Despite record production in 2023, local tea estates are facing financial strain as a number of commercial tea growers have been forced to shutter businesses in the face of recurring losses.
The cause of this crisis is a perfect storm: production costs have risen steadily, up 11.71 per cent per kilogram since 2018, according to official data. This trend coincides with a dramatic decline in auction prices, which have plummeted 34.56 per cent over the past five years.
"Since 2018, tea has been consistently sold at auction below production costs," said Kamran Tanvirur Rahman, chairman of the Bangladesh Tea Association.
"Prices for essential foodstuffs like rice, pulses, ginger and garlic have all risen in recent years. However, tea prices have not kept pace, instead experiencing a decrease," Mr Rahman, head of the tea estate owners' association, told The Financial Express.
According to him, the consequences of this situation are "severe". Dilkusha Tea Estate in Moulvibazar district exemplifies those challenges.
The estate was forced to lay off workers two weeks ago due to ongoing losses. Industry insiders fear other estates may face a similar fate unless auction prices improve.
The country currently has 168 commercial tea estates and gardens spread across eight districts, employing roughly 150,000 workers.
These estates and gardens are required to sell at least 75 per cent of their production through open auctions regulated by the Bangladesh Tea Board. There are three auction centres located in Chattogram, Sreemangal and Panchagarh.
Only a small number of tea estates -- some 10-12 gardens -- have their own packaging facilities, allowing them to bypass auctions for 25 per cent of their produce and sell it directly to consumers. The vast majority of estates rely solely on auction sales.
Local tea estates achieved a record-breaking production of 102.91 million kilograms in 2023, maintaining an upward trend since 2001. Domestic tea consumption sits at roughly 92.15 million kg, leaving a surplus.
"At least 10-12 million kilograms of tea are being sold to the market bypassing auctions," said Tea Association Chairman Kamran Tanvirur Rahman.
However, Mr Rahman was concerned about "a huge quantity of very low-quality tea" being smuggled into Bangladesh from a neighbouring country, suggesting it may be impacting auction prices.
The Tea Association attributes rising production costs to factors like increased labour wages and surging input prices. Fertilisers, fuel and electricity are among the key contributors to this cost increase.
The association estimates a 159 per cent rise in labour wages over the past decade.
Meanwhile, the total production cost has climbed by 42 per cent. Conversely, the average auction price has fallen by a concerning 34 per cent compared to 2018 levels.
Adding to the industry's woes, Deundi Tea Company Limited Managing Director M Wahidul Haque pointed at the growing threat posed by coffee consumption.
"Coffee is rapidly becoming a major competitor for tea in the local market, particularly among younger demographics," he added.
The country's tea exports, once a major source of foreign currency, are also not performing well.
While the country exported 12.92 million kg and 13.65 million kg of tea in 2001 and 2002, respectively, exports have not surpassed 2.66 million kg after 2009.
The country has transitioned from a tea exporter to an importer in recent years.
Sector people admitted the rising domestic demand as a contributing factor, but believe other issues are also at play for declining exports.
Major General Md Ashraful Islam, chairman of the Bangladesh Tea Board, advocated for quality improvement and effective branding to bolster tea exports.
Tea estate owners downplayed the tea import development, suggesting the import volume is negligible and does not pose a serious threat.
Tea cultivation in Bangladesh started during British rule. Although Sylhet division is currently the most famous for tea cultivation, the first initiative was taken in Chattogram between 1828 and 1840.
As both attempts failed, in 1854, or to popular belief in 1847, the first commercial tea garden of Bangladesh, 'Malnichhara Tea Garden,' was established near current Airport Road in Sylhet.
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