Case Study: Assam

Tea Industry

Done by: V. Lakshana

Grade:11 “B”
Real-Life Case Study: Assam Tea Industry

Introduction
Assam is one of the world’s largest tea-producing regions. Known for its rich
flavour and bright colour, Assam Tea is globally recognized. It plays a vital role
in India’s economy and provides livelihoods to millions.

Case Study: Halmari Tea Estate, Dibrugarh

The Halmari Tea Estate, located in upper Assam, is one of the most famous tea
gardens in India. Established over 100 years ago, it produces premium
orthodox and CTC teas that are exported to countries like the USA, UK, and
Japan. Workers live in the estate colonies, and most families are engaged in
plucking, sorting, and processing tea.

Change in Price of the Product

Prices of products—especially agricultural goods like tea, grains, fruits, and
vegetables—do not remain constant throughout the year. They are influenced
by several economic, seasonal, and logistical factors. Here's how and why
product prices change:

1. Seasonal Production
Most agricultural products are seasonal, meaning they are harvested only at
certain times of the year.
During harvesting season (e.g., tea plucking in Assam):
 Supply increases sharply.
 Local markets are flooded with produce.
 Prices drop due to oversupply.
During off-season:
 Supply decreases.
 Demand remains steady or increases.
 Prices rise, especially in urban and distant markets.

2. Demand and Supply Forces

The law of demand and supply governs price changes:
 If demand is higher than supply, prices rise.
 If supply is higher than demand, prices fall.
Example: Premium Assam tea is in high demand overseas. If supply is limited
due to weather issues or low production, prices go up in the export market.

3. Transportation and Logistics

Poor transport systems increase the cost of delivering products to the market.
🚛 If roads are bad or transport is delayed:
 Goods spoil or lose freshness.
 Producers may sell at lower prices.
 Consumers may pay higher prices due to added transport costs.

4. Storage and Warehousing

The absence of proper warehouse facilities forces farmers and small producers
to sell immediately after harvest, even if prices are low.
Without storage:
 Producers face distress selling.
 Oversupply lowers prices.
 Later in the year, the same product may sell at a much higher price due
to scarcity.
5. Government Policies and Global Market
Government decisions on minimum support price (MSP), taxes, or export bans
can also impact prices. Additionally, global market trends affect products like
tea, which are traded internationally. If global demand rises for Indian tea,
prices in India will also rise.

Effect on Prices in the Absence of an Effective

Transport System
Transport is a crucial link between producers and consumers. An efficient
transport system ensures the smooth movement of goods from the place of
origin to markets. Without it, several negative effects on prices and the
economy can occur:
1. Delayed Delivery of Goods
Without a good transport system, goods take longer to reach markets. This is
especially harmful for perishable products like tea, fruits, vegetables, and milk.
Result: Products may lose freshness and quality, forcing sellers to lower prices
or face rejection from buyers.

2. Higher Transportation Costs

When transport options are limited or in poor condition (bad roads, lack of
railways, etc.), the cost of moving goods increases.
Result: Sellers must increase the price of goods in the market to cover the high
transportation cost.
Alternatively, producers may receive lower profits if prices can't be raised.

3. Restricted Market Access

Poor transport limits the movement of goods to distant or urban markets
where demand and prices are higher. Producers are then forced to sell locally,
where prices are usually lower.
🔻 Result: Local oversupply leads to price drops at the place of origin, while
urban areas face price hikes due to limited supply.

4. Uneven Price Distribution

An ineffective transport system creates price gaps between rural and urban
areas. For the same product:
 In villages, there's excess supply and low prices.
 In cities, there's shortage and high prices.
This harms both producers (low income) and consumers (pay more), leading to
market inefficiency.

5. Exploitation by Middlemen
When producers can't access markets directly due to poor transport,
middlemen take control. They buy goods at very low prices from farmers and
sell at high prices in distant cities.
Result: Producers get unfair prices, while consumers pay more.

Effect on Prices in the Absence of Suitable Warehouse

Facilities
Warehouses play a critical role in maintaining supply, quality, and price
stability. When there are no proper storage facilities, several negative impacts
on product prices occur:

1. Forced Distress Selling

Without warehouses, producers (like farmers or tea growers) are often forced
to sell their produce immediately after harvest, even when market prices are
low.
Result: This creates excess supply in the market, causing prices to fall
drastically.
2. Spoilage and Quality Loss
Without proper storage, goods may get spoiled due to moisture, pests, or
temperature, especially perishable items like tea, fruits, or grains.
Result: Buyers pay less for low-quality or stale goods, reducing the market
price further.

