers are in no mood to expand or venture into new area development under tea. They are engaged in maintaining the garden developed earlier. When asked about the new plantation and expansion of existing area they expressed reluctance in the present situation. 2.5.2 Harvesting and post harvest handling
Harvesting Initial plucking of green leaves begins along with training and pruning of tea plants to maintain bush. The commercial tea plucking however starts only after 5-7 years depending on the altitude of tea growing area. The area in lower altitude starts producing green leaves earlier compared to higher altitudes. Plucking from fully matured tea bush can be divided into four categories, namely Spring Flush: The early first flush tea is harvested in months of February to mid April. It has a light red colour with yellowish green liquor with gentle taste with aroma and flavor. It is accepted by the connoisseurs as an afternoon tea. Summer Flush: Late first flush comes in May and June. This flush comes with consolidated qualities of tea with bright and shinning colour with good flavour, taste, aroma and muscatel. It is recommended best for late afternoon tea. Monsoon Flush: Tea leaves harvested after June comes with some change in liquor. It looks deep red but shinning colour, some briskness in taste. This flush has an honor for morning tea. Autumn Flush: It is harvested in the autumn - the last harvesting season. Its liquor contains strong coppery colour with other special qualities like aroma, flavour briskness, and muscatel. Connoisseurs have suggested autumn flush for morning tea with some milk Post-harvest curing Green leaves produced in the farmers' level do not undergo any curing, rather it is sent to the processing factory as soon as possible. The green leaves once plucked cannot be stored for over 10-12 hours and that in well aerated conditions only. Grading In general, grading of green leaves is not carried out. Practice of grading green leaves, however, started in Fikkal area where some of the processing factories started offering better price according to quality. Quality of green leaves is augmented according to the percentage of standard leaves (two leaves and a bud) present in bulk. Transporting Green leaves harvested are usually collected in bamboo baskets or in open hips. They are transported to local road head collecting points by porters or mules. From the collecting centres, they are transferred to processing factories on tractor with trolleys and/or mini trucks/vans.
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Processing Green Leaves Collections: Depending upon the availability of raw materials (green leaves), there are two types of processing factories bought leaf or own garden. Boughtleaf factory is the one that depends entirely on leaves bought from small growers in the area. It usually does not own the garden. Apart from Kanyam in Ilam, all orthodox tea processing factories located in Ilam district are bought leaf factories and depend heavily on small tea growers for green leaves supply. Such factory usually sets up collecting points at road heads to facilitate small growers. The farmers located close to factory bring their green leaves on their own. There are some commission agents acting to provide services to both farmers and factory owners. The registered companies that have been maintaining the garden and processing factory simultaneously do not depend on small growers for green leaves. Although, some of them buy green leaves to maintain their capacity utilization. Kanyam in Fikkal, Kanchanjungha Tea Estate in Pachthar and Guranse Tea Estate in Dhankuta fall in those categories.
Some small tea growers located afar from processing factory make handmade tea for local consumption. The process involves Weathering (24hrs.) Rolling (by putting the green leaves inside a jute sack and roll manually) Fermentation (in the sack or basket for 4-6 hrs.) and Drying (in sun for 24 hrs.) Price of such tea ranges from Rs.100 to 120
There are some other companies with small garden of its own depends on bought-out leaves for their factories to operate properly. Kuwapani and Narayani in Dhankuta, Small Tea Producers in Fikkal are some of the examples. Processing stages: Depending on the type of tea to be produced different processing methods are employed. Method of producing Green tea, Orthodox tea and CTC tea are different. Processing of tea, starts with offloading of green leaves in the factory premise and feeding them into withering trough. Withering duration varies according to the seasons shorter duration in dry (5-6 hours) and longer duration in wet seasons (12-13 hours). After withering, the green leaves are fed into sets of machinery. Processing stages of tea production can be explained by following flow charts as well:
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Fig. 2.1: Orthodox Tea Production process

Green leaves Witheri ng Rollin g Ferment ation Drying Sorting & Grading Packa ging
In Witheri ng Trough
In Rolling Tables
In Racks or Floors
In Dryers (Coal/ Woods)
In Sorting/ Grading machine
Green Leaf Tea Processing (by Steamed Method)
Green leave
Steaming
Rolling
Drying
Sorting & Grading
Packagi ng
Green Leaf Tea Processing (by Dry Method)
Green leaves
Dry leaves
Rolling
Drying
Sorting & Grading
Packagi ng
Packaging Once the made tea produced and graded, tea is packaged. Packaging is done either in cardboard tea chests or in paper bags. It is learned that the tea produced during summer season (Chaitra / Baishakh) are put into cardboard box and one produced in rainy season are packaged in paper bags. Raw materials for cardboard box are available in domestic markets, whereas the paper bags are imported from India and Sri Lanka.
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CHAPTER III: MARKETS AND MARKETING
3.1
GREEN LEAVES
Green leaves are the primary outputs of tea plantation. And their marketing is one of the major problems facing by tea growers in the hills. The problems are more pronounced in the district of Ilam, where area and number of tea growers are significantly high. It is estimated that there are about five thousand individuals and companies engaged in growing tea in Ilam district alone. And the area covered under tea is about 5052 ha. So far, the production of green leaves from the said area is around 76,02,630 Kg only. The yield is comparatively low due to young bushes. Once all tea bushes in the area attain their full maturity, the production will increase by many folds. The processing factories currently operating in the district with a combined capacity of absorbing 50,00,000 Kg of green leaves are not sufficient. There must be an alternative markets for the surplus products. In the distant past, the growers in the district used to sell the surplus products across the border towards Darjeeling and have been getting handsome returns. From last couple of years those alternative doors have been closed and tea growers suffered a lot. This season, a ray of hope emerged after tea factories located in Jhapa started purchasing green leaves from the Fikkal area with a reasonable price. The venture however, is not a permanent solution. Due to current high demand of CTC tea in Indian markets some of the factories are engaged into increasing the volume by any means. And it benefited hill crops. A couple of new tea processing units under construction in Ilam area may of course bring some relief to increasing volume of green leaves in a long run. So far the green leaves produced in the area have been either sold to local processing units or to the factories located in Jhapa and as far as in Dhankuta. Green leaves produced by small growers in Dhankuta area are consumed easily by three processing units operating within the district. It is learned that the all three factories are running under-capacity due to scarcity of green leaves in the district. Some of them even go as far as Fikkal to collect green leaves. Likewise, Kanchanjungha Tea Estate of Panchthar district has been absorbing almost all green leaves produced in the district.
3.2
MADE TEA
The end (Finished) product of a tea processing factory is called Made Tea. As discussed in previous chapter the made tea produced may be of different grades. Marketing of made tea orthodox tea in particular is very challenging job, because the demand for orthodox tea in domestic market is very low. It is already stated that almost of 90% of orthodox tea is exported. And almost 99% of the export (official and unofficial) is through India.
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An interaction with officials of Ilam Tea Producers P. Ltd. and Nepal Small Tea Producers P. Ltd. revealed that the tea produced in Nepal is exported through Indian traders located in Siligurhi or Kolkota. Some processors have developed a good business relation with Indian traders and are doing quite a good job, while others are not so fateful. Once Nepal Tea enters into the Indian territory it becomes a terminal market for its disposal and unscrupulous traders capitalize such situation. Thus, an over dependency on Indian markets makes Nepal Tea marketing highly vulnerable. Frequent imposition of control at the border and stopping of imports of orthodox made tea and green leaves by India causes complete stoppage and sharp price decline. A very small consignment of Nepal Orthodox tea is exported directly to overseas markets Japan, Germany and other European countries. The marketing of tea is carried out by the processors themselves. There is no individual tea traders encountered who is involved in tea export. Fig. 3.1: Orthodox Tea Producing Area and Marketing Centres
Production area
District
Processing Centres Fikkal Ilam Nepaltar
Terminal Markets
Ilam Mechi Highway Corridor Panchthar
Japan, Germany, Europe
Jitpur
Phidim
Terhathum Koshi Highway Corridor
Dhankuta
Hile
3.3
TRADERS
Village Level Mobile Traders The role of village level mobile traders is tremendous where small tea growers are concerned. Green leaves, produced in small farmers' level, are collected by these traders in their farm gates and transfer them to either road head collection points designated by the processing factories or directly to the factory itself. The green leaves from farms to
Kolkota, Siligurhi, (India)

