Wednesday, January 29, 2014

Where Will Your Next Cup of Tea Come From?

In a casual conversation with some friends in a popular café in the capital city Dhaka, I was told that Bangladeshi’s worst enemies are their own guys. They, of course, meant people in authority that matter. Upon inquiry, they mentioned the sad saga of the tea industry. Last year, Bangladesh imported more tea than it had exported. For someone like me, who is only a casual drinker of tea, and that too, only when I have a sore throat, I had no clue what had happened to this once-prosperous industry, which used to earn a major chunk of the foreign exchange for Bangladesh. Not anymore!

The government, in spite of serious objections coming from the tea growers and exporters, had decided to move the tea auction house from Chittagong to Sreemangal, which is located at the heart of tea plantation areas of Bangladesh. It is worth noting here that an overwhelming majority of the tea gardens is in the Greater Sylhet area (Sylhet, Moulvibazar and Habiganj), the remainders are in Chittagong and Tetulia (south-eastern and north-western corners, respectively, of Bangladesh). So, the choice of Sreemangal in the Moulvibazar would appear logical to most outsiders. After all, almost 93% of the tea is grown in that north-east corner of Bangladesh, adjacent to the Assam state of India. But I am told that the reason for moving to Sreemangal had more to do with caving in and catering to the interest of the tea producers association in India, or more specifically the Tea Board of India. The Anti-Corruption Commission may like to investigate if some kickbacks happened behind the scene. 

For decades, Cachar Tea had faced communication bottleneck simply because it is grown in the state of Assam of India, which is a land-locked territory. Tea is grown in 36 thousand hectares in the three districts of Cachar, Karimganj and Hailakandi in the Barak Valley. The gardens there produce about 50 million kg of tea, commonly known as Cachar Tea. With the auction house now moved to next-door Sreemangal inside Bangladesh the tea exporters in Assam don’t have to pay the hefty carrying cost for export via warehouses and ports in Kolkata, and instead can dump their produce inside Bangladesh via this newly opened channel. For years, because of such constraints, Kachar Tea was less competitive and as such, non-threatening for tea growers inside Bangladesh.

But now all that is sure to change making Bangladeshi grown tea less competitive in the world market. Unless corrective measures are taken, I am afraid that tea will embrace the same fate as had visited jute decades earlier. That would be undesirable for Bangladesh’s economy.

As I have hinted above, there was a time when tea was a major exportable item from Bangladesh. In the 1970s, tea export was next only to jute. It exported 80% of its 40 million-kg production, consuming only 8 million kg inside. The consumption of tea has steadily increased ever since, far surpassing the local productivity level. For instance, Bangladesh produced approximately 60 million kg last year (2013), but ended up importing 10 million kg from outside costing Bangladesh Tk. 125 crore (Tk. 1.25 billion). Of this imported amount, 75% came from India. The figures for the previous few years are not great either. In the years 2010-2012, Bangladesh imported 2.9, 5.6 and 2.3 million kg of tea, respectively.

It is difficult to believe today that Bangladesh used to earn tens of millions of USD from her tea export, and now it is an importer of tea in order to meet the growing demand inside from its tea drinkers whose numbers are increasing at an annual growth rate of 3.5 to 5 percent.

Several factors are responsible for the sad saga of the tea industry in Bangladesh. Of the 114,000 hectare area that is granted for tea plantation, less than half of it is now under tea plantation as a result of the devastation suffered during the 1971 Liberation War. Of this planted area, only 30,000 hectare area can deliver higher yield tea @ 1,400 kg per hectare, and the reminder 22,000-25,000 hectare area @ 700 kg per hectare. Thanks to Mosharraf Hossain, an innovative tea grower and executive who has shown how tea could be produced in plain land with proper irrigation and how ordinary poor farmers rather than being tea workers can actually own their small tea gardens in a cooperative farming, the yield in Tetulia tea gardens is 3,000 kg per hectare, which is way above the national average of 1176 kg/ha. However, Tetulia tea gardens comprise only a very small fraction of the total plantation area and cannot affect the overall production capacity to meet the ever growing consumer demand inside Bangladesh.

With perceived health benefits coming from tea drinks, there is no doubt that the consumer market is bound to grow not only inside Bangladesh but everywhere. Not only is the number of consumers increasing, but also the per capita consumption is on the rise. A study done in 2000-2001 also showed that world tea production had grown by an annual increment of 3 % while in Bangladesh the production had increased by only 1.84 % annually. Sadly, the picture is worse for the subsequent years. Between 2001 and 2010 tea production in Bangladesh only increased from 56.82 to 59.58 million kg annually, a dismal growth rate, while the export shrunk from 12.92 to 0.91 million kg annually! Currently, only 30 countries produce tea to meet the growing global demand which runs in excess of 2.5 million metric tons yearly. Some of the newer producers with use of modern techniques have been able to capture their piece of the pie while Bangladesh’s share has been ever shrinking.

The government of Bangladesh and its Tea Board must come up with a serious plan – both short and long term - to salvage this industry. The use of modern machinery, equipment, tools, improved irrigation and fertilizer, rehabilitation of soils, pest surveillance and replanting by uprooting old tea plants, planting high yield varieties of tea clones, and making use of unused land of the tea gardens while improving the quality of tea overall (satisfying, e.g., the prescribed criterion of the European countries in terms of the Maximum Residue Level value of pesticides), and less bureaucracy would go a long way to saving this vulnerable industry from collapse. Lest we forget, some one million Bangladeshis (mostly women, and from the minority races) are directly tied up with tea plantation and trade, let alone the fact that most of these hilly territories are unsuitable to grow any other agricultural crop. If Bangladeshi tea cannot compete pricewise with Indian or other imported tea, a huge majority of all these people would join the poverty line, which is undesirable. It is their survival which is at risk.

Remedial measures must look into how to increase the yield from current average of only 1176 kg per hectare, which is far below the yield amongst the best in the class. Kenya, which has the highest yield, and accounts for roughly 16% of world tea export and 8% worldwide production, is estimated to produce more than 1900 kg per hectare.  India, which produces 29% of world production, accounting for approximately 15% world tea export, has an average yield of more than 1700 kg per hectare. Sri Lanka, another major player in tea export accounting for 12% of world market, has a yield of more than 1400 kg per hectare. Bangladesh may like to identify the causes behind the yield gaps against those more productive countries and implement prudent solutions. 

Bangladesh must also review its ill-conceived decision to move the tea auction house away from the port city of Chittagong to Sreemangal. This move does no good to Bangladeshi tea growers and farmers, let alone the exporters, but instead rewards India who would flood the market with her cheaper tea, undercutting the cost of production and selling price inside Bangladesh for the indigenous industry to remain profitable and thereby survive. The government should also reevaluate its VAT and customs duty policy so that the indigenous industry is not threatened by outside competition. The national interest should and must take precedence over any other local interest.

 Bangladesh Tea Industry 1975 – 2012 (Actual) and 2015 – 2020 (projected) in million Kg.



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