The tea trade, which migrated from a manual auction system to e-auction format in 2016 as part of the auction reform initiative, has been implemented in Coonoor and the Borad has proposed, furthering the system to the remaining five auction centres.
India has 1,585 tea gardens spread across 13 states with more than 12 lakh workers working on more than 6.36 lakh hectares.
The Federation of All India Tea Traders Association (FAITTA), the apex body of tea trade in the country, has urged the Tea Board to undertake a thorough evaluation of the e-auction system before rolling it out since the public auction system could have serious ramifications posing several problems for tea buyers.
The tea trade, which migrated from a manual auction system to e-auction format in 2016 as part of the auction reform initiative, has been implemented in Coonoor and the Board has proposed, furthering the system to the remaining five auction centres.
The purpose of introducing the e-auction system by the Tea Board was fair price discovery, to ensure trades take place at the market-determined prices. But with several lacunae in the system, it has ended up working like a tender process, said Viren Shah, chairman of FAITTA, adding that in mock trials, the tea lots went to the buyer who had entered the highest bid price, regardless of the actual auction bidding trend and price increments leading up to the second highest bidder price.
“The faulty logic of knockdown of lots is required to be revised. The maximum bid price logic for knockdown could have serious disadvantages in the long-run and impact buyer participation in the auctions,. This could be counterproductive to the Tea Board’s intent, and interest of stakeholders,” Shah said.
Among the likely impacts of the new auction system are tea prices that do not reflect the ground reality. The auction system can lead to an unnecessary hike in tea prices,” he said. Tea auction prices in 2020 were around 35% higher as compared to 2019 or around Rs 80 per kg higher. This was the result of a fair price discovery mechanism based on demand and supply. Tea production last calendar year was 1,250 million kg, around 100 million kg lower than the previous year’s output of 1,350 million kg. Retail tea prices rose by an average Rs 70 per kg during the year.
“We have conveyed our concerns to the Tea Board. We have demanded that the features of the new auction system be communicated to all stakeholders in a transparent manner. Any system should not be implemented without wider consultation with the trade,” Shah said.