Tea prices drop by 47% due to Covid-19, 3 lakh workers affected

Auctions for tea sales resumed on May 18, after a break of two months' Covid-19 shutdown, but the price has dropped by about 47 percent over 10 auctions.

Due to the closure of tea stalls and restaurants in the country to prevent the spread of Covid-19, the demand for tea has decreased by about 67 percent.

Meanwhile, a large amount of tea of the record amount produced last year remained unsold.

Further, the quality of tea has declined due to low rainfall at the beginning of the year. This also contributed to a decrease in the price of tea.

Tea garden owners are in trouble because of the continuous fall in tea prices. The drop has also affected the payment of salaries and allowances to tea garden workers, said the people concerned and the leaders of Bangladesh Tea Association – an association of tea garden owners.

According to the Bangladesh Tea Association (BTA), there is demand for nine crore cups of tea per day across the country. Under the coronavirus situation, it decreased to three crore at the beginning of April.

After the Covid-19 shutdown, the average price of tea at the first auction – held on May 18 – was Tk212.46. However, at the ninth auction, it stood at Tk163.41. The average price of tea has decreased by Tk49.05 over nine auctions in just two months.

On average, about 27 lakh kilogrammes of tea were auctioned at each auction; the average value of which was Tk57 crore. However, at the latest auction, it was reduced to around Tk44 crore.

There are 167 tea gardens in the country including in: Chattogram, Sylhet, Habiganj, Moulvibazar, and Panchagarh.

Some 5,000 small farmers are involved in tea cultivation in the gardens, North Bengal and in Bandarban. Around three lakh workers are employed there. 

Mozammel Hossain, project director of Dantmara Tea Estate in Chattogram, told The Business Standard that the tea has been stored in the warehouses of tea garden owners since April right after the Covid-19 infection was detected. 

"Moreover, a record amount of tea was produced last year, leaving it unsold. Further, the demand for tea has decreased due to the closures of hotels and restaurants. Due to excessive supply over demand, the price of tea is decreasing at every auction," he said. 

At the latest auction, tea garden owners had to sell tea at a lower price than their production cost. So, they are in the crisis of capital, while the small tea gardens are currently in a crisis for their survival, he added.

He continued, "If the prices continue to fall in this way, the garden owners will soon face a financial crisis in paying the salaries and allowances of the workers. This will affect the country's expanding tea industry."

Meanwhile, the BTA, has sent a letter to the Bangladesh Tea Board seeking financial incentives to battle the ongoing crisis.

The tea producers of the country want to get loans at four percent interest under the incentives package announced by the government so that they can sustain production and recover their financial losses.

The letter requested the Ministry of Commerce, the Bangladesh Bank, Bangladesh Krishi Bank, and other appropriate authorities provide special facilities to the tea garden owners through the Bangladesh Tea Board.

It is also feared that many of the tea gardens in the country may be shut if they do not get the low interest loans to keep the gardens functional.

M Shah Alam, chairman of the BTA, told The Business Standard that the Covid-19 situation was a major setback for the country's tea industry.

"In such a situation, the garden owners are struggling to pay the workers and officials. Thus, if prices continue to fall, it will be impossible to sustain tea garden production. This crisis can be overcome to some extent if the government provides loans under the incentives scheme to the tea garden owners," he said. 

He further said that they had written to the Bangladesh Tea Board requesting cooperation in availing the loan facilities of the government incentives package. 

The letter from the Bangladesh Tea Association mentioned that the market price of tea at the auction was very low and the tea put on sale at previous auctions remained unsold.

Due to Covid-19, auction number 46 and 47 – set to be held in April 2020 at the weekly auction center in Chattogram – was closed and a huge amount of tea remained unsold.

Consequently, the price of tea has come down by 47.31 percent – reduced by Tk98.85 per kilogramme – this year as compared to last year.

Further, the tea garden owners are facing trouble to pay their bank loans on time.

The tea gardens are operational to maintain the employment during this pandemic. However, it will not be possible to keep the gardens functional for a long time if they do not have any working capital.

Thereby, the cooperation of the government is essential for providing working capital and development loans at a low interest rate.

When contacted, Kula Pradip Chakma, secretary of the Bangladesh Tea Board said, "We have received a written request from the Bangladesh Tea Association seeking government incentives. I have informed the concerned authorities including the Ministry of Commerce about the matter."

In the current crisis, tea garden owners should be brought under the incentives package, he said.