Tea gardens hit by increased production costs as diesel price hiked

A cup of tea, a fixture in Bangladeshi lives, may become even dearer. A rise in the price of both powdered milk and sugar may be followed by an increase in the price of tea itself.

Now, the impact of diesel price hikes is being felt in tea gardens across the country which have seen a subsequent rise of 15%-20% in production costs. 

Sector insiders said the production cost has increased around Tk20 per kg as diesel price jumped from Tk80 to Tk114 per litre earlier this month.

They said most of the tea gardens in the country use diesel to process green leaves. Diesel is also used for irrigation and to run some machines in tea gardens.

As per them, around 350 mililitre of diesel is needed to process one kilogramme of green leaves.

Akhtaruzzaman Mondal, manager of the Andharmanik Tea Garden in Fatikchhari, Chattogram, told The Business Standard, "We sell green leaves to the neighbouring tea gardens. Our garden uses around 200 litres of diesel per week, and during the irrigation time it increases to around 1,000 litres.

"Before the fuel price hike, the production cost per kilogramme of green leaves was Tk132. Now the cost has increased to Tk150. We produce around five lakh kg of green leaves per year. We have already started counting losses due to the diesel price hike."

Tea garden owners said although some of the gardens in the country use natural gas and coal to process tea leaves, the use of diesel is the highest.

Apart from that, as the prices of tea leaves in the auction have not increased, making it harder to recover the extra expenses.

They said the tea industry had started to plunge into a crisis during the advent of the Covid-19 pandemic in 2020 when tea sales declined sharply. The companies had to sell tea leaves at lower than production cost.

On 4 November last year, the prices of diesel increased from Tk65 to Tk80. This further hurt the business. As per the tea garden owners, they had to concede a loss of Tk20 to Tk30 per kg at that time.

Garden owners said they are yet to recover the losses caused by the pandemic and last year's diesel price hike.

In this situation, the latest price hike of diesel from Tk80 to Tk114 declared by the government on 6 August has put the industry into a new crisis.

The manager of a large tea estate in Datmara area of Chattogram's Fatikchhari said on condition of anonymity that his company uses 400 litres of diesel to process around 600 kg of tea leaves per day.

"Earlier, the production cost of processing one kg of tea was Tk180. Now the cost has increased to Tk200. However, the processed leaves are being sold at auction at a price of less than Tk200 per kg. As a result, we are counting losses.

"Both the quantity and quality of tea leaves collected in the garden will decrease after around two months when the peak season will be over. Then the amount of losses will increase," he added.

The tea produced in the gardens is sent by the owners to the brokers registered with the Bangladesh Tea Association. Then the tea association verifies the quality of the tea and fixes the proposed price and grade in the catalogue prepared by the brokers.

The buyer firms, which are members of the tea association, go to the auction on Tuesday every week and purchase tea by bidding as per the rules. In the auction, the tea sent by the garden owners is sold at a price higher or lower than the price recommended in the catalogue.

A senior member of the Bangladesh Tea Association, under the condition of anonymity, said, "The price of tea depends on supply and demand. Due to rise in diesel prices, production costs have gone up, leading to losses for the owners. Apart from this, the tea producers have also faced losses due to the protests."

According to the Bangladesh Tea Association, there are 167 tea gardens in Sylhet, Habiganj, Moulvibazar, Chattogram and Panchagarh with more than 1.5 lakh workers. Among these, in Chattogram district, around 1,5000 workers work in 18 tea estates and three tea gardens.

Besides, around 5,000 small farmers are also involved in tea cultivation in the northern districts and in Bandarban.

As per the tea association, the target of tea production in the country is 100 million kg in 2022. Out of this, 27.06 million kg of tea has been produced till June. The production in June alone was 12.59 million kg.

In 2021, the country's tea gardens produced a record 96.51 million kg of tea.