FE Report

The National Tea Company Limited (NTCL) has incurred losses to the tune of around Tk 472 million in the last three years due to declining production and lower tea price.

The NTCL production dropped to 47.66 million kilogram (kg) in 2006 from 56.22 million kg of the previous year. The declining trend also continued in 2007 and 2008, according to the company statistics.

The production of 2008, 2007 and 2006 was about 1.18 million kg, 1.37 million kg and 0.86 million kg less than that of 2005 that had cost the company Tk 291 million in loss.

"The country's production was 1.22 million kg or 2.05 per cent less than 2005 denoting that the overall production has been falling due to declining trend in NTCL production," an expert, who is also a company insider, told the FE.

In 2008, the company set the average selling price at Tk 106.87 per kg against the country's average price of Tk 117 per kg, which was Tk 10.0 less than the country's average.

Similarly, the NTCL's average prices of Tk 14 per kg and Tk 15 per kg fixed in 2007 and 2006 respectively were less than the country's average.

The state-run tea company lost Tk 180 million during the period under review because of lower price fixation of tea than the country's average prices due mainly to poor quality of their production, the expert said, adding that the average price of other major tea companies was much higher than the country's average.

"During the period, the company experienced a loss of Tk 292 million on crop output and Tk 180 million on account of low price adding to the total loss of about Tk 472 million because of ineffectiveness of the management," the expert noted.

The company management refused to accept the inefficiency claim saying that the production dropped during the period because of unfavorable weather.

"Tea production depends largely on weather that was not in favour of us during the period," the NTCL Secretary, M Naufel Karim Khan, told the FE while explaining the main causes of production loss.

But the expert said: "It is far from the truth. In the same period, the production growth of other major producing companies is much better than the NTCL while the weather condition in tea districts is more or less similar to the NTCL plantations."

Regarding average price, Mr. Khan also said the company has set lower average prices during the period due mainly to frequent power failure that has hampered the quality of the tea production.

The company's plantation also dropped sharply to 86.38 hectare in 2008 from 122.3 hectare in 2005 and 135.15 hectare in 2004, the company's data showed.

Mandatory planting according to the policy of the Bangladesh Tea Board is 2.5 per cent grant areas, which is about 140 hectare each year.

"But the NTCL's actual plantation area is much less than the mandatory figure, which is a gross violation of the government policy," the expert said, adding that the cost of production of NTCL has increased gradually due to poor production.

In 2008, the NTCL's cost of production was Tk 90 per kg, which was much higher than any other tea company. The production cost was Tk 61.11 per kg in 2005.

The NTCL is a listed company since 1978 and its shares are traded at both Dhaka and Chittagong Stock Exchanges.