Govt taskforce prescribes reforms for ailing tea sector

Bangladesh’s tea industry is under mounting financial strain as estates grapple with years of losses, high borrowing costs, falling exports, rising production expenses and low productivity, prompting a government taskforce to recommend sweeping reforms.

The taskforce identified problems across eight priority areas, made 59 recommendations and laid out an implementation roadmap covering cheaper credit, tax cuts, debt restructuring, replanting, exports and investment.

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Bangladesh is the world’s eighth-largest tea producer, with 172 estates producing 9.49 crore kg of tea in 2025. The sector directly employs 102,000 permanent and 40,000 temporary workers, while around 5 lakh people live within estate boundaries.

Yet tea gardens have been selling tea below production costs every year since 2019, according to Bangladesh Tea Association data cited in the report.

THE SECTOR’S GROWING WOES

In 2024, production costs stood at Tk 260 per kg against an average auction price of Tk 208.88, leaving a gap of Tk 51.12 per kg.

Exports have fallen 79 percent since 2002, while production costs have risen 78.31 percent over the past decade, with auction prices failing to keep pace.

The taskforce, formed in the first half of June and headed by Mamun Rashid, chairman of publicly traded National Tea Company Limited, submitted its report to the commerce ministry on July 12.

The committee comprises representatives from government bodies, regulatory agencies and tea sector stakeholders.

One key problem identified by the taskforce is the classification of tea estates as an industry rather than agriculture, forcing owners to borrow at more than double the rate available to farmers.

Calling it a “classification mismatch”, the taskforce recommended reclassifying tea gardens as agriculture so owners can access loans at 6 percent instead of the current 13.75 percent.

The industry also faces a heavy tax burden, including 15 percent value-added tax, 1 percent Tea Cess, 1 percent brokerage fees, a Tk 50.15 warehousing charge per bag and 3 percent advance income tax on direct sales.

The taskforce recommended cutting VAT to 5 percent and reducing the overall tax burden at the production and auction stages.

Exports remain weak, generating only $2.5 million to $4.5 million annually, with Pakistan the only significant overseas market. Bangladesh also lacks a national tea brand, geographical indication recognition and a presence in premium export markets.

Productivity stands at around 1,550 kg per hectare, compared with 2,500 kg in India and 3,300 kg in Sri Lanka.

About 45 percent of total estate land is not under active tea production, but only 8-9 percent is genuinely available for new planting, with the rest serving operational, residential and ecological purposes.

TASKFORCE CHARTS RECOVERY PLAN

To address the industry’s financial stress, the taskforce proposed a Tk 2,050 crore Tea Sector Assistance Fund, including a Bangladesh Bank-backed refinance facility for debt restructuring at 4-6 percent, replanting loans with a moratorium and seven-year financing for factory modernisation.

It also recommended dedicated annual budget allocations for the Bangladesh Tea Board (BTB) and Bangladesh Tea Research Institute (BTRI).

The report proposed a three-tier floor price framework: Tk 275 per kg for domestic-grade tea, Tk 200-220 per kg for export-grade tea with a Tk 30-40 per kg duty drawback, and market-based pricing for premium and specialty tea.

A National Tea Replanting Master Plan was also proposed, requiring estates to prepare rolling 10-year plans targeting annual replacement of 2-3 percent of tea bushes.

To revive exports, the taskforce recommended pursuing government-to-government trade agreements with Pakistan, Egypt, the UAE and Russia, while raising Bangladesh Bank’s export incentive from 3 percent to 5 percent.

It also proposed making tea a priority sector of the Bangladesh Investment Development Authority (BIDA), establishing a Tea Investment Desk and attracting foreign investment in agri-tech, solar infrastructure and premium brands.

A Bangladesh Tea Green Finance Facility was proposed to mobilise financing for solar agrivoltaics, battery energy storage, irrigation and factory modernisation.

For small growers, the taskforce recommended establishing a permanent BTB regional office in Panchagarh to provide technical support and improve quality management for more than 8,000 smallholders in North Bengal.

The report also proposed minimum labour welfare standards, including government-managed schools for workers’ children, functioning dispensaries, ambulance access and improved estate roads.

The taskforce outlined a 90-day plan to begin implementing the reforms.

Within 30 days, an inter-ministerial working group should be formed to validate data and determine eligibility for financial assistance.

Within 60 days, the government should reclassify tea estates as agriculture, prepare VAT and Tea Cess reform options, and establish a 6 percent tea garden credit window through Bangladesh Krishi Bank in consultation with Bangladesh Bank.

Within 90 days, a phased implementation roadmap should be submitted, the Tea Investment Desk at BIDA established, trade talks with Pakistan initiated, and the BTB regional office in Panchagarh launched.

Mamun Rashid, convenor of the Tea Industry Task Force, told The Daily Star that workers’ welfare cannot improve unless tea companies’ earnings improve first.

“Access to education and healthcare for workers’ families should be ensured by the government,” he said.

“We should seriously consider new plantations and the establishment of solar power facilities. Exports under G2G arrangements and access to green finance could also be expedited,” Rashid added.