Trapped in the Green Fields: The Economic Reality of Assam’s Small Tea Growers

Recently, an article in the Times of India (September 2025) highlighted the increasing frustration of Assam’s small tea growers, who feel they are “price takers in their own land.” Although small tea growers, of whom most cultivate less than 10 hectares, account for nearly 52% of the total tea produced in Assam, they remain vulnerable to pricing from a handful of Bought Leaf Factories (BLFs). The article depicts small growers selling their fresh leaves for as low as ₹10–₹15 per kilogram. 

"When it costs ₹27 to produce a kilogram and we are selling for ₹15, how can we survive?" 

A grower asked. The question is simple yet reveals a profound structural issue: why are the producers of Assam tea, tea globally recognized as one of the best, remain the most dispensable link in the value chain?

From an economic standpoint, this is not merely a case of low prices: this is a classic example of monopsony power. Monopsony exists when there are many sellers and only a handful of buyers, allowing the buyers to set the prices. In Assam’s tea belt, BLFs operate as major buyers in localized markets. The growers are scattered across rural districts and lack collective bargaining power, and therefore are operating in what Joan Robinson dubbed a "buyer’s market with diminishing returns to labor."

 This results in a distorted equilibrium. Prices are downwardly sticky: they fall rapidly upon a decline in demand, but they always rise slowly (if at all) upon an increase in demand. This maladjustment locks all growers in with uncertainty and subprime debt. As the Times of India report illustrates, even in high export demand season, the benefits rarely go to the small cultivators. Instead, the margin get taken by middlemen or factories, perpetuating a dual economy format where production thrives, but producers are suffering.

Economists such as Amartya Sen and Pranab Bardhan have noted for some time that rural markets either not convey competition but "coercive exchange" where one side's economic vulnerability stands in for consent. In Assam, such coercion is revealed in structural limitations such as high interest rates associated with limited access to credit, limited processing capabilities, and weak institutional mechanisms for price discovery. Concerning price discovery, the Tea Board of India initiated floor pricing that has yielded limited results because enforcement is fragmented, and localized bribery undermines transparency. 

Most fundamentally, the issue is around institutions, not individuals. Individual farmers cannot collectively organize to pool resources towards micro-factories or cooperatives. Without vertical integration, farmers remain dependent on BLFs for processing, thus transferring complete bargaining power to buyers. Farmers are trapped in an iron cage of small farm development identified with classical institutional economics, where small producers operate within an extractive market that stifles capital accumulation.

To consider reform, it is first essential to understand the grower not simply as a victim but as an economic actor constrained by market design. For instance, digital platforms for auctioning green leaves, cooperative micro-factories, and direct market linkages might begin to diminish the impact of monopsony power. However, any reform must also take into account the cultural and ecological context of Assam's tea economy: a geographic landscape of crossed lives, heritage, and land.

As The Times of India aptly concludes, "Assam's small growers are not deficient in productivity; they are deficient in power." What were once fields of colonial extraction are now relabelled as the extracted part of a subtler economy: one that is not extractive on behalf of the Empire, but extractive due to an imbalance in the market itself. To understand this is not only an act of economics but of empathy. For every cup of Assam tea, there is a hidden narrative of those who grow it and a market that is defining their existence in silence.