Bhumya Tea Company owns and runs a tea farm in the Assam region of India. Assam is the largest contiguous tea-growing region in the world, contributing to over 50% of India’s tea production and 17% of the world’s tea production. Long periods of drought and higher temperatures have reduced tea production in Assam by 6% in the past year. Bhumya has been directly hit by erratic weather conditions due to climate change – the harvest of tea leaves has deteriorated both in quantity and quality. Reduced rainfall leading to poor plant health has reduced tea production by over 10% in the last year.
Poor harvest has serious economic consequences for Bhumya. The farm has a fixed number of laborers that need to be deployed despite reduced harvest and increased idle time, leading to high labor costs which cannot be cut down due to strong unions. The lowered supply of tea from the Assam region does lead to a slight increase in prices of tea, but this is not linear since the demand for tea is elastic and the consumer is price-sensitive. Further, the plant has fixed manufacturing costs as Bhumya lacks economies of scale and operates below capacity, so the cost per unit of tea rises consequently. Moreover, Assam tea can be substituted with tea from other regions (Darjeeling or Nilgiri in India, Sri Lanka, China, Kenya), further limiting the higher prices that Assam tea can command because of lower supplies and high demand. The unpredictable weather conditions further aggravate the problem by changing the nature of the leaf in each season, creating variability in the leaf structure and therefore in product quality. This fundamentally alters the product that the consumer wants, further reducing prices. The cumulative impact of decreased quantity and lower quality in the tea leaves is reflected in Bhumya’s financials that show declining revenues over the past few years. These declining revenues are further exacerbated by increasing costs: dry spells make the tea plants more prone to pests, resulting in higher use of pesticides and a further erosion of profit margins.
To mitigate the impact of reduced rainfall and frequent droughts, Bhumya’s primary strategy is rain water harvesting – storing rain water from the monsoons to irrigate the farms when rains fail. A more recent mitigation plan involves the use of tubewells, a type of water well that taps into water in the underground aquifer. However, such tubewells are only a short-term solution to the problem of scarce rainfall. During peak times of use, they lead to a temporary depression in the water table. Over long periods of continuous use, tubewells can permanently lower the water table, adversely impacting water availability in the region. In rural communities that rely on water from wells, a lower water table dries up these wells, resulting in damaging effects on the health and well-being of community members by cutting out their primary water source.
As a long-term strategy to deal with the increasing likelihood of reduced rainfall, Bhumya should consider diverting water from the nearest perennial river, the Brahmaputra. While this involves considerable investments in the short-term, it can solve a large part of the water shortage in the long-term without any unfavorable impacts on the environment or the community. To alleviate financial pressures, Bhumya can explore long-term contracts with buyers to assure revenues that can cover increased costs.
As a pre-emptive strategy, Bhumya should consider planting rehabilitation crops that prevent degradation of soil that occurs due to drought. In North-East India, the most common soil-binding grasses are Guatemala grass (Tripsacum laxum), Pusa Giant Hybrid Napier (Pennisetum purpureum) and Citronella grass (Cymbopogon wintarianus). Moreover, the use of natural fertilizers (instead of chemical fertilizers) can improve absorption of water in the soil. As Bhumya plants new tea bushes over the next few decades (the average lifespan of a tea plant is 50 years), it should explore new plant varieties that are being bred to better tolerate effects of climate change. The Tea Research Association will soon release two new Assam tea clones that are drought and water-logging resistant without compromising Assam tea’s distinct bold flavor.
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- Interview with Director of Operations for the holding company for Bhumya. The company has requested that their name not be revealed.
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