MoF throws cold water on NTCDB’s plan

Kathmandu, April 27

The National Tea and Coffee Development Board (NTCDB) has failed to bring the tea auction house into operation as the Ministry of Finance (MoF) has shown reluctance in giving its consent to the operational directive for the tea auction house.

The directive had been endorsed by the agriculture minister-led board of NTCDB last year.

It has been three years since the NTCDB has been preparing to bring tea auction house into operation in Birtamod of Jhapa district. All necessary infrastructure have been set up. However, the board’s plan to operate the tea auction house from National Tea Day (Baisakh 15) this year could not materialise owing to the MoF not giving its go-ahead.

The directive has envisioned to offer around 60 per cent value added tax (VAT) exemption while selling Nepali tea to international buyers from the auction hose. Currently, the government has been providing 50 per cent VAT exemption for exporters of Nepali tea.

“We planned to provide higher amount of VAT exemption for traders of Nepali tea so that export of the cash crop could be channelised through the auction house,” said Gaurab Luitel, planning officer at NTCDB.

Moreover, the directive has provisions to provide three to five per cent discount for international buyers on the market price of Nepali tea for first three years of operation, so that the auction house can build relations with international buyers.

Likewise, the directive also envisions providing concessional credit facility through banks and financial institutions, which would accept tea stored in warehouses owned by the tea auction house as collateral. However, the MoF has not given its green signal on these provisions mentioned in the directive.

Ministry of Agricultural Development, the parent ministry of NTCDB, has been lobbying with the MoF to incorporate all the aforesaid provisions in the upcoming fiscal budget.

NTCDB has set up all the necessary infrastructure for the operation of the auction house in the eastern part of the country, as most tea factories are located there. It has even started negotiating with Nepal Food Corporation to lease its property in Birtamod to set up its warehouse.

It is reported that the auction house will be operated by sharing the cost with private tea producers. The auction house would support tea producers (farmers) to get high yield from their production by selling tea at competitive rates through bidding.

The auction house will inform the international buyers of Nepali tea through its website and the buyers can bid for the products by themselves or through their Nepali agents, as per NTCDB. Similar model has already been adopted in India and Sri Lanka.

Tea is one of the major export items of Nepal and the country exported 11,142 tonnes of tea worth Rs two billion in fiscal 2014-15. Tea is cultivated on more than 26,165 hectares of land — tea gardens and small farmers’ cultivation — mainly in Jhapa, Ilam, Panchthar, Terhathum, Dhankuta and a few more districts in western Nepal. A total of 14,898 farmers cultivate tea in 11,569 hectares of area out of the total tea production area of 26,165 hectares.

The country’s total production of tea hovers at around 23,186.73 tonnes — Orthodox (4,923.73 tonnes) and CTC (18,145.36 tonnes), according to NTCDB.