Can the local tea industry recover?

Due to my long association with the tea industry, friends often ask me: if tea gardens are not profitable, why do so many people want to own them? More importantly, who skims the milk in our tea value chain?

Tea has been cultivated in Bangladesh since colonial times. Today, 168 commercial estates across Sylhet, Moulvibazar, Habiganj, Panchagarh, and Chattogram cover about 280,000 acres. In 2023, the gardens harvested a record 102.92 million kilogrammes, a seven percent rise that positioned the country as the world's ninth-largest producer, accounting for roughly 3 percent of global output.

Almost every leaf stays within the country as annual domestic demand consumes 90 to 95 million kilogrammes. Yet, blenders still import around 610,000 kilogrammes to meet niche quality standards. Exports remain low, reaching only 2.2 million kilogrammes in the first 10 months of 2024, worth about Tk 382 million, a far cry from the 13.65 million kilogrammes shipped in 2002.

The sector operates as a hybrid of private conglomerates and state oversight. Heavyweights such as Ispahani Tea, James Finlay Bangladesh, Abul Khair's Seylon, Kazi & Kazi, Duncan Brothers, Transcom, Halda Valley, and Orion dominate planting and distribution. The National Tea Company, in which the government holds a 51 percent stake, controls several gardens but continues to struggle with legacy inefficiencies. Oversight rests with the Bangladesh Tea Board, which sets auction rules, licenses factories, and regulates exports. These institutions help sustain a beverage that touches nearly every household, yet the underlying business model is showing signs of stress.

Structural bottlenecks begin at the auction house. Nearly all tea is traded weekly in Chattogram under Tea Board-mandated floor prices, preventing estates from negotiating directly with overseas buyers or even local trading houses. A lack of branding and modern packaging keeps Bangladesh stuck in the low-value bulk market. Meanwhile, high borrowing costs, 10 to 14 percent, because tea is classified as industry rather than agriculture, hinder replanting efforts. Yields remain low as output per hectare averages around 900 kilogrammes.

Labour policy deepens this further. Estates must retain headcounts fixed decades ago, regardless of crop size, and industry culture often resists reform. Basic wages hover around Tk 170 a day. Besides, workers receive subsidised food, free housing, and access to clinics and primary schools. Yet a recent NGO survey found that only 42 percent of homes had on-site electricity and safe drinking water. A welfare-linked productivity plan could raise incomes by at least 30 percent.

Reclassifying tea as agriculture would reduce interest rates to four to six percent, saving roughly Tk 6 per kilogramme, funds that could support replanting and factory upgrades. Export strategies also need segmentation. Bulk shipments could go directly to Pakistan, Egypt, and Russia, bypassing auctions and increasing gross margins by about 12 percent. Organic and wellness lines, already pioneered by Kazi & Kazi, can tap into premium online buyers. Meanwhile, seven million Bangladeshi diaspora offer an underutilised market whose monthly purchases could double export volumes.

Good governance would also boost investor confidence. Introducing ERP payroll systems, GPS asset tracking, and IoT field sensors could reduce theft and verify sustainability claims. Gardens that meet fair-wage and low-carbon standards should qualify for tax rebates and faster export clearance.

Bangladesh has scale, climate, and a century of experience. What it lacks is a policy bridge connecting leaf, labour, and logistics. If interest rates drop, auctions liberalise, and technology tightens governance, output could rise by 15 percent, wages by 30 percent, and even a 1 percent slice of the global speciality market could push export earnings past Tk 5 billion. The tea industry's roots run deep, but its branches will only spread if reform waters them.

The writer is an economic analyst and chairman at Financial Excellence Ltd