The tea sector in Bangladesh is currently facing a multifaceted crisis. Due to cash crisis, fair wages and benefits for workers in 31 tea estates are not being ensured. As a result, worker dissatisfaction has emerged. At the same time, the entire tea production management has become unstable. Additionally, five gardens have already completely closed their operations due to economic hardship and administrative complications. And the gardens that are still operating are drowning in debt and operating with low production capacity.
Even though tea is produced both agriculturally and industrially, the country’s tea estates fall under the jurisdiction of the Ministry of Commerce. Although entrepreneurs in the labor-intensive sector receive credit facilities like those in other industries, most tea estates have been in losses in recent years due to a large difference between production costs and sales prices. In addition to five estates stopping production, 31 estates are unable to provide various benefits, including wages to workers. Since a part of the tea sector’s production system is agricultural, garden owners are in a severe liquidity crisis due to the industrial nature of the loan system. In order to resolve this crisis in the tea sector, which has reduced import dependence and met almost 100 percent of domestic demand, garden owners have demanded agricultural loan facilities in addition to simplifying the loan system.
The value of tea sold in the country every year (excluding customs duties and taxes) is more than BDT 20 billion. A total of 150,000 workers are directly employed, and 500,000 are indirectly employed in the tea sector. The country’s 170 tea estates and small-scale entrepreneurs produce more than 100 million kilograms of tea annually. But since 2018, the gardens have been forced to sell tea at auctions at prices lower than the cost of production. In such a situation, due to the lack of approval from Bangladesh Bank (BB) to obtain loans, the gardens are forced to hold back the wages, PF, and ration of workers due to the liquidity crisis. 80 tea estates are unable to pay the workers’ provident fund contributions regularly due to the financial crisis.
According to the members of the Bangladesh Tea Association (BTA), agricultural banks provide 65-70 percent of loans in the tea sector. Although lending to this huge investment sector is safe, the total loan amount is currently around BDT 11 billion. Even though there are huge loan defaults in many other sectors, the default loans of entrepreneurs in the country’s tea sector are only around BDT 100 million. But since the rules for imposing strict rules on lending to other industries and entrepreneurs have been imposed on safe sectors like tea, the gardens have been in crisis. In recent times, tea estate owners have proposed to relax the rules and formulate a separate policy to resolve these crises in the tea sector, as well as provide a fund of BDT 45 billion.
According to the Bangladesh Tea Board and the BTA, the country’s post-production marketing of tea is auction-based. As a result, the producer has no say in determining the price of the product. The production of the specialized sector is 100 percent dependent on nature. Especially favorable weather and moderate rainfall are very important for tea cultivation. For this reason, entrepreneurs have said that they are being affected by the imposition of the Internal Credit Risk Rating (ICRR) issued by BB on various banking transactions, including obtaining loans. Entrepreneurs have appealed to various departments, including BB, the Ministry of Finance, to remove the ICRR from crop mortgage loans, incentive package loans, other loans, and loan rescheduling and restructuring for the tea industry.
The related documents show that BB has not approved the crop loan proposals of various tea estates in the country till the first week of this month. It is learnt that mainly due to ICRR's no-objection, the loan proposals of Deundi, Mirtinga, Lalchand, Sirajnagar, Rehana, Mazan, and Asia Tea estates were not approved. Even the proposal to increase/ease the single barrow exposure limit of 12 gardens of the National Tea Company was not approved. Due to these reasons, many gardens are in severe financial crisis. They are not able to pay various dues to the workers. This is hampering the production of the gardens.
Sector stakeholders say that loans are available from banks at a concessional interest rate of 4 percent for many crop productions. Agricultural products receive fertilizer, pesticides, and electricity at subsidized prices. Additionally, adequate allocations for the development and research sector of the agricultural sector include higher education and training facilities. Although a part of the country’s tea sector production is similar to agriculture, it only receives fertilizer at subsidized prices. Currently, the gardens are operating their business with loans at a maximum interest rate of 13.75 percent. Again, most of the gardens have been selling tea at a price lower than the cost of production for several consecutive years, and their operations are on the verge of closure. Especially, entrepreneurs who depend only on tea estates are unable to pay labor-related dues, including labor wages, due to a lack of alternative investments and liquidity. For these reasons, the country’s tea estates produced less tea than the target in 2024 after a long time.
Those concerned claim that the gardens suffered a loss of about BDT 4 billion due to the workers’ strike during the peak season (monsoon season) of 2022. At that time, when the daily wage of the workers was increased from BDT 120 to 170, about BDT 1.7 billion in new expenses were added to this sector. Moreover, the government has decided to increase wages by 5 percent for the next five years, from August 11 last year. But due to the continuous decline in tea prices, the owners are not able to provide additional money. Again, obstacles in obtaining loans, complications in repaying previous loans, and cash flow shortage due to losses have put the tea estates in a major crisis.
BTB member (Research and Development) Dr. Pijush Dutta told Bonik Barta, “There are various crises in obtaining loans for tea estates in Bangladesh. This complication has arisen in the tea production industry after picking tea leaves, in addition to agricultural production. Due to this, many gardens have been in crisis recently due to the discrepancy between production costs and selling prices. All parties are aware of the issue. An inter-ministerial meeting has also been held with all parties to resolve this crisis. I hope everyone will reach a consensus on increasing the liquidity supply of the production-oriented sector and obtaining loans at low interest rates. I hope that this crisis of the entire tea industry, along with the gardens in crisis, will end soon.”
According to data, despite the continuous increase in tea production costs in the country for a decade, the selling price at auction is not increasing as expected. In 2024, a minimum price level was set for the first time to keep the tea market stable. As the cost of tea production did not rise even in this, on May 14 of this year, the minimum price of tea in the Sylhet and Chittagong regions was increased to BDT 245 per kg, and the price of botleaf tea in the northern region was increased to BDT 170. Although the minimum price increase per kg from BDT 10 to a maximum of BDT 85, many gardens are still not able to cover their production costs.
When asked, BTA President Kamran Tanvirur Rahman told Bonik Barta, “Agricultural production that is completely dependent on nature cannot be done with loans at 14-15 percent interest. Even if all the needs of the workers are met in the tea sector, which is a completely social enterprise, the garden owners do not have the opportunity to sell the products by adding profit to the production cost. 31 gardens are in extreme crisis due to losses caused by dependence on auctions. If this crisis is not resolved quickly, many more gardens in the country will gradually close. We have informed all the relevant government agencies, including the Bangladesh Bank, about the matter. In a meeting organized with all stakeholders on Thursday (July 24), we explained the crises in the tea sector to the Ministry of Commerce. The Ministry of Commerce has assured to resolve the obstacles in obtaining loans due to the ICRR of the Bangladesh Bank.”
A member of the BTA, without revealing his name, told Bonik Barta that tea worth at least BDT 2.5 billion is sold in three international auctions in the country. When adding duty, branding, and associated products such as sugar, powdered milk, and condensed milk, the total turnover of the sector is more than BDT 10 billion. In addition to meeting domestic demand, the country’s tea is also exported to the world market. But entrepreneurs in this sector are stopping investment due to excessive interest rates on loans taken in agriculture-dependent sectors like tea and various obstacles in getting loans. If the government does not take initiative to resolve the crisis, millions of tea workers will be unemployed.
He expressed concern that if tea production decreases, employment will decrease, and tea will have to be imported, spending foreign currency.