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road heads are transferred either by mules or by porters. From road heads they are transferred by tractors and/or trucks. Road Head Traders Road head traders engaged in tea collection are rare. There are some in Fikkal area (Barbote) engaged in collecting green leaves at road heads and transfer to Processing Factories. In fact, these collectors are involved not only in trading green leaves, they provide credit services as well in off seasons.
3.4
PRICING
Pricing of any commodity is based on demand and supply configurations. Whenever demand of any product increases, the price associated with it also increases accordingly. Same principle applies to pricing of green leaves. During last couple of years demand of green leaves from processing units has been far less than productions. On the top of that India imposed ban on purchase of green leaves from Nepal. This resulted in lower price per unit of the crop. The scenario has improved this year thanks to factories located in Jhapa and Dhankuta. Farm Gate Price (Green Leaves) Price of the green leaves varies according to plucking seasons and level of demands for it. Usually, green leaves produced at the beginning of the season, summer flush in particular fetches comparatively best price followed by autumn flush. Rainy flush produced during the Monsoon season attracts the lowest. Depending on the demands, price of green leaves in the past has never been stable. It was always fluctuating. Before regulating flow of green leaves across the border Nepalese tea growers have been enjoying fairly good price of their produce. In those haydays traders from across the border come to farmers' doorstep to collect green leaves offering best price possible. The scenarios have been changed during past couple of years when green leaves flow towards India have been tightened and tea growers have to depend entirely on domestic processing factories, some of which are operating in their full capacity utilization. Pressure on processing factories has been immense during these years. During these days, some of the enterprising tea growers have united to venture towards new tea processing plants and some of them are going to be ready to receive coming season's first flush. During the field study it is revealed that the green leave produced in this season are getting fairly good price thanks to tea processors located in Jhapa. They are offering a good price for the green leaves produced in the hills. It is learned that this season's spring/autumn flush has fetched on an average Rs.24 per kg and monsoon flush is receiving Rs.20 per kg. These prices are said to be best prices compared to recent past. Likewise, handmade (manually processed) tea in Panchthar district have been fetching Rs.200 per Kg for First Flush and Rs.150/Kg for Second Flush
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Factory Price (Green leaves) The tea processing factories in Ilam district have some regular suppliers of green leaves. They have fixed the price of green leave for the season. According to them, the companies are offering Rs.18 per kg for grade one, followed by Rs.16 for second grade and Rs.14 for lower grades.
3.5
IMPORT AND EXPORT OF TEA
The formal export/import statistics as presented in the table below showed that Nepal exported some 3493 Mt of the tea during FY 2063/64. It is learned that almost 90% of orthodox tea produced in the country is exported. If it is true, total export volume of orthodox tea is about 1779 Mt and the rest of the consignments must be CTC tea. The export volume of CTC is about 13% of total production in that fiscal year. Rest of volume is consumed domestically. Nepal exports orthodox tea to Germany, Hong Kong, Netherlands, and Japan. The data available for last nine years indicate that the export of tea is rising constantly. The trend has been slowed down a bit during last two years. The import figures, however, showed an unstable trend during the same period. Table 3.1: Tea Exports and Imports from FY 2055/56 to 2063/64
Year 2054/55 2055/56 2056/57 2057/58 2058/59 2059/60 2060/61 2061/62 2062/63 2063/64 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 Export (MT) 35.01 83.80 81.60 69.50 79.60 193.00 984.22 4316.00 4623.00 3493.00 Export (Rs. '000) 11745 30081 25722 23084 27787 53908 104822 438771 98644 123642 Import (Rs. '000) 60218 27831 73277 98000 8838 468 992 419 5005 19000
2064/65 2007/08 9401.88 902121 NA Source: Nepal Overseas Trade Statistics, Trade, & Export Promotion Centre (TEPC), Customs Office, Mechi
The audited report of the last fiscal year is yet to be published. But figure is quite encouraging with 9401 Mt of tea has been exported from the country. Moreover, an interaction with one of the CTC processors in Jhapa revealed that he has alone exported some 5000 Mt of CTC tea in the current season. The jump in the figure is said to be due to the high demand of CTC tea in international markets owing to the draught in tea growing area in Africa one of the major suppliers of CTC tea. Nepal overseas trade statistics still shows a significant quantity of tea being imported into the country. Value of such import in the FY 2063/64 is in the tune of Rs.19 millions. It's an irony - the country still imports such a huge volume from across the border, namely India. It is believed that some of the tea exported to India gets blended in well-known Indian brands and returns to Nepal again.
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3.6
INSTITUTIONAL INVOLVEMENT
Primary Organizations There are score of farmers' organization, cooperatives, and associations involved in promoting tea in the project area. Small Farmers Tea Producers' Association (Chairperson Purna Karki) Nepal Tea Association (Chairperson Mr. Aswini Agrawal) Nepal Tea Producers Association (Chairperson Mr. Chandi Parajuli) Nepal Tea Federation (promoted by farmers, processors and traders) HIMCOOP cooperative formed with the objectives of market promotion and marketing Facilitating Agencies One of the major facilitating organizations working in the field of tea is National Tea and Coffee Development Board formed under the chairpersonship of Minister of Agriculture, Government of Nepal. The board has been formed with an objective of promoting and overall development of tea sectors in Nepal with its main office located in Kathmandu. It has a regional office based in Birtamod and a number of outreach offices located in tea growing districts. The board in its inception used to be very active in promoting tea by providing technical supports to the small tea growers. It also distributed planting materials in the beginning. The activities seem to be in dormancy in recent years with limited resources and lack of competent technical hands. Service providers, donors, local government bodies, NGOs / INGOs Apart from Government Institutions and associations/cooperatives formed by the entrepreneurs, there are quite a number of non government organisations/institutions working in the field of tea sectors, they are Himalayan Orthodox Tea Producers Associations (HOTPA) Tea Sector Services Centre (TEASSEC)
