Tea industry in Nepal faces complete shutdown as export crisis puts 60,000 jobs at risk

KATHMANDU: Nepal’s tea industry has come to a standstill after Indian regulatory restrictions halted exports, forcing factories to shut down and putting nearly 60,000 jobs at risk, according to industry stakeholders.

The crisis emerged after the Tea Board of India introduced a new Standard Operating Procedure (SOP) that requires 100 percent testing of Nepali tea, treating it as a “red-zone” food product. As a result, exports from Nepal to India have been completely blocked for the past several weeks.

Industry Forced to Halt Production

Following nearly 45 days of export disruption, most CTC tea factories have now suspended production from Thursday, while orthodox tea factories have been gradually shutting down since early June.

The Nepal Tea Producers Association said around 30 CTC factories under its network are preparing for complete closure, as unsold inventory continues to pile up and cash flow collapses across the sector.

Industry leaders warned that without urgent diplomatic intervention, the crisis could deepen further, threatening both production capacity and long-term viability of the sector.

Major Export Market Severely Hit

Nepal produces tea worth around Rs 12–14 billion annually, of which nearly Rs 5 billion worth is exported to India, the primary market for Nepali tea.

According to the association, over 5 lakh kilograms of CTC tea are currently stuck in factories due to the export blockage. Orthodox tea producers are facing a similar situation, with large volumes stored in warehouses without market access.

India accounts for more than 90 percent of Nepal’s orthodox tea exports and over 60 percent of CTC tea exports, making the current disruption particularly damaging.

Farmers and Workers Under Pressure

The tea sector supports an estimated 60,000 workers and employees and generates around Rs 1 billion in annual tax revenue, making it one of Nepal’s key agro-export industries.

In eastern Nepal’s Ilam district alone, all 53 orthodox tea factories in Suryodaya Municipality have already shut down since early June. The shutdown has directly affected around 50,000 farmers and workers, according to the Suryodaya Orthodox Tea Producers Association.

Daily production of nearly 40,000 kilograms of tea has now stopped in the region.

Cash Flow Crisis Deepens

With exports halted, inventory levels have surged sharply, while working capital shortages are becoming critical across factories.

Industry representatives said the sudden disruption has left businesses unable to sustain operations, with many factories already unable to meet operational costs, wages, and loan obligations.

Government Urged to Act

The FNCCI Koshi Province Committee has urged the government to immediately initiate diplomatic dialogue with India to resolve the issue.

In a statement, the private sector body said the blockade has severely affected tea-producing districts such as Jhapa and Ilam, impacting farmers, industries, workers, and the broader regional economy.

The committee stressed that Nepali tea is a major export commodity contributing significantly to foreign exchange earnings, employment generation, and rural economic development.

Large-Scale Production Base at Risk

According to industry data, tea cultivation in Nepal covers around 10,000 hectares, producing approximately 274 million kilograms annually, of which about 256 million kilograms are exported to India.

Stakeholders warned that prolonged disruption could cause structural damage to one of Nepal’s most important agro-export sectors, unless immediate policy-level intervention is undertaken.