The tea market of Bangladesh.

Ormaan Rafay Nizam details the history and current situation of the Bangladesh tea industry.

The art of tea cultivation in Bangladesh began over a century and a half ago in the 1840s near the Chittagong Club. The first tea garden to be established was Malnicherra in Sylhet in 1854. Its commercial production began shortly thereafter in 1857.

Today, the main tea-growing areas lie to the east of the Ganga-Jumma flood plain in the hill areas bordering India's Cachar tea-growing district. Most of Bangladesh tea grows at only 80-300 ft. above sea level northeast of Sylhet in the Seven Valleys. Tea is still grown in Chittagong as well as in the Hill Tracts.

A Tea Estate in Bangladesh

The seasonal nature of rainfall and temperature results in an uneven pattern of tea production. Annual rainfall is in the range of 90180 inches and falls mainly between May and October. Almost 80% of the crop is manufactured in the six months from June to November. The dry season from mid-October to mid-May is divided into a cool season (mid-October to mid-February) and a very hot desiccating season (mid-February to mid-May) These extreme conditions tend to cause severe stress on the unshaded tea plants on southerly and westerly slopes.

Most estates are situated on valley sides. However, approximately 25% of the area runs down into swampy valleys where tea can be maintained only if the land can be drained and kept free from the water which backs up from paddy cultivation downstream. The topography rises from these ebheelsi, or low flats, through high flats or undulating slopes, representing about 45% of the tea-growing areas to steep sloping hills or ridges called tillahs.

There are two major geological formations in Bangladesh, both sedimentary in origin. The older of the two forms the hills and consists of quartzite and ferruginous gravel, sandstone, silts and clays, with outcrops of laterite, ferrocrets and occasionally lignites. The younger formation, still being deposited, forms the lowlands and consists of sands, silts, and clays brought down by the river systems draining part of the Himalayas and the hills of the Manipur and the Mize districts. The older formation yields soils rich in iron which tend to be acidic, whilst the younger formation (with little intrinsic nutrient value) provides inherently fertile soils with adequate calcium levels but vunerable to waterlogging in low-lying areas.

Figure 1

Area Under Tea (in hectares)

Year

1955         1960      1970      1980       1994      1995      1996

30,373     31,668    42,637    43,969     48,000    47,938    47,889
Figure 2

Production (in million kg)

Year

1955    1960    1970    1980    1992    1994    1995    1996    1997

23.2    19.0    40.0    45.9    48.3    52.1    47.7    53.4    51.5

The Bangladesh tea industry, has undergone significant changes both at a national and at a global level in the last three or four decades (see Figures 1 and 2).

There has been a shift in the method of manufacture from Orthodox teas to virtually 99% CTC manufacture, with the balance being green tea.

Pre-Partition 1947

During pre-partition days and up to the year 1947, all teas produced in the Sylhet and Surmah valleys were called Indian teas, but were also known as eSweet liquoring Surmah valley teas. Crop figures for the region during the mid-1940s were approximately 10-15 million kg per year. The teas were all of Orthodox manufacture, their quality being fairly similar to that of neighboring Cachar district teas. There was also some Legg-Cut and green tea manufacture prior to 1947.

Post-Partition 1947-1971

After partition, the subcontinent was broadly divided into two political regions - India and Pakistan (comprising West and East Pakistan).

When Pakistan became independent in 1947, there were 133 tea gardens. By 1971, this number had risen to 147, with roughly 90,000 workers out of a total country population of 249,000 people.

In 1950, under the Pakistan Tea Act, the Pakistan Tea Board was established in Dhaka and in 1957, the Tea Research Institute was [TABULAR DATA FOR FIGURE 3 OMITTED] founded in Srimangal in 1957. Together, these organizations aimed at promoting the sale and consumption of tea in Pakistan and abroad, and at assisting in the research and development of the tea industry.

The Tea Ordinance Act of 1959 replaced the earlier Pakistan Tea Act of 1950 to enhance the Board's role in promoting tea cultivation and quality control. During the 1952-1953 season, buyers, sellers, and brokers in Chittagong got together, under the auspices of the Pakistan Tea Association, to form the Tea Traders Association of Chittagong. This association's duty was to promote the common interests of tea sellers and buyers in the Chittagong market. In 1960, the Tea Traders Association of Pakistan was registered.