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CHAPTER IV: VALUE CHAIN ANALYSIS
4.1
INTRODUCTION
With an objective of studying value chain of the tea an extensive field visits were carried out in four major tea growing hill districts of Eastern Development Region. The field visits concentrated on interviews with tea growers, processors and traders, and carried out a series of interactions with concerned stakeholders Commercial Agricultural Alliance (CAA) district offices, District Chamber of Commerce and Industry (DCCIs), District Agriculture Office (DADOs), National Tea & Coffee Development Board (NTCDB) Outreach / Regional Offices, Cooperatives, NGOs/INGOs, individual growers and registered companies, etc. The secondary data and information so collected have been duly analyzed and interpreted to derive upon following findings and its corresponding chain produced:
4.2
VALUE CHAIN MAP
As show in fig. 4.1, the tea value chain map provides a graphic preview of the commodity as it moves from production to the consumers, passing through different stages and processes. The linkages are shown vertically from bottom to the top. The left hand blocks represent the major functions of the chain. The functions, in this case, include production, collection, trading, processing and marketing. The second blocks represent the activities carried out to accomplish listed functions and third blocks the major players involved in carrying out the functions and activities. As seen in the diagram, some players perform more than one function whereas the others are confined to only one function. For example, the local collectors collect the product from farmers/growers, and supply them to the processing factories bought leaf or operated on own leaves. The made tea produced in the factories is either exported directly to overseas or sent to blenders/packagers for home consumptions. The supporting service providers or the enablers, shown on the right hand block, assist and facilitate the players in carrying out their functions. The enablers are mainly the institutions - formal and informal, credit suppliers. The roles of the enablers can encompass several actors and functions in the value chain.
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Fig. 4.1: Tea Value Chain Map
Marketing
Trading III
Transfer packaged Tea (To domestic consumers)
TIPC Domestic Consumers (2%)
Packaging
Blending and Packaging (For domestic consumption)
Blenders/ Packagers
Inputs Packaging materials Suppliers
Trading II
Bought leaf Factories
Processing
Rolling, Fermenting, Drying, Sorting
Own Factories
Transfer Tea in Bulk (To blenders/Packagers)
Machinery & Fuel Suppliers
Trading I
Transport GL to Processing Units
Local Collector
Farmers' Groups
Production
Nursery, Plantation, Maintenance
Small Tea Growers
Reg. Companie
Tea Board (NTCDB)
Tea Credit (ADBL)
Functions
Activities
Major Players
Enablers (Support Services)
Tea Associations (Nepal Tea Producers' Association, Nepal Tea Planters Association, Himalayan Orthodox Tea Producers Association
Export (India, Europe & Japan)
Exporters/Int'l Consumers (98%)
Customs, Air Cargo
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4.3
VALUE CHAIN ANALYSIS AND PRICE MARGINS
The analysis of price margins has been carried out by using a standard format that shows major costs, margins and prices along the chain and the share of each players as he product moves from production to local traders, collectors, processors and finally up to the exporters. The analysis is based on the information obtained along the Mechi corridor. The Table below illustrates the price margin analysis of tea in Ilam and Birtamod, a typical marketing channel from Hills to Terai plain. It shows the analysis of per unit margins retained by the major players along the chain from producers to the exporters. Table 4.1: Value chain Analysis and Market Margins
Farmers/Growers Item Cost Production Costs Inputs Fuel Wood Labor Others Total Production Costs 6.66 1.02 11.2 Acquisition Cost Trasfer costs Post Production Costs Miscellaneous 0.75 0 Total Assembling Costs Miscellaneous 18.0 0.7 18.7 0.0 Acquisition Cost Trucking Costs Total Assembling Costs DDC & other tax 155 0.0 22 Acquisition Cost Trucking Costs Total Assembling Costs DDC & other tax/levy Custom Clearance & transfer K'bhittaKolkota Total Export Level Cost Losses Margin Sales price Kolkota 200 0.96 267.5 1.48 3.53 Collectors Item Assembling Costs Cleaning/Sorting Packaging (in jute bags) Cost Processors Item Cost Assembling cost Processing cost Raw materials, Admin, O'head 133.0 Cost, etc. Exporter Cost Item Assembling cost Sorting O'head Cost 0.00 66.5
8.90
Total Farm Level Cost
11.9
Total Trading Cost Losses Margin Assembler level price
18.7 0.0 3.3 22
Losses 0.00 Margin 6.1 Avg Farm gate 18 Price Source: Field Survey, 2008
Total Wholesale Level Cost Losses Margin Wholesale level price
155
277.8 0.00 18.2 296
45 200
Farmers/Growers As seen from the table above, the margin attributed to the farmers/growers' share is comparatively smaller than those of processors along the chain. Total production cost calculated at the beginning of the plantation is Rs.11.2 per kg of green leaves. At the first year of plantation, inputs constitute major portion (almost 65%) and the rests 35% are labour employed. With the post production cost included, the total farm level cost is around Rs.11.9 per kg. The margin enjoyed by the farmers is Rs. 6.1 per kg. Green leaves Collectors Role of green leave collectors along the value chain is equally important. The major costs incurred by them are acquisition and transferring. The margin enjoyed by them is Rs.3.3 per Kg.
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Processors The processors on the other hands also support value chain by converting the raw green leaves into products made orthodox tea. The margin calculated for them is Rs.45 per kg. The costs of processors include acquisition, processing and overhead costs. Exporters Exporters are the last lot of the value chain. In fact, processors themselves play a vital role of exporters. They usually produce different grades of products in the factory. They are, in fact, the backbones and most sensitive lots of a value chain. They usually get a margin of around Rs.18.2 per kg depending on season and international markets.
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CHAPTER V: SWOT ANALYSIS

