Nepal brews a fresh crisis for Darjeeling tea with cheaper leaves

A notification banning blends of imported tea in GI-tagged teas has almost pushed Tata Consumer Products, the biggest buyer, out of the market

A notification from Tea Board India issued last year to put brakes on imports has had an unexpected outcome: It has brushed off the biggest buyer of Darjeeling tea, Tata Consumer Products Ltd (TCPL), and exacerbated the weakening financial condition of the fabled gardens that produce some of the best tea in the world.

Imports had been eating into the share of Indian tea and depressing prices at the auctions; checking it was an ask from the industry; Nepal — with properties similar to Darjeeling but cheaper — accounted for a major chunk.

The Tea Board, in November 2021, came out with notifications and circular to restrict distribution of inferior imported teas.

One of the directives called for proper labelling with the source of origin for imported tea, irrespective of whether the imported tea has been bought directly by the seller or through an intermediary.

Also, under powers of the Tea (Marketing Control) Order, 2003, registered buyers were prohibited from blending any imported tea with Geographical Indications (GI)-tagged teas — Darjeeling, Kangra, Assam (orthodox) and Nilgiri (orthodox). The restriction on blending tripped TCPL’s Darjeeling tea buy and, in turn, domestic demand for the variety.  

Tata Tea Gold was mixing Nepal tea procured in India, with Darjeeling for one of its blends, prior to the Tea Board notification. But in the aftermath of the curb, it has hardly picked up tea at the auctions this season, industry sources said. Whatever little buying has happened is for other packets that use only Darjeeling. But on a relative scale, the volume is paltry.

A TCPL spokesperson said, “Tata Consumer Products has made numerous representations to the Tea Board & Commerce Ministry on the notification, which included directives on not allowing any Indian GI tea to be blended with other origins even if not claiming the GI mark, which in our view was not in the interest of any stakeholder.”

“We believe that TCPL is an important participant in the Darjeeling market and we would want to continue our role as the leading buyer. We, however, are also committed to abide by all applicable rules and regulations as may be issued by the Tea Board from time to time.”

To comply with the Tea Board directive, TCPL has made changes to its blends. “We have undertaken consumer research and made changes to our blends in line with taste and flavour requirements of different markets to ensure supply continuity to our consumers,” the TCPL spokesperson said.

That may be a loss for Darjeeling. According to Anshuman Kanoria, chairman, Indian Tea Exporters Association (ITEA), about 20 per cent of Darjeeling whole leaf produced annually is sold in one CTC packet— Tata Gold — but it never claimed to contain any Darjeeling.

“This notification has not stopped imports of Nepal tea. The retailers importing Nepal tea for resale in India continue to do it. But Tata has discontinued buying Darjeeling tea since the beginning of the year,” pointed out Kanoria.

With weak EU economies, demand from the export market has been lower this year though demand for good teas was stable. Now, a lower offtake from its biggest domestic buyer has taken a knock on auction prices.

The average leaf price for Darjeeling for Sale 14 — Sale 33 (April to August) was Rs 412.80 per kg, down from Rs 485.60 per kg in 2021 and Rs 422.38 per kg in 2020.

For the producers of Darjeeling — grappling with climate change, falling production and rising costs — it’s a blow. Would TCPL revert to Darjeeling if the notification is amended? The spokesperson said that it doesn’t want to stop being major buyers of Darjeeling tea.

But the industry too wants to make sure that TCPL remains a leading buyer and is lobbying hard with the Tea Board and the commerce ministry to have the notification amended in a way so that that the GI of Darjeeling is protected, but buyers can operate without restrictions for multi-origin blends as long as it’s not under the GI mark.

“There are hundreds of retailers selling Nepal tea as Darjeeling tea. That was hurting us a lot and the government had no way of stopping it because of porous borders and infrastructure issues. So they came out with a notification that imported teas should not be mixed with teas having GI,” B K Saria, chairman, Darjeeling Tea Association (DTA), said.

But packers and exporters who were buying Darjeeling tea got hurt by this, he pointed out. “It’s a double kill for Darjeeling tea – those who were buying stopped because of the notification while people who were hurting us, continue to do so.”

Saria refrained from naming any specific packer. The restriction may be impacting others in the industry but Darjeeling is feeling the heat from TCPL’s relative absence.

Between January and May 2022, import of tea from Nepal stood at 4.59 million kg compared to 1.98 million kg in the same period in 2021. Some industry associations believe that a better way of checking use of Nepal tea would be to impose duty and ensure strict adherence to FSSAI standards.

Several meetings between the industry and the Tea Board and even the commerce ministry have been held on the blending notification.

Tea Board sources said, “While we have to protect the sanctity of GI of Darjeeling tea, we are also taking into consideration the representations we have had from the Darjeeling tea association and buyers.”

Darjeeling tea was among the first Indian products to get the GI tag in early 2000. The inflow of cheap teas from Nepal, however, put its survival in question.

A Parliamentary Standing Committee on Commerce in a report in June on the tea industry, especially Darjeeling, noted that “unhampered” and “easy” influx of substandard tea from neighbouring countries especially Nepal was jeopardizing the tea industry.

It said that inferior quality of teas from Nepal being sold and re-exported as premium Darjeeling Tea was not only diluting the global brand image of India but also affecting domestic tea prices. The Committee called for an investigation on the dumping of teas from Nepal for remedial measures and imposition of anti-dumping duty.

In 2021-22, India’s total production stood at 1344.40 million kg, Darjeeling was at 7.15 million kg. So, it’s a precarious balance between demand and supply for the prized but small production.

It’s been a while since Nepal tea emerged as a challenger to Darjeeling. But it made permanent inroads into the export and domestic markets from 2017 when the industry shut down for more than 100 days during the Gorkhaland agitation. Five years since, it’s déjà vu for the Darjeeling gardens as the single largest buyer goes nearly missing, adding to the vulnerability of the business.