Comparative Study: Tea of Nepal and India

Topics: International trade, World Trade Organization, Tea Pages: 27 (10419 words) Published: January 9, 2013
Tea is the second most popular drink in the world, after water. For a number of developing countries it is also an important commodity in terms of jobs and export earnings. Tea production is labour intensive and the industry provides jobs in remote rural areas. Millions of livelihoods around the world depend on the production of tea. For a number of tea exporting countries, including world champion exporters Kenya and Sri Lanka, tea is a critical source of foreign income. However, as with many commodities, producer prices have fallen dramatically in recent years. If corrected for inflation, world market prices for tea in the period from 2000 to 2005 were half what they were in the 1980s. And as production costs have not been falling at the same rate and have increased lately, this has obviously put pressure on profitability in the industry. There is evidence that this in turn has negatively affected working conditions and the livelihoods of plantation workers and small-scale farmers in tea producing countries. The most important cause for decreasing prices is a persistent situation of oversupply on the international market. There is fierce competition between a number of producing countries for market share, by expanding production. Another reason is uneven value distribution. The tea supply chain tends to be complex, with many actors, producers, collectors, traders/brokers and packers involved. However, the buying and retailing end of the market is dominated by a handful of multinational companies that are still profiting from stable retail prices. In contrast with other agricultural commodities such as coffee, cocoa, soy, oil palm or fruits such as bananas, pressing issues from a sustainable development and poverty eradication perspective have received much less attention. Along with other stakeholders such as producers, officials and consumers, multinational tea packers (companies that sell often branded tea blends in bags or packets to consumers) have a clear responsibility to address these issues, and their strong position in the market gives them the opportunity to do so. This study therefore has a special focus on the concept of corporate accountability or corporate social responsibility. History of Tea

Nepali tea industry owes its roots to the colonization of India by the East India Company. Numerous tea plantations around the hill station of Darjeeling were promoted by the British. Hybrids of tea bushes were introduced in several districts in Nepal - Illam, Taplejung, Panchthar and Dhankuta within a few years after their introduction in Darjeeling and the first tea estates were established in 1863 in Illam and Jhapa. But whereas the Darjeeling tea production soon emerged into a prosperous commercial industry, the Nepalese tea production remained low profile until the 1990s, unable to fulfill domestic demand. Decades earlier, in 1966, the Nepalese government had established the Nepal Tea Development Corporation. Initially, Nepalese tea leaves were sold to factories in Darjeeling. With time, the Darjeeling tea bushes had become old and along with internal changes in the industry it led to a deteriorating quality of the Indian tea. These conditions made the Nepalese tea leaves a valuable input for the Indian factories. During the last decade tea processing factories have been built and turned Nepalese tea production into a fully commercialized industry. Although, even today some farmers sell their tea to Indian factories as they get a better prices from across the border. In the early 1990’s, large tea plantations run by the government mainly dominated the tea sector. Through reforms in 1993 the state owned National Tea Development Corporation was privatized. Its regulatory functions were handed over to the National Tea and Coffee Development Board under the Agricultural Ministry. To promote the industry further the government launched a new tea sector policy at the end of 2000. This policy seeks...
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