In 1947, gardens in East Pakistan had 75,000 acres (30,364 hectares) under tea. Between 1947 and 1960, the acreage devoted to tea increased by 8,000 acres. In the following decade, thanks to the compulsory 3% extension plan undertaken by the government in 1961, the gardens were further increased to 28,000 acres (11,336 hectares). By 1971, the total land under tea was 104,886 acres (42,464 hectares).

In 1947, Pakistan began with a production of 41.5 million lbs. (19.0 million kg) - approximately 7% of India's production. In 1956, this figure reached 53 million lbs. (24.1 million kg), and in 1971, a record crop of 69.18 million lbs. was harvested.

Orthodox leaves continued to form the bulk of the produce, with a little processing of Legg-Cut and green teas. Since quality is determined by environmental conditions, particularly by elevation, the gardens in Pakistan, by virtue of locality, are naturally not in a position to produce quality teas. Instead, our Bandlesh or Pakistan teas were classified in the world market as 'clean common' and were in demand by blenders overseas who used them as fillers.

However, by the late 1960s, the need for better quality teas was strong and, with the gradual decline in the availability of Orthodox teas, CTC teas, particularly the better liquoring types, received strong support. It was noticeable during this period that the consumer gradually demanded brighter and better teas, and at the same time, became partial to the strong liquor produced by the CTC and the Legg-Cut methods of manufacture.

Until 1971, teas continued to be imported to meet the growing internal demand while production was inadequate. With export restrictions and the captive market of West Pakistan, the tea industry operated in a seller's market with the 1969 crop being sold in the Chittagong auctions at Rs 3.50 per lb., against the CIF Chittagong cost of imported tea at Rs 1.50 per lb.

The 1971 War of Liberation 

During the War of Liberation in 1971, the tea industry suffered many setbacks. In addition to the fact that many factories were damaged, two-thirds of the experienced planters of British and Pakistan origin left the industry, whilst many senior Bangladeshi planters joined the war. This meant that inexperienced men who had to combat disturbed conditions were running the estates. Some of the battles even took place in the tea garden areas, which were very near the borders. In fact, for the first time after the crackdown on April 4, 1971, the available senior offices of the Eastern Sector of the Liberation War met at Teliapara Tea estate manager's bungalow, which became a seat of the Bangladesh Forces Headquarters (BDFHQ) for quite a time.

Figure 4

Production Figures 1970-72 in million lb. and million kg

Year 1970 1971 1972

million lb. 68.6 26.5 53.2
million kg 31.2 12.0 24.2

[TABULAR DATA FOR FIGURE 5 OMITTED]

Figure 6

Yield per Hectare in kg per hectare

1970      1975     1980     1985     1990     1992     1995     1996

736        684      911      927      963     1080    1,084    1,115
Figure 7

Production of Bangladesh Tea by Category 1984-1994

                1984      1990      1991      1992     1994     1997

CTC             29.0      43.0      44.0      47.0     52.1     51.4
Orthodox         8.0       1.0       1.0       1.0      nil      nil
Green tea        0.3       1.0       0.9       0.4      0.3      0.1

Due to the dedication and determination of the planters and the effective help from the then government, the industry soon made a comeback. In May 1972, the Government of Bangladesh set up the Rab Committee to address the problems of the tea industry under the chairmanship of A. Rab, which submitted its report (Rab Report) in March of 1973.

A production of 26.5 million lbs. (12 million kg) in 1971 was low as a consequence of the Liberation War.

The captive market of the 1960s resulted in extremely high prices, which provided large profits and did not encourage efficiency. On the crest of this profit wave, the growers became complacent and sought to maximize returns while investing as little as possible in green leaf and manufacture.

After 1971

After the war, assistance from England was readily available. At the request of the Government of Bangladesh, the British agency Overseas Development Administration (ODA) commissioned the Commonwealth Development Corporation (CDC) in 1973 to assess the requirements for a process of rehabilitation and reorganization of the tea industry, including tea growing, manufacture, research, markets and market organization, with an assessment of the financial and economic returns to such a program. In addition, in 1976 the government-sponsored Dastagir Committee, which looked into the financial constraints of a number of estates, also submitted its recommendations which proved to be very effective.

In 1977, the Bangladesh Tea Board was reconstituted with objectives common to those of the erstwhile Pakistan Tea Board formed under the Pakistan Tea Act 1950, and as the regulatory body for the tea industry of Bangladesh, the role of the Tea Board expanded to include the monitoring of the crop and its disposal, the issuance of export licenses to export buyers, and the authority to give permission to producers for consignment and direct sales, etc.

