Chapter I INTRODUCTION
6. Productivity: Productivity variation has a significant impact on the production of tea
1.4 GAPS IN THE EXISTING RESEARCH
The review of the relevant literature conducted above helps the identification of areas where future research could be centered.
The small tea growing sector is a relatively new sector. It has attracted plenty of small peasants from the Indian agrarian economy which is itself undergoing a crisis (Das, 2016). Will the small
tea growing sector be sustainable in the long run? This is a crucial question, whose answer depends on,
(i) If the prices that small garden owners receive are remunerative, and (ii) If there exists scope of improving production.
We propose to examine the question of remunerative price through the idea of exploitation. We seek to examine the monopsonistic exploitation of small tea garden owners by the tea leaf buyers. According to the microeconomic theory in a monopsonistic market the degree of exploitation by the monopsonist depends on the price elasticity of supply. Thus we need to estimate the price elasticity of supply in order to estimate the extent of monopsonistic exploitation. There have been some work on small tea growers which estimated the supply function and price elasticity of supply (Bhuyan et al., 2004). But, to the best of our knowledge, they have not taken into account the endogeneity problem while estimating the supply function.
Hence, these studies may have given incorrect estimations of price elasticity. Our study will correct the deficiency in this nascent literature on small tea growers. Also we are not aware of any previous research which estimated the degree of exploitation of small tea growers. This again will be our contribution to the literature.
The second question of improvement of production of tea will be dealt with by estimating the production function of small tea growers. Estimation of production function will be done both in the deterministic production function set up and in the stochastic production function set up. This exercise will give us a clue to (a) if technical inefficiency is present in tea production and (b) which factor(s) are needed to be paid attention to in order to raise the production to the optimum level. Bhuyan et al. (2004) in his study of small tea growers estimated whether individual small tea growers are technically efficient or not. Along with estimating the technical efficiency of the small tea growers at individual level as Bhuyan et al. (2004) has estimated, we are planning to estimate if the small tea growers of our sample are technically efficient or not as a whole also.
We observe that in his model specification Bhuyan et al. (2004) did not include capital as an element of the production function. In contrast, we seek to include capital, an important element of production, in the estimated production function. This way we plan to contribute to the research of small tea cultivation of Assam.
On the basis of the above two answers we may be able to make inferences regarding which policies the Government needs to focus on. This is our third research objective.
Another way to look at the question of exploitation of the small tea growers is the following. In the large estate tea gardens, which were the old model of tea production in Assam, there was rampant exploitation of labourers by the tea producers. Lack of alternative avenues of employment of migrant tea labourers was also evident (Guha, 1977; Kadavil, 2008; Das, 2014;
Das and Saikia, 2011). One way to stop the exploitation of workers by the producer is to have tea gardens which are controlled by the workers themselves. It would appear that the small tea garden model seems to provide a way out of exploitation by the producer. This is because in the small tea gardens the owner himself/herself is often a worker, although he may employ some workers from occassionally.
Even though in the small tea gardens the exploitation of the workers by the owners may be less, yet another kind of exploitation may surface which was unimportant in case of large estate gardens. This is the issue of monopsonistic exploitation. The small tea growers are many in numbers and buyers of tea leaves are very few. As small tea growers are small in size and many in numbers, they have little influence over the selling price. Being the producer of the product, they are price takers as they cannot influence the price of their tea leaves. Thus the small tea growers are powerless in comparison to the buyers of tea leaves. Typically bought leaf tea factories or large tea estates buy tea leaves from the small tea growers either directly or through agents. Since there is an asymmetry in the bargaining position between the seller and the buyer, exploitation takes the shape of monopsonistic exploitation (Bhuyan et. al, 1993; Goswami et.al, 2006; Kadavil, 2008; Banerjee, 2011).
In the first part of research we are trying to estimate the monopsonistic exploitation. In the second part we go one step further and try to look at the nature of the response from the inputs to the output in small tea gardens and possibilities of technical inefficiency. In other words, in the second part we are not focusing on exploitation of the small tea. Instead, we are asking if the price is given, is there a way in which the profit of the small tea grower can be boosted by raising the output to an optimal level.
METHODOLOGICAL GAP
Ambiguities around the concept of evaluation combined with the things that the evaluator purports to do lead to a series of methodological gaps. In the literature certain gaps have been observed. As mentioned in the previous section Bhuyan et al. (2004) used the supply function but without considering the endogeneity problem. Hence the estimation of elasticitity of supply is not valid. On the contrary, we want to resolve this problem by the use of instrumental variable (IV) and using two-stage least square (2SLS) techniques.
Another methodological gap which is observed in his (Bhuyan et al., 2004) study is that he has not included capital as an independent variable in his production function which is an important input of production. Similar methodological gap can be noticed in the study of Lama et al.
(2016) where capital is not included as an independent variable in the production function. In contrast, we tried to incorporate capital cost in our production function.
Again in the study of Lama et al. (2016) it is observed that they have not included Tea Board registration as an important factor of technical efficiency/inefficiency. We considered TB registration is an important factor as from the literature study it is observed that the growers who are registered with the TB are able to avail the facilities provided by the TB which includes technical training also. Higher the technical training to the growers, higher is the efficiency and vice versa. Hence in our estimation of technical efficiency, we have included dummy for TB registration as an independent factor of inefficiency.
Thus the present study has been conducted on the basis of the following objectives:
A. To investigate the possible monopsonistic exploitation of small tea growers by the buyers of tea leaves, and to investigate the production conditions of the small tea growers.
B. To frame policy prescriptions to enable the survival of small tea growers in the long run.
For the first research objective following questions can be formulated.
A(1). What is the degree of exploitation of the small tea growers by buyers of tea leaves?
A(2). What does the production of small tea grower depend on? Is there presence of technical inefficiency?
Both these are empirical questions. For A(1), we estimate degree of exploitation by estimating price elasticity of supply.
We estimate the production function (deterministic and stochastic) for A(2).
For the second research objective the following question can be formulated.
B. What steps are warranted from the side of Government and other agencies for the long run sustainability of small tea growers?
To realize the first objective primary survey of small tea growers has been conducted. Answers to the research question (A) helps us to address the second research question (B), which pertains to the policy implications of our study.