Gorkha unrest: Darjeeling's loss is Nepal's gain

After losing its 2nd flush harvest, Darjeeling tea gardens will miss out on contracts with EU, US

Gorkhaland protests that have shut down Darjeeling for more than a fortnight have also hit tea production in the district — and neighbouring Nepal is likely to be a beneficiary.

Almost all the 87 tea gardens in Darjeeling, having lost their most import second flush, is likely to fail on forward export contracts with the European Union (EU), Japan and the US, its major markets. Producers of Nepal’s Illam tea — the closest substitute of the legendary Darjeeling variety — will try to exploit this opportunity.

Major tea producers of this district in north Bengal have incurred a Rs 150-crore loss. Subsequent tea harvests this year and the next are also likely to be affected.

Kaushik Basu, secretary-general of the Darjeeling Tea Association, said after the gardens reopened the tea bushes would need to be trimmed. By the time new leaves started spouting, the monsoon would have arrived in Darjeeling and the rain and autumn flushes were expected to suffer, he added. 

“A garden closed for a fortnight during the prime plucking season (early-mid June) wreaks havoc on the quality and volume for the entire year,” Basu said. The Darjeeling harvest this year is most likely to be inferior and unlikely to bag even break-even prices.

A tea producer from Kurseong said by the time his garden resumed supply to German blenders, prices would drop to $6.7 per kg from the current $13.41 per kg. The cost of production would be $1.5 a kg more than the average realisation price, he added.

“Since there will be an acute shortage of Darjeeling tea, production from Nepal will make its way into global markets dominated by us,” an industry executive said.

Nepal’s Illam tea, which is exported to India, Germany, the Czech Republic, the US and Japan, is the closest substitute to Darjeeling tea in taste and smell.

“If German blenders change the packaging from Darjeeling to Himalayan tea, it will deal a death blow to this industry,” said an executive with one of India’s largest tea producers.

Owing to its geographical indication tag, assured supply commitments and lower prices, Darjeeling tea has so far maintained its hold in European markets.

In 2016, India exported 10.55 million kg of tea to Germany at an average price of $3.55 per kg and Nepalese exports were 0.1 million kg at an average price of $10.81 per kg.

“Importers in the EU, Japan and the US are going to look for alternatives and Nepal is the most likely contender,” the executive added. 

Of its 37 million kg tea exports, Nepal routes 98% of it to India at an average price of $1.82 per kg. Indian tea producers now expect Nepal to route a large portion of exports to the EU, Japan and the US.

In Germany, Darjeeling tea, except the second flush, is being sold at $6-9 a kg while Illam tea sells for $10-12 a kg. Only select and organic teas are exported by Nepali producers to these countries, which drives their prices higher than Darjeeling tea.

“There is a risk that the taste buds of European, Japanese and American consumers will adjust to Nepal tea. If that happens, there is an impending danger of lower average price realisations next year when production may normalise,” said an executive at one of the oldest tea gardens in Darjeeling.

Nepal faces problems in extending production as well as shipment lines, which is likely to be exploited by China and Vietnam, the other major producers of Chinary Orthodox tea.