In 1974, the Tea Traders Association of Bangladesh replaced the Tea Traders Association of Pakistan. Eight years later, the metric weight system was adopted for the sale of tea, replacing the earlier imperial system. The area which produced tea increased from around 43,000 hectares in 1971 to the present area of about 48,000 hectares [ILLUSTRATION FOR FIGURE 5 OMITTED]. After 1971, an improvement in yield per hectare was also evident (see Figure 6).

Based on the findings and recommendations by the March 1973 Rab Report that aimed to maximize production, subsequent studies were carried out. By the 1973-74 season, the production of Bangladesh tea recovered to pre-1971 levels of around 30-32 million kg.

During 1975-76, in an attempt to increase yields, the Tea Board prepared two plans for intensive cultivation and replanting. Bangladesh Tea Research Institute BTRI, the scientific wing of the Tea Board, also brought out several high yielding clonal varieties of distinct character and quality.

By 1979, British consultants had developed a strategy to rehabilitate the damaged tea industry of Bangladesh. Although by this time an onward program for intensive cultivation and replanting of the tea was going on, the actual thrust started in 1983-84 and was effective from 1985/85. During the years 1971-1994, production increased from 24.2 million kg (53.2 million lbs.) in 1972 to 52.1 million kg (115 million lb) in 1994.

Although the number of estates manufacturing Orthodox teas was declining (especially after the 1980s), after independence, Orthodox teas continued to form the bulk of all teas produced. During this period, CTC teas became increasingly popular in Bangladesh with both internal and external buyers because they produced a stronger and quicker brewing liquor with more cuppage. Today in Bangladesh, CTC teas account for virtually 99% of all categories of tea produced, the balance being green teas.

The quality of Bangladesh teas competing in the world market during this period may be comparable to lower plain-grown teas from nearby Cachar, Tripura, and the Dooars, as well as with low, more plain-tasting teas from. Sri Lanka and Indonesia.

The Supply of Teas to the Auctions

The auctioning company, which is the fulcrum of the auction system is comprised of professionals who combine multi-faceted talents as tea tasters, valuers, quality controllers, auctioneers, and independent arbitrators and consultants between buyers and producers.

Auctions in Chittagong commence in early May and continue up to the third week of March of the following year, by which time the entire crop has been disposed of. Buyers operating in the Chittagong auctions are registered as export or internal buyers. At the beginning of each new season, producers nominate brokers for the disposal of their crops through the Chittagong auctions. The broker charges 1% of the sale price as brokerage and also collects an additional 1% as Tea cess levied by the Bangladesh Tea Board on all producers.

The Supply of Tea to the Domestic Market

The systems used for the supply of tea to the domestic market are the Chittagong Auction sale and direct sales by producers in bulk or value added form, or both. The domestic market consists of loose tea traders and blenders. Internally, more than 70% of teas are sold loose or in bulk form through a network of licensed wholesalers on whose behalf internal buyers operate.

There is a small market for packet tea, mainly confined to middle and upper-middle income groups in the urban areas. Sale of teabags constitute an even smaller percentage of all teas consumed in the domestic market. Value Added teas (i.e. packet teas and tea bags) are principally a blend of teas available in the local auctions, ex-factory sale to local traders, and garden packed teas from the estates themselves.

As the bulk of teas supplied to the domestic market has always been in loose or original form, the major marketing system prevailing for the supply of such teas has been the Chittagong auctions.

Direct sales by producers to the domestic market constitute less than 5% of all teas consumed and are presently one million kg.

Of the estimated domestic consumption of around 27 million kg, the market share of loose tea is almost 70% at roughly 18-19 million kg per annum, whilst value added teas (including garden packed), at roughly 8 million kg per annum, is nearly 30% of total consumption. Sales of teabags are minimal and are estimated at less than 5% of the value added market.

Recent figures for sales of value added teas have shown an upward trend. There has also been an increase in the number of blenders operating in the domestic market; these blenders are now in close competition for the brand name market for packet teas and tea bags, the sale of which is increasing rapidly and also includes the direct sale of garden packed teas by producers (run-on). This is indeed a positive sign and an expansion in the system prevailing for the supply of tea to the domestic market. Further, with continued economic stability and prosperity comes an increase in the general purchasing power of the consumer, which will no doubt be beneficial in the marketing of tea for domestic consumption.