3. No Price Stabilization
Warehouses help regulate market prices by storing products during surplus and
releasing them during shortage. Without this facility, there is no buffer stock,
and prices fluctuate sharply.
Result: During harvest, prices fall; during off-season, prices rise, harming both
producers and consumers.

4. Middlemen Exploitation
Small producers without storage facilities become dependent on middlemen,
who buy goods cheaply and store them to sell later at higher prices.
Result: Farmers earn less, while middlemen profit more, creating a price
imbalance.

5. Limited Access to Credit

In the absence of a warehouse, producers cannot get warehouse receipts,
which are often used to take loans from banks.
Result: Without credit support, producers are pressured to sell quickly, further
lowering prices.
Duties Performed by a Warehouse
A warehouse is a storage place for goods and materials. It plays a vital role in
the smooth functioning of trade, commerce, and industry by performing the
following important duties:

1. Storage of Goods
The primary function of a warehouse is to store goods safely until they are
needed for consumption, sale, or further processing. This helps businesses
maintain a continuous supply and manage seasonal production and demand.
Example: Tea produced in Assam during the harvesting season can be stored
and gradually supplied throughout the year.

2. Protection of Goods
Warehouses protect goods from damage, theft, weather, and pests. Special
facilities like cold storage, dry storage, and fire safety measures ensure the
goods remain in good condition.
Benefit: Prevents spoilage and quality loss, especially for perishable items like
food and beverages.

3. Regular Supply of Goods

By storing goods in bulk, warehouses ensure that products can be supplied
regularly to the market, regardless of seasonal variations in production.
Example: Even when tea is not being harvested, stored tea can be supplied to
meet market demand.

4. Price Stabilization
Warehouses help in stabilizing prices by balancing supply and demand. When
supply is high, goods can be stored instead of sold at low prices. Later, they can
be released when demand increases, avoiding sharp price changes.
Benefit: Farmers and producers can avoid losses during glut periods and gain
fair prices later.

5. Grading, Sorting, and Packaging

Many modern warehouses offer value-added services like:
 Grading goods based on quality
 Sorting them into categories
 Packaging them attractively for the market
Example: Tea leaves can be graded into premium and regular types before
packaging.

6. Financing Support
Warehouse receipts (a document showing proof of stored goods) can be used
by traders and farmers to get loans from banks. This improves access to credit
without immediate selling.
Benefit: Producers get working capital without being forced to sell their goods
quickly at low prices.

7. Risk Bearing
Once goods are stored, the warehouse becomes responsible for their safety. If
there is any damage due to negligence, the warehouse authority is liable.
Benefit: Reduces risk and responsibility for the owner.

8. Efficient Inventory Management

Warehouses often use technology and inventory systems to keep track of
goods. This helps businesses manage stock, reorder levels, and ensure proper
documentation.
Benefit: Saves time, reduces wastage, and improves business planning
Demand and Supply Situation of Tea During
Harvesting Season

1. Supply Increases During Harvesting

During the tea harvesting season, production is at its peak. In regions like
Assam, where tea is widely grown, there is a huge influx of fresh tea leaves
being plucked, processed, and sent to markets. This leads to an oversupply of
tea at the place of origin.
2. Prices Near the Place of Origin Fall
Due to the large quantity of tea available in local markets:
 Local prices drop because supply exceeds the immediate local demand.
 Small tea growers, who often lack storage facilities, are forced to sell
quickly at lower prices.
 The pressure to sell fast also comes from the perishable nature of tea
leaves, which lose quality over time.
3. Prices in Distant Markets Remain Higher
In big cities and other states, where tea is not grown but widely consumed:
 The supply is more controlled and spread over time.
 Due to transport costs, packaging, and middlemen, the prices stay
higher than in production areas.
 Demand remains steady, as consumers in cities buy tea regularly,
unaffected by the harvest.
4. Role of Transportation and Storage
 Efficient transport systems can reduce the price gap between origin and
destination.
 Lack of proper warehouses near the tea estates forces producers to sell
quickly, keeping local prices low.
  If proper storage and transport were available, producers could wait for
better prices and also reach farther markets more easily.

5. Market Behaviour and Seasonal Trends

 During harvest, wholesalers and middlemen buy in bulk at low prices
from farmers and sell at higher rates in cities.
 After the harvesting season ends, the supply decreases, and prices rise
again both locally and in distant markets.
 Thus, price fluctuations are seasonal, and affected by how well demand
and supply are balanced across regions.

Bibliography
(PDF) A study on the present scenario of tea industry in ...
Assam [Link]
A Case Study in Tea Plantation in Assam, India
Tea industry in assam | PPT
Assam Tea - Assamese tea Latest Price, Manufacturers & ...
North India Tea - Assam CTC Dust Tea Wholesale Trader ...
Demand and supply situation of the assam tea during ...