Chinese tea buyers have disrupted a heated trade dispute between Nepal and India, which has led to the introduction of counterfeit Darjeeling tea into teapots that were not expecting it.
Indian tea estates are under pressure because of a flood of cheaper Nepalese Tea that traders are happy to repackage and sell as Darjeeling – the “champagne’ of premium teas, grown just across the Nepal/India border.
Darjeeling tea producers have struggled to compete against the cheaper leaves that flood the market. Industry insiders believe that the pressure on India will decrease now that China is a larger buyer of Kathmandu wares.
Nepalese trade in tea with China has increased since 2022 when the Tibetan border was opened and tariff-free trading expanded.
The Nepalese Ministry of Commerce reported that the amount of tea purchased in fiscal years ending 2023 has more than doubled, to 15.7 tonnes, compared to 7.3 tonnes the previous year, before China’s Zero-Covid Policy halted Nepalese-China trade.
The traders say sales will increase again this year.
Nishchal Banskota is the founder and owner at Nepal Tea Collective. He said that Nepal has a good chance to enter a lucrative new market in China. “[The trade conflicts] are an issue of economics and this should provide relief.”
The fact that Nepal can trade more teas with China is “good for Nepal” and may mean Darjeeling will not be threatened as much, said Jeni Dodd of the tea importing firm Jeni Dodd Tea.
Since 1960, the tea industries of Nepal & India have been closely intertwined. India produces 1.3 million tonnes of black tea annually, making it the world’s largest producer. According to the UN Food and Agriculture Organization and OECD, 90 percent of Nepalese tea will be exported to India by 2023.
Joydeep Phukan is the secretary of Tea Research Association in India. The organisation supports global tea production.
The economic landscape has changed, with Chinese buyers boosting Nepal’s burgeoning sector and Darjeeling producers seeing their costs rocket.
According to UN FAO, China’s black-tea producers serve primarily its domestic market and export only 7% of their product. In response to the growing demand for green and black tea grown to Chinese standards, many traders are turning to Nepal.
“China plays a vital role in supplying tea machinery to Nepal’s tea industry.” “Along with the tea machines, the tea producers in Nepal are taught to make [Chinese style] teas”, said Phukan.
The cost of tea has decreased for Nepalese farms, but it has increased for Indian estates. India’s stricter labour laws forced estate owners to pay their workers a higher wage, while climate change is reducing tea yields faster than in Nepal.
Darjeeling produced 6,180 tonnes less tea in 2023 than the previous year, a drop of 11 percent.
Sparsh Agarwal, of Selim Hill Tea Garden in Darjeeling, estimates that production costs in Nepal are a third less than in India because of different labour requirements. He said that Darjeeling producers were unable to compete with Nepalese producers.
The competition reached a peak during the pandemic when a strike by Darjeeling workers left a gap on the market, and China’s border closure pushed Nepalese tea farmers and Indian tea growers into fiercer competition.
Indian tea sellers, under pressure from large buyers, began to blend cheaper Nepalese with Darjeeling in order to maintain the supply and keep prices low. This put even more strain on Darjeeling estates that were already struggling.
Vivek Lochan is a tea seller who sells both Indian and Nepalese products.
Members of the Indian Parliament were motivated by the use of Nepalese leaves to demand an import ban for Nepalese Tea in 2022. The Tea Board of India, the government agency responsible for the tea industry, briefly banned blending teas from 2022 under pressure from the large tea companies.
According to tea sellers, the increased demand from China will ease tensions between Darjeeling growers and Nepalese ones.
The Chinese Foreign Ministry stated in April 2023 that “tea” was a popular beverage. . . After Kathmandu expanded its free trade agreement with Beijing, “[there will be] an important link connecting China [and Nepal]”.
The opening of a road linking the tea-growing regions in western Nepal to Tibet is expected to boost trade this year.
“More Chinese buyers come every week.” They are also helping us to set up our banking [in Renminbi] so that we can trade easier in the future,” Tara Adhikari said, a Nepalese seller of tea.
Data from the Nepalese Ministry of Commerce shows that Chinese buyers also pay more for Nepalese leaves. Chinese buyers have paid an average of 1,600 Nepalese Rupees (or 200 rupees) per kilogramme in the past year. Indian buyers, on the other hand, pay only 200 rupees.
“Indian traders are demanding a lower price for leaves from Nepal. Chinese traders are offering more. . . This will reduce the sale of [counterfeit Darjeeling] in India,” said Gaurab Liitel, the National Tea and Coffee Development Board of Nepal, the government agency responsible for the tea sector.
Even though the trade in tea between China and Nepal is growing, it still pales when compared to India’s near-monopoly of Nepalese products. China’s support of Nepalese farmers may reduce costs even more, which could cause problems for Darjeeling growers in the future.
The main problem facing the tea industry as a whole is that it costs too much to produce tea, and consumers do not want to spend more on it, said Brandon Friedman. He is CEO of Rakkasan Tea a direct-to-consumer tea company.
“If you have larger factories that mass-produce [Nepalese] Tea, that could be a problem [for Darjeeling].