Policy Support for Tea Sector in Nepal

The Government of Nepal has defined tea as one of the high potential export sectors in the NTIS 2010, but support by the government for the sector has its roots around 50 years ago.

Peculiar weather, agro-climate, soil and geographical conditions of Nepal are in favour of tea plantation. Nepalese tea harbours a special aroma, fusion, taste and colour that attract tea lovers across the globe. Aroma from the Nepalese tea reflects the beauty of the Trans-Himalayan eastern hills.

The history of tea plantation in Nepal began in 1863 when the first factory was built in Ilam in 1878. After almost a century without government support for the sector, the government established the Nepal Tea Development Corporation (NTDC) in 1966. In 1982, five eastern districts were designated as ‘Tea Zone’: Jhapa, Ilam, Panchthar, Terhathum and Dhankuta. Since then, the government has supported the tea sector by a number of measures.

The government adopted the Nepal Tea and Coffee Board Act in 1992 and set up the National Tea and Coffee Development Board (NTCDB) in 1993.

The objective of this board is to promote and strengthen the tea and coffee sector through policy formulation, technical and managerial support. In addition, the government’s privatisation and liberalisation policy in 1991

further benefitted the private sector. The introduction of the National Tea Policy in 2000 was another important step to support the sector. This policy ensured several facilities for entrepreneurs:

• Access to Credit: Banks shall provide loans up to 80 % as priority credit with a grace period of 5 years for CTC and 7 years for orthodox tea plantations. In addition, the government has exempted income tax for the above grace period.
• Access to Land: Whoever buys land for tea plantations will get a 75 % exemption on land registration fees. In addition, the government provides appropriate public land on lease for up to 50 years for tea plantations. Likewise, the government arranges low interest loans to purchase land for tea cultivation.
• Access to tools: The government provides capital grants for irrigation, necessary agricultural and tea processing equipment. Furthermore, it is allowed to import fertilizers, pesticides, weedicide, and agricultural equipment required for the tea business. Electricity and agricultural roads to the place of tea cultivation are provided.
• Access to Infrastructure: Priority is given for infrastructure development (roads, irrigation, electricity, communication, education and health) in the commercial tea plantation areas.
• Access to Market: Necessary information on the international tea market is provided via the Agro Enterprise Centre (AEC) and embassies abroad. A Tea Development Fund supports small and cooperative tea entrepreneurs to attend trade fairs, trade exhibitions, workshops and seminars for tea promotion.
• Access to Information: National as well as international information covering studies and research, market development of tea and information to tea entrepreneurs is provided.
• Access to Technical Services: Small tea farmers and cooperatives have access to free technical services including disease and pest control, plantation, harvesting, drying, organic farming etc.
• Human Resource Development: The government provides national and international trainings under the Tea Development Fund for small tea farmers and members of tea cooperatives.
• Promotion of Auxiliary Industries: The government levies a minimum customs duty on the import of machineries for the tea packaging industry. In addition, the duty levied on packing materials to export Nepalese tea shall be refunded under the Duty Drawback facility. Further, the government exempts income tax up to five years to those industries established for the packaging and exporting of tea.

After the promulgation of the National Tea Policy 2000, there has been a tremendous growth in the Nepalese tea industry . Subsequently, the tea cultivation area has been extended to different districts from Jhapa in the Terai to Ilam, Panchthar, Dhankuta, Terhathum, Sankhuwasabha, Bhojpur, Dolakha, Ramechhap, Solukhumbu, Sindhupalchowk, Nuwakot, and Kaski in western Nepal.

The tea sector has been identified as a very promising sector for job creation. Especially orthodox tea gives higher returns compared to other crops, therefore it is a strong engine for income generation and poverty reduction for farmers especially in rural areas.

Rup Kumar BK, May 2012


This article was published in Nepal Trade Magazine, Issue 3, May 2012, GIZ
http://nepaltrade.org/sites/default/files/magazines/Nepal-Trade-Issue-3-English.pdf