India Tea Board Expands e-Auction Nationwide in January 2013

KOLKATA, West Bengal

The Tea Board of India will expand sales of tea via electronic auctions nationwide by January to address technical setbacks in Kolkata last week.

A technical problem prevented the sale last week of 5.5 million kilos of tea at the Kolkata auction which has abandoned the manual open outcry process. Prices fell and the quantities on offer this week nearly doubled.

The Reliance Communications network regularly experiences difficulties, but generally not as severe as last week. The system currently relies on less reliable broadband internet connections that technicians hope to replace with dual leased-line connections.

The Tea Board is pushing ahead to provide access to buyers throughout the country by early next year. Outcry auctions are efficient and low cost but the requirement to be in the auction house limits the number of interested parties and subsequently the price paid.

Rajeev Roy, financial advisor and chief accounts officer for the Tea Board told The Business Standard that “we expect this pan-India access to e-auction would start from January 2013.”

“This will increase participation of bidders from other centers,” Roy said. “While trade volumes might not see a sharp rise, it would improve value realization for sellers. And, buyers from other parts of the country will get access to different types of  teas — CTC, orthodox, Darjeeling, dust, etc.”

There are seven auction centers in the western part of the country: Kolkata, Guwahati, Siliguri and New Jalpaiguri with three other centers at Kochi, Coimbatore and Coonoor. Weekly trades average about 200-300 kg for growers.

India's Tea Buyers Association estimates 54 percent of the tea produced is offered in auction in India against 88 percent in Mombassa, Kenya; 91 percent in Chittagong, Bangladesh and 96 percent in Colombo, Sri Lanka. Electronic auctions ensures proper price discovery particularly for bulk tea, according to the association. 

“It is very disturbing that the auction at Kolkata was postponed for a week due to a technical snag in the system. This has, once again, proved that the public auction of tea through e-auctions is not at all satisfactory,” said Piyush Desai, chairman of the Wagh Bakri Group and president, Western India Tea Dealers Association.

He cited innumerable delays and postponements since the start of auctions this calendar year due to technical problems. Link failure are common at some centers sometimes forcing traders to wait idly the entire day. Traders say this creates uncertainty of supply and, thereby, escalates prices.

“Buyers’ orders for a particular lot, price and quality also get delayed. On the seller’s side, receivables get delayed, affecting payments to labor and warehouse costs, etc.

Major link failures in Guwahati occur at least three-four times a year, observed one trader.

Source: The Business Standard