SWOT (Strength, Weakness, Opportunities and Threat) is a powerful tool used in developing strategies for intervention. The tool provides a framework for understanding controllable internal and non-controllable external factors that the interventions should address for the entire value-chain. The critical issues of the SWOT can be categorized into the following four broad categories: S W O T - What are the commodity internal Strengths? - What are the commodity internal Weaknesses? - What external Opportunities might move the value chain forward? - What external Threats might hold the value chain back?
The typical assessments of sub-sectors strengths and weaknesses as well as the opportunities and threats specific to each of the interventions consist of the following: Production system and delivery of products in the value chain and cost which will indicate inefficiency Quality of business service provisions to indicate performance and satisfaction of chain members and end users Competitive advantages of the value chain members to show relationships among actors, if they are threatening, cooperation, or competition Market access, infrastructure, management information and financial systems Policy environment.- the kind or support needed to strengthen the linkage
The following SWOT analysis of the tea production and processing shows a number of Strengths and Opportunities for boosting value-adding interventions. During the designing of interventions adequate provisions needs to be created for addressing the weaknesses and threats for the growth of the sub-sector.
Strengths Diversified topography and agro climatic conditions provide production of Orthodox tea in the hills of Nepal Large number of farmers involved in cultivation and potential for expansion Existing gardens with comparatively young bush High demand of orthodox tea in international markets Large potential market within the country Profit from tea production is relatively higher
Weaknesses Lack of proper knowledge on cultivation and processing Dependency on technicians from across the border Lack of quality of inputs Poor on-farm infrastructure Lack of skilled manpower Low yield Shortage of processing units Quality of product - inconsistent Lack of well equipped and accredited laboratories Lack of market information & poor market access Dependency on Indian territory and
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Rural and women employment/ empowerment Steady growth in export volume and earnings Communication systems developed Loans at attractive interest rates Government grants and subsidies available Code of conduct drawn up to achieve Fair Trade Practices Opportunities Government declared the area tea zone Sufficient land area, potential for new tea plantation/expansion High demand in for both domestic and export market High potentials for additional processing factories Large blending & packaging facility for supply of bigger consignments Promotion of research &development, and training centers Potential to employ large number of people Higher yield through adoption of improved production technology
ports for transportation abroad Irregular power supply No research and development facilities No central marketing facilities (like auction)
Threats Declining international reputation due of poor quality (residual effects of insecticides/pesticides) Intense competition from neighboring countries Political instability Lack of skilled technical manpower Inconsistent government policies
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CHAPTER VI: MAJOR ISSUES AND FINDINGS
6.1
PRODUCTION
The past efforts of stakeholders concerned have definitely helped increase the production of green leaves at small farmers, cooperatives, and estates. But the processing capacity has not developed to cope with the increased production of green leaves. As a result, tea growers are selling orthodox raw materials to either CTC processors located in Jhapa or illegally to the factories across the border. Seeds/seed materials supply situation is satisfactory available locally when required but the quality is not at par. Some of the garden has been established with wrong varieties of tea, which resulted in poor performance (low yield) Chemical fertilizers are available locally quality is not good Farm yard manures are available in good quantity and quality Labour supply situation is satisfactory available locally when required Technical support services are very poor the agriculture development offices located in tea growing districts do not have any program to support or promote tea. The growers and processors have to rely on technicians from across the border for their technical advices. NTCDB's outreach offices located in the tea growing area for the promotion and development of tea sector are provided with very little resources to carry out activities related to the sub sectors. Individual growers have been operating the garden on their own Costs of inputs are relatively high. 6.2 PROCESSING There is shortage of processing facilities in some tea growing areas, whereas some of factories in the area are operating below capacity. (There seem to be mismatch between processing facilities and green leaves production. It is learned that current factories operating in Fikkal area of Ilam district are not in position to absorb all green leaves produced, whereas the ones in Dhankuta area are operating in below capacity.) The reason is due to low productive area in Dhankuta. Due to scarcity of sufficient processing facilities, tea growers in Fikkal area could not get reasonable price until last year. Electricity power, one of the major utilities to run the processing units is not stable. Factories depend on expensive generating sets to operate the units, incurring high operating costs. Packaging materials such plywood chest and paper sacks used for packing tea for export to India and third countries are not eligible to duty rebate. Facilities of value addition to the basic product are rarely available, resulting in over dependence on Indian exporters and marketers. Once Nepal tea lands in India, the Indian exporters use blend mixes of both origins causing loss of identity of Nepal Tea. Lack of awareness on true organic farming. There is no formal guidance or training towards maintaining truly an organic tea. Farmers are maintaining as per hearsay from among the growers themselves resulting in low yields.
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6.3
MARKETING There are no organized sectors assisting in marketing of Nepal tea in overseas markets. There is no central marketing/auctioning facility that determines a competitive price due to interaction of buyers and sellers in one place. No brand image still built to make global buyers aware of Nepal Tea and their quality Exporter unable to deliver as per standard accepted by buyers resulting in loss of credibility of Nepalese trade. No blending or mixing facilities available to cater to international buyers who require bigger consignments Inconsistent quality and non uniformity of products with no supportive certificates causing difficulties to make good blends Overseas buyers are not able to get supplies with consistent quality, face delays in delivery and apprehensive of getting tea with high residue level. Lack of professionally qualified and experienced marketing personnel to promote sales Accredited and equipped laboratory not available to test and analyse samples for exports. Many buyers and countries require test report on residue level, heavy metal, radiation clearances with each consignment. Orders are held up for long periods till the results are released from laboratories overseas. Organic certifications and test reports on the products from accredited laboratories/authorities are not available. Lack of efficient services on the part of Indian Plant Quarantine Office compelled the incur tea exporters additional expenditure in the form of demurrages. No brand image is still built to make global buyers aware of Nepal Tea and its quality. SUPPORT SERVICES NTCDB is not functioning as envisaged District Agriculture Development Office (DADO) apex body looking after agriculture sectors in the district level has no program on tea. Lack of well equipped and accredited laboratories for tea tasting and analysis of chemicals present in the green leaves/made tea samples for exports. Lack of market information & poor market access Dependency on Indian territory and ports for transportation abroad Irregular power supply No research and development facilities No central marketing facilities (like auction) Controlled investment on new tea projects (plantation) due to bad portfolios (non recovery of previous loans). Poor road networks have been hindering in smooth flow of green leaves from the field to the processing units.
