VOL. 04, NO. 04, July 16 2010 (Ashadh 32, 2067)

ECONOMY

Ilam’s tea farmers are facing a tough time

UMA KANTA KHANAL in Jhapa

The bargaining has been going on for the last many years. The green tea leaf producers are not satisfied with the price of their green tea. They blame that the tea factory owners have been cheating them by not giving them a reasonable payment for their product.

Illam's Tea Garden: Over production

"There is a lack of trust between the green tea producers and the tea factory owners. We are getting a very low price for our product. So, tea factory owners are responsible for this," Saroj Bimali, a green tea producer of Jhapa, said.

Although attempts have been made to ease the tussle between the green tea producers and the tea factory owners, nothing has come out of them. Now the green tea producers say the government should intervene in this matter.

"We are in a great problem. At this moment, we request the government should take initiation to settle the case," another green tea producer Shiva Kumar Oli said.

The government has established a board to look after tea and coffee production in the country but the role of National Tea and Coffee Development Board has not been effective in the settlement of the price of green tea.

The office representative of the regional office of the board in Birtamod, Jhapa, Ram Awatar Shah, claimed, "Neither green tea producers nor tea factory owners have come to the board complaining about the price of green tea. And our responsibility is only to act as a mediator."

In Nepal, tea gardens cover approximately 17 hectares of land. The eastern districts of Nepal like Ilam, Panchthar, Jhapa, Dhankuta and Sankhuwasabha are known for green tea production. But tea gardens which have their own packaging companies do not have this problem.  The orthodox tea which has a big demand in the international level has been produced in the hills.

The tea factory owners are also demanding the government's action to settle the price of green tea.

Bhakti Adhikari, owner of Jagadamba Tea Processing Company, Bhadrapur, said, "We have tried a lot to negotiate with the green tea producers but the case has not been settled."

Adhikari claimed that if the tea factories have to provide the price as per the producers' demand, all the factories will be closed in the near future.

In India, green tea producers get up to Rs. 21 and in Nepal, they get up to Rs. 18. The internal consumption of the ready tea leaf is only thirty percent. Seventy percent of the production is exported to India, so, that way, the green tea producers are not getting the price as per their demand and as the Indian producers get.

If the government develops a system of auction within the country, the misunderstanding between tea factory owners and green tea producers will be settled, said Chandi Parajuli, one of the tea factory owners.

The government is forced to confront the bitter truth that its efforts at increasing revenue are further pushing trade gaps and consumption

By SANJAYA DHAKAL

It became official with the release of the Economic Survey 2010.

The country is spending far too much on consumption and saving far too little – than is desirable for an ailing economy like this.

The GDP of Nepal has reached Rs 1200 billion. Of the total, almost 92 percent is spent on consumption.

This high consumption is fueled by the surge in remittance income – which totaled Rs 250 billion this year. In fact, 40 percent of the country’s households have at least one member abroad. The money sent back by them are being used up in consumption.

That, in turn, has pushed the import growth.

The import has grown by astounding 42 percent this year compared with the 10 percent decline in exports.

The trade gap has widened to staggering Rs 298 billion.

These figures have come up as uncomfortable facts before the officials at the Ministry of Finance who were, otherwise, wallowing in the huge rise in revenue.

Primarily based on the import surge, the custom duties and other taxes like VAT collection have continued to grow in astounding rates.

The Survey showed that in the last one year, the revenue growth was 25 percent compared to the previous year.

The government collected Rs 178 billion this year as revenue.

Revenue Vs Trade Gap

The distortion in the foreign trade balance of Nepal has triggered a debate whether the government’s policy of encouraging revenue growth has backfired.

“Definitely, there is a problem to be rectified. We must act to narrow down the trade gap. But handsome revenue growth, in itself, is a very positive outcome,” said Finance Minister Surendra Pandey, addressing a post-budget press meet.

Encouraging the Ministry officials on this revenue drive are the multilateral donor agencies. They have always been pointing out the benefits of strong revenue growth.

But the consequences of the revenue-centered policies are now becoming too glaring to ignore.

The huge trade gap that is almost one quarter of the total GDP and the resulting Balance of Payment deficit has rung alarm bells at the Ministry.

The minister himself admitted that had he been given the opportunity to bring the full budget – instead of the advance budget he submitted to the parliament – he would have introduced measures to control import.

The officials were already talking about controlling imports of luxury goods and promoting import-substitution industries.

“The fact that in an agriculture-based economy like ours, there were imports of cows, goats and buffaloes totaling Rs 15 billion, is a shameful one. We wanted to introduce measures to substitute such imports by promoting local livestock industry,” said Keshab Acharya, senior economic advisor at the Ministry.

Whether such policies would have been introduced and whether they would have been successful are now a matter of speculation.

But what has been established firmly is the fact that the one-sided policy of increasing revenue can no longer be sustained. The debate has already begun.

For the second time in the last three years, Nepal is forced to do with a truncated budget due to political instability.

The parliament, on July 12, passed an advance budget for fiscal year 2010/11 submitted by the Finance Minister Surendra Pandey.

Being a caretaker government, Minister Pandey could not introduce the full budget.

Instead, he proposed the advance expenditure bill of Rs 110 billion – one-third of the actual expenditure  of the current fiscal year 2009/10.

“With this budget, theprojects being carried out in the current fiscal year can be continued by remainingwithin the one-third expenditure limit,” he said.

The advance budget, however, could not introduce any new policy, tax and revenue rate or new project due to the constitutional provision.

“This is only the interim expenditure management provision.It cannot address the current economic and financial problems faced by the country. Only full-fledged budget can do that. I hope a new government is formed quickly so that a full budget can be introduced expeditiously,” said Minister Pandey.