It is being largely felt amongst the tea growers that the Tea Board must adopt a cautious approach towards this as it will be done for the first time in the world.

Besides, looking at it from the Indian context, where quality of tea ranges from one producing state to the other, efforts should be made to first standardise the product in terms of quality, said a leading tea grower.

Various varieties, qualities and flavours have proved to be major deterrents in futures trading. The growers feel that there is a wide variation in the quality of Indian tea as tea bushes yielded different quality of tea in different months and the plucking and manufacturing practices varied from one estate to other.

Therefore, it would become difficult to predict the quality of tea months before in advance, said a planter.

It is therefore suggested that a very cautious approach should be adopted before introducing this mechanism as it may otherwise lead to several problems. Recognising the importance of forward tea trading, the planters appreciate the step initiated by the Tea Board, however, in order to make this system successful, it is felt that a system of standardising production needs to be evolved by the tea trade.

However, the Tea Board, which is fully geared up towards the commissioning of a study on the `Futures Market for Tea', feels that this mechanism would help control the huge price fluctuations witnessed during the past one year.

It may be recalled that the Kobra Committee had earlier listed few commodities for futures trading. However, despite the fact that tea did not figure in that list, the Tea Board's decision of undertaking this study rests on the wide price fluctuations being witnessed in tea.

Speaking to The Financial Express, the chairman, Tea Board, Surjeet Singh Ahuja said that futures trading has already been recognised as a risk management and price mechanism.

``In South India, the prices of tea had been ruling even below the cost of production. It is the recent price fluctuations have led to this study,'' added Ahuja

The price fluctuation in tea is mainly because of the fact that tea is a rain-fed crop and adverse weather invariably brings down the production level.

Moreover, lack of information on other producing countries often creates problems for crop estimation and potential prices as a result of which prices experience wide fluctuations. This can, however, be contained to a certain extent by the introduction of futures trading.

A formal decision to examine the possibility of setting up of this exchange was taken recently by the Tea Board at its last meeting held in Calcutta on September 16.

The Tea Board has entrusted the Indian Institute of Plantation Management (IIPM) with the task of conducting this study. The estimated cost of the study would be close to Rs 1.5 lakh and will be submitted to the Tea Board within two months.

Besides looking into the feasibility of setting up a futures commodity exchange, the study would also dwell into the technical, financial and legal parameters related with the setting up of this exchange. The study initialled by the Tea Board would cover feedback from all the auction centres and selected tea gardens in north and south India.