India’s Parliamentary Commerce Committee Critical of Auctions


India’s Parliamentary Committee on Commerce’s annual report on the tea industry endorsed tea as the national drink and drew attention to weakness in the open-cry and e-auction methods of sale.

The committee, which consists of 31 members from both the Rajya Sabha (10) and lower house (21), in its 102nd report, considered 48 recommendations for improving India’s tea industry.

The report noted that between 96- and 99-percent of those living in India from huts to five-star hotels consume tea and as such “tea has already acquired the status of a national drink,” said BJP Rajya Sabha member and Committee Chair Shanta Kumar.

Kumar reported that during the committee’s year-long interactions with stakeholders he observed “an overwhelming demand from nearly all the stakeholders of the tea industry that tea should be given the status of  ‘National Drink.’ “

A formal announcement by the Government of India is expected this year.

The committee also deliberated on the shortage of labor in growing regions; the decline in yield due to aging tea plants and overall reduction in acreage devoted to tea cultivation.

The report, presented to Parliament Aug. 9, also urged the Commerce Ministry and the Tea Board to take a fresh look at the tea auction system in general and the e-auction system in particular.

The Hindu Business Linereported committee members “feel that the present auction system does not always guarantee remunerative prices to growers who often find it hard to pass on the cost to consumers once tea is offered at auction where prices are determined by free interplay of market forces. “

The electronic auction system on the other hand, the committee notes, causes problems for sellers not connected electronically and access to computers and Internet is a problem in many parts of the country. The committee has, therefore, urged the Commerce Ministry and the Tea Board to “revisit the present e-auction system and come out with an optimal solution”.

The committee has expressed grave concern over the Commerce Ministry’s “unpreparedness” to deal with