6.4
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CHAPTER VII: CONCLUSION AND RECOMMENDATIONS
7.1
CONCLUSION
Overall situation of tea sub sector is still good in the country. It's, in fact a very promising enterprise that is contributing to overall economical, social, and environmental aspects in the area. It's a labour intensive enterprise giving employment to all kinds of people lower level labourers to high class technicians/experts. Tea garden cannot be imagined without the labourers, be it in land preparation, plantation, or maintenance. Tea harvesting, still to be mechanised in the country, is fully based on manual plucking. Similarly, the processing units are also providing employment opportunities to large section of the people rural women in particular. Furthermore, the sub sector has been contributing to government coffer with significant sum of money in the form of revenue. Tea gardens, established in slopes of the hills have been protecting land slides, erosion and contributing local area free of pollution. The tea processing, one of very few industries that neither uses any chemicals/additives in its production process nor it produces any harmful affluent hazardous to the health of the people and the nature. Hence, the industry needs the support of the government ministries and concerned institutions/organizations in its further promotion and development. The observation and recommendation presented in this report may assist in drawing out strategy for overall improvement and development of the industry. 7.2 RECOMMENDATIONS As per the demand of the tea growers, sufficient processing factories should be established in tea growing areas (Fikkal area in particular). Tripartite approach comprising up of Tea Growers, Financing Institutions and CAA is recommended for the promotion of processing facilities. Skill development training for lower level staff and intermediate/higher level training for extension/advisory staff of supporting institutions/organizations. Mechanism should be developed to control the use of poor quality seeds and seed materials, and other inputs. NTCDB should be strengthened with necessary resources and qualified humanpower to provide technical services sought by the growers and processors. And, it should be made more accountable towards tea development. Support in uprooting and carrying out new plantation in selected areas with technically unsuitable planting materials in a phase-wise basis. Blending, packaging, and warehousing facilities should be developed in the tea growing area so that the entrepreneurs/exporters concerned can prepare for export orders. A central marketing facility in the tea growing area should be developed for auctioning and trading of Nepalese tea. A fully equipped and accredited tea analysing lab should be established in the tea growing area to facilitate maintaining quality product for export.
Page 30
Final Report
A fully equipped market information system should be developed in the major tea growing areas. The outreach units of NTCDB should be strengthened to carry out research and development on tea cultivation and processing. CAA district office may create awareness among small tea growers to repay credits from financing institutions so that tea growers can enjoy fresh credits for new plantation and expansion of existing garden. In close coordination with ADBL and NTCDB, it can also assist in establishing tea processing units in farmers' level. CAA can assist in developing small road networks in the major tea growing areas, so that small tea growers from that area can easily bring their products to the tea processing factories. CAA can organise short term training/orientation programs on creating awareness in organic farming. ACTIONS TO BE TAKEN
Where Jorpokhari, Lalikharka, Nepaltar, Nayabazar, Basantapur NTCDB units How much At least one in each location How Mobilizing Cooperatives By Whom GoN/ CADP
7.3
What Green Leaf Collection centers
Establishment of Research Center/Lab Explore New Technology and HYV Cooperative processing units Strengthen National Tea & Coffee Development Centers Blending, packaging, and warehousing facilities Central marketing facility Small road networks Awareness on production technology & organic farming
One in each units
Assam, India As required
Ranke Nepaltar, Fikkal, Lalikhark Mangalbare Fikkal, Jasbire Hile & Solma Fikkal area Fikkal
At least one in each site One in each location
Providing Grants/ Subsidy Visits to Research Stations/ Councils Tripartite approach Grants and subsidy
NARC/ CADP/ NGOs NTCDB, with a support of CADP/ GoN Tea processors GoN, CADP, FIs CADP/ NARC/ NGOs
At least one At least one
Jitpur-Gagre In all Tea growing Areas
About 10km Ten pocket areas
Tripartite approach/ Coops Tripartite approach/ Coops Community mobilization Training / Orientation
Tea growers, CADP/GoN, FIs Traders, CADP/GoN & FIs Tea growers & CADP CADP / NARC
Page 31
ANNEX
Annex 1 Persons Contacted during the field study SN Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Lekh N Khatiwada Kajiman Kagate Brish Pradhan Dilip Rai Krishna P. Subedi Durga Banskota Viddya Raj Prasain Suresh Limbu Bhanu Bhakta Baral Bhisma Baiddya Ramchandra Rewant B. Karki Bishnu P Gautam Pankaj Ghimire Tek N Acharya Shiva S. Pokhrel Durga Rai Dipak Banskota NN Acharya Ram N Chhetri Balram Koirala Subh Raj Thapa Nabaraj Ghimire Bishnu Joshi Dharma R Bohara Chandra M Upreti JP Sharma Anant B Rai Madhav Sharma Isu Shankar Shrestha Tej B Thapa Madhav Nepal Prakash Address Siddigaun, Kanyam Ilam Siddigaun, Kanyam Ilam Siddigaun, Kanyam Ilam Daaktar Khola, Ilam Nayabazaar, Ilam Malbanse, Phidim 3 Aitabare, Ilam Jeetpur, Ilam Ilam Ilam Ilam Fikkal, Ilam Fikkal, Ilam Fikkal, Ilam Ilam Fikkal, Ilam Fikkal, Ilam Phidim 1, Panchthar Phidim 1, Panchthar Phidim 1, Panchthar Phidim 1, Panchthar Phidim 1, Panchthar Phidim 1, Panchthar Phidim 1, Panchthar Phidim 1, Panchthar Phidim 1, Panchthar Maheshpur, Jhapa Dhankuta Kathmandu Birtamod Birtamod Kathamandu Affiliation 1 1 1 Tea Grower Tea Grower/Processor Tea Grower Processor Small Tea Producers P. Ltd. Tea Grower/Cooperatives Processor - Handmade Tea Processor - Ilam Tea Producers Processor - Mist Valley Tea LDO, DDC, Ilam VC, DCCI, Ilam Coordinator, REAP, DCCI, Ilam Manager, CAA, Ilam M & E Officer, CAA, Ilam Fin. & Admin. Officer, CAA Ilam Manager, ADBL, Ilam Manager, ADBL, Fikkal Officer, ADBL, Fikkal Grower/Processor Kanchanjungha Tea Estate P. Ltd. Kanchanjungha Tea Estate P. Ltd. (Grower/Processor) Manager, ADBL, Panchthar DADO, Panchthar Chairperson, DCCI, Panchthar Executive Officer, DCCI, P'thar Coordinator, REAP Manager, CAA, Panchthar M & E Officer, CAA, Panchthar CTC Processor, Khusboo Tea Manager, CAA, Dhankuta NTCDB, Central Office, Kath. NTCDB, Reg. Office, Birtamod MercyCorps, Birtamod, Jhapa TEPC
Annex 2 Organization, Companies and Individuals visited during field survey 1. Government organizations National Tea and Coffee Development Board, Central Office, New Baneshwor, Kathmandu National Tea and Coffee Development Board, Regional Office, Birtamod, Jhapa
2. Non Government Organizations (NGOs) Offices of District Chamber of Commerce - Ilam, Panchthar, Dhankuta, Terhathum Himalayan Orthodox Tea Producers Association (HOTPA) Different Cooperatives
3. Associations Small Tea Producers' Association Nepal Tea Association Nepal Tea Planters Association
4. Individual Tea Growers / Entrepreneurs Individual Growers/Farmers (Ilam, Panchthar and Dhankuta) Organized Producers/Companies (Ilam, Panchthar, Dhankuta and Jhapa) Inputs Traders/Suppliers/Importers (Birtamod, Bhadrapur, Biratnagar) Processors (Ilam and Dhankuta) Outputs Traders/Exporters (Fikkal, Birtamod, Biratnagar)
5. Credits (Production, Processing and Marketing) Different Commercial and Development Banks (Ilam, Dhankuta, Birtamod, Biratnagar)
Annex 3 Product Chain Analysis Commercial Agriculture Development Project (Checklist Farmers/Producers)
Name of the Commodity: Date of interview: ../..../2056 Interviewer: .. Interviewee's Position in Value chain: (Farmers / Producers) Interviewee's Address & Contact Details: Village/town : VDC : District : . Distance from district HQ : . Nearest Markets/Haats : . Contact tel./Mob./Email : . .. ... Demography of the area Population : .. Ethnicity : .. No. of households : .. Infrastructure/support services Road networks : .. Technical Service centers: Communication : .. Others: . Miscellaneous Land use/Cropping pattern : . Other industries : .
General Background Markets Tick Whom do you sell your products to? Local consumers Traders Exporters Where do sell your products? Within the district Markets Collecting Centers Outside the district Markets Collecting Centers Marketing Tick How do you market your products? By yourself Collectors/Traders comes to buy Have you ever considered selling your products directly to national markets? Or Exports? Accessibility/Transportation Tick Distance to Local consumers Traders Exporters How do you transport your products to? Local consumers Traders Exporters Remarks Remarks Remarks
Yes/No
Because,
Use of the products Do you know for what purpose your product is being bought? For fresh consumption For use in processing plants as raw materials Export Farm/Production management Commodity Green leaves Made tea Variety Local Improved Grade First Second Third Area Coverage In Ropanies In Bighas Value addition
Production Cost Estimate & Production Nursery (Unit Cost) SN Particulars A Total Inputs 1 Planting materials 2 Chemical fertilizer* - Urea - DAP - MoP 3 Insect/Pesticides 4 Polythene tubes 5 Bamboo (Poles) 6 Thatch 7 Twines (Sutli) B MANPOWER 1 Seed bed preparation 2 Shade for seed beds 3 Filling up of soil in poly bags 4 Planting seed in poly bags 5 Watering 6 Plant protection 7 Fertilizer application 8 Weeding & hoeing TOTAL for 1 unit area Plantation (Unit Cost) SN Particulars A Total Inputs 1 Planting materials 2 Chemical fertilizers - Urea - DAP - MoP 3 Insect/pesticides B Total Manpower 1 Land preparation 2 Layout & Staking Commodity: Tea/Cardamom Rate Quantity Amount, Rs
Unit Nos KG KG KG LS KG Nos. Kg MD MD MD MD MD MD MD MD
Unit Kg Kg Kg Kg
Rate
Quantity
Amount, Rs.
MD MD
3 4 5 6 7 8 9
Holing Sapling planting Mulching Weeding & sickling Fertilizer application Plant protection Trail & drain construction TOTAL, for 1 unit area
MD MD MD MD MD MD MD
Maintenance (Unit Cost) SN Particulars
Unit
Rate Rs/u nit
2Yr Qty. Am nt
Qty .
3Yr Am nt
4yr Qty. Amnt Qty.
5yr Amnt
A 1 2
3 B 1 2 3 4 5 6 7 8
INPUTS Planting materials Chemical fertilizers - Urea - DAP - MoP Insect/pesticides MANPOWER Infilling Mulching Weeding & Hoeing Appl'n of fertilizers Plant protection Training & Pruning Trails & Drain Constn. Tea Plucking TOTAL in 1 unit
Nos. Kg Kg Kg
MD MD MD MD MD MD MD MD
Pricing Could you describe on how you set prices with buyers? Starting price, Rs./kg End price, Rs./kg Are you satisfied with the price? (Please rate your price) - Unfair - Relatively fair - Fair - Good What are the factors governing the price in your area? - Seasonality - Availability of the product - Bargaining/negotiating strength - Availability of processing unit in the area - Availability of markets - Road/transport system - Market information Who are the major players in determining the price in your area? - Collectors/Traders - Processors - Exporters - others
Inputs supply situations Inputs
Availability Regular/Irregular
Available locally/ outside
Quality (Good/ Satisf'ry / Bad)
Major Suppliers
Seeds/Seedlings Chemical Fertilizers FYM Pesticides/Insecticides Others Labor supply situation Labor
Availability Regular/ Irregular
Quality (Good/ Satisfy / Bad)
Labor other than locals
Own/Household Skilled Semi Skilled Skilled Credit supply situations Credit
Availability Regular/ Irregular
Access (easy, difficult, no access)
Name the institutions/ Individuals providing credit services
Institutional (Bank/Fin. Inst.) - Term Loans - Working Capital Non-institutional (Local money lenders, etc.) Services of Credit Supplying Institutions/Individuals Credit Service (Good/ Satisfy / Bad Institutional (Bank/Fin. Inst.) Non-institutional (Local money lenders, etc.) Quality of Product Quality criteria
Terms & Conditions (favorable/ unfavorable
Areas of improvements
Remarks
Who set the criteria?
Who check for quality?
Where the inspection is done?
Factors affecting success of the product Determining factor Availability of planting materials & inputs Quality of planting materials & inputs Technical know-how & technical support services Land Other Major Problems & Constraints Determining factors Availability of planting materials & inputs Quality of planting materials & inputs Technical know-how & technical support services Supporting infrastructure - processing units - road & transport - collection centers - credit - land
Specify
Grade
Specify
Grade
- quality control units Information on price and market Good relationship with buyer Other Solutions and area of interventions Obstacle Availability of planting materials & inputs Quality of planting materials & inputs Technical know-how & technical support services Supporting infrastructure - processing units - road & transport - collection centers - credit - land - quality control units Information on price and market Good relationship with buyer Other
Solutions
If the possibility would be there, would you be willing to produce the product in larger quantities? No (under no conditions) Yes, but with some conditions Yes and even if there are some bad years Undecided Overall impression Answer farmer Risky but profitable Risky and unprofitable Unrisky and profitable Unrisky but not profitable
Reason farmer:
(Checklist Processors)
Name of the Commodity: General Background Date of interview: ../..../2065 Interviewer: .. Interviewee's Position in Value chain: (Processors) Interviewee's Address & Contact Details: Village/town : VDC : District : . Distance from district HQ : . Nearest Markets/Trade center : . Contact Tel./Mob./Email : .. .. Demography of the area Population : .. Ethnicity : .. No. of households : .. Infrastructure/support services Road networks : .. Technical Service centers: Communication : .. Others: . Miscellaneous No. of processors : . Other industries : .
Category of Processors Garden owner Bought out leaves Mixed Area coverage & nos. of farmers/producers Category Garden owner - Own garden area - Out-growers area - Nos. of out-growers Bought out leaves - Area under out-growers - Nos. of out-growers
Rop./bigha/Ha
Markets Particulars Whom do you sell your products to? Local consumers Traders (national) Traders (international) Exporters Where do sell your products? Within the district Markets Collecting Centers Outside the district Markets Collecting Centers Marketing
Tick
Remarks
Tick How do you market your products? Oneself Through Traders Through Packagers
Remarks
Accessibility/Transportation Tick Distance to Local consumers Traders Packagers Exporters How do you transport your products to? Local consumers Traders Packagers Exporters Use of the products Do you know for what purpose your product is being bought? For fresh consumption Value addition (packaging) Export Others (Oil extraction) Remarks
Tick
Production technology/process (flowchart) Made Tea Green Leaves
Production Cost Estimate & Production SN Particulars 1 Fixed Cost Indirect Labor Depr & Amort Insurance Fixed Elect. Charge Repair & Maintenance Office O'heads 2 Variable Cost Direct Labor Utilities Repair & Maintenance (var.) Raw materials & inputs Financial Cost 3 Interest on LTL Interest on STL 4 Total Production Cost (1+2+3) Cost of production per unit
Unit
Rate
Quantity
Amount, Rs.
Pricing How do you fix raw material price? By negotiation Association fixes the price Starting price, End price, Could you describe on how you set prices with buyers? Starting price, Rs./kg End price, Rs./kg Are you satisfied with the price? (Please rate your price) - Unfair - Relatively fair
- Fair - Good What are the factors governing the price in your area? - Seasonality - Availability of the product - Bargaining/negotiating strength - Availability of processing unit in the area - Availability of markets - Road/transport system - Market information Who are the major players in determining the price in your area? - Collectors/Traders - Processors - Exporters - Others
Inputs supply situations Availability Regular/ Inputs Irregular Green Leaves Raw Cardamom Fuel wood Coal Furnace oil Diesel Others Labor supply situation Particulars Own/Household Skilled Semi Skilled Skilled Technical hands Others Credit supply situations Availability Regular/ Irregular Institutional - Term Loans - Working Capital Non-institutional Availability Regular/Irregular
Quality (Good/ Satisf'y/ Bad)
Major Suppliers
Available locally/outside
Quality (Good/ Satisf'y /Bad)
Labor other than locals
Access (easy/ difficult/no access)
Services of Credit Supplying Institutions/Individuals Services (Good/ Credit Satisfy /Bad Institutional (Bank/Fin. Inst.) Non-institutional Quality Check (Accreditation) Particulars Quality criteria Who sets the criteria? Who checks for quality? Where the inspection is done? Cost involvements for accreditations Area of improvements?
Terms & Conditions (favorable/ unfavorable
II
Remarks
Factors affecting success of the product Determining factors Availability of planting materials & inputs Quality of planting materials & inputs Availability of technical support services Technical know-how of the entrepreneurs Others Major Problems & Constraints Particulars Availability of planting materials & inputs Quality of planting materials & inputs Availability of technical support services Technical know-how of entrepreneurs Government policy towards the products Supporting infrastructure - Road & transport - Collection centers Quality control/Quarantine services Information on price and market Other Solutions and area of interventions Particulars Availability of planting materials & inputs Quality of planting materials & inputs Availability of technical support services Technical know-how of entrepreneurs Government policy towards the products Supporting infrastructure - Road & transport - Collection centers Quality control/Quarantine services Information on price and market Other
Tick
Remarks
Tick
Remarks
Tick
Remarks
If the possibility would be there, would you be willing to produce the product in larger quantities? Remarks No (under no conditions) Yes, but with some conditions Yes and even if there are some bad years Undecided
(Checklist Traders/Exporters)
Name of the Commodity: General Background Date of interview: ../..../2065 Interviewer: .. Interviewee's Position in Value chain: (Traders/Exporters) Interviewee's Address & Contact Details: Village/town : VDC : District : . Distance from district HQ : . Nearest Markets/Trade center : . Contact Tel./Mob./Email : .. .. Demography of the area Population : .. Ethnicity : .. No. of households : .. Infrastructure/support services Road networks : .. Technical Service centers: Communication : .. Others: . Miscellaneous Other industries : .
Category of Traders Seasonal Over the year (Permanent) Mixed Domestic International Trade coverage Category Collection centers VDCs Districts Regions
Nos. and Names
Markets Particulars Whom do you sell your products to? Local consumers Traders (national) Traders (international) Exporters Where do sell your products? Within the district Markets Collecting Centers Outside the district Markets Collecting Centers Marketing
Tick
Remarks
Tick How do you market your products? Oneself Through Traders Through Packagers
Remarks
Accessibility/Transportation Tick Distance to Local consumers Traders Packagers Exporters How do you transport your products to? Local consumers Traders Packagers Exporters Use of the products Do you know for what purpose your product is being bought? For fresh consumption Value addition (packaging) Export Others (Oil extraction) Trade flowchart Made Tea Made tea Remarks
Tick
Transaction Cost Estimate SN Particulars 1 Purchase 2 Rent 3 Labor 4 Utilities 5 Financial Costs Transaction Cost (1..5) Transaction cost per unit 6 Sales No. of days in Stock/Storage
Unit
Rate
Quantity
Amount, Rs.
Pricing How do you fix raw material price? By negotiation Association fixes the price Starting price, End price, Could you describe on how you set prices with buyers? Starting price, Rs./kg End price, Rs./kg Are you satisfied with the price?(Please rate your price) - Unfair - Relatively fair - Fair - Good What are the factors governing the price in your area? - Seasonality - Availability of the product - Bargaining/negotiating strength - Availability of processing unit in the area - Availability of markets - Road/transport system - Market information Who are the major players in determining the price in your area? - Collectors/Traders - Processors - Exporters - Others
Labor supply situation Particulars Own/Household Skilled Semi Skilled Skilled Others Credit supply situations Availability Credit Regular/Irregular Institutional - Term Loans - Working Capital Non-institutional Availability Regular/Irregular Available locally/outside Quality (Good/ Satisf'y /Bad) Labor other than locals
Access (easy/ difficult/no access)
Name the institutions/Individuals providing credit services
Services of Credit Supplying Institutions/Individuals Services (Good/ Terms & Conditions Credit Satisfy /Bad (favorable/ unfavorable Institutional (Bank/Fin. Inst.) Non-institutional (Local money lenders, etc.) Quality Check (Accreditation) Particulars Quality criteria Who sets the criteria? Who checks for quality? Where the inspection is done? Cost involvements for accreditations Area of improvements?
Remarks
II
Remarks
Factors affecting success of the Trading Determining factors Availability of Products Quality of Products Availability of technical support services Technical know-how of the entrepreneurs Others Major Problems & Constraints Particulars Availability of Products Quality of Products Availability of technical support services Technical know-how of entrepreneurs Government policy towards the products Supporting infrastructure - Road & transport - Collection centers Quality control/Quarantine services Information on price and market Other (Road tax, excise) Solutions and area of interventions Particulars Availability of Products Quality of Products Availability of technical support services Technical know-how of entrepreneurs Government policy towards the products Supporting infrastructure - Road & transport
Tick
Remarks
Tick
Remarks
Tick
Remarks
- Collection centers - Road tax, excise duty Quality control/Quarantine services Information on price and market Other If the possibility would be there, would you be willing to produce the product in larger quantities? Remarks No (under no conditions) Yes, but with some conditions Yes and even if there are some bad years Undecided

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Government of Nepal

Ministry of Agriculture and Cooperatives

COMMERCIAL AGRICULTURE DEVELOPMENT PROJECT

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Tea Value Chain Report

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RATIONAL OF THE STUDY

APPROACH AND METHODOLOGY

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Tea Value Chain Report

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CHAPTER II: AREA AND PRODUCTION

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Rationale of the Crop

AREA AND PRODUCTION

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Table 2.2: Tea Production in Nepal, (From FY 2055/56 to 2063/64)

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Jhapa Ilam Panchthar

Dhankuta Terhathum Others Total Source: NTCDB 2008

PRODUCTION MANAGEMENT Inputs Supply Situation

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Table 2.7: Plantation and Maintenance Cost (in 1 ha)

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Plantation and Maintenance (Garden)

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Fig. 2.1: Orthodox Tea Production process

In Dryers (Coal/ Woods)

In Sorting/ Grading machine

Green Leaf Tea Processing (by Steamed Method)

Sorting & Grading

Green Leaf Tea Processing (by Dry Method)

Sorting & Grading

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CHAPTER III: MARKETS AND MARKETING

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Processing Centres Fikkal Ilam Nepaltar

Ilam Mechi Highway Corridor Panchthar

Japan, Germany, Europe

Terhathum Koshi Highway Corridor

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Kolkota, Siligurhi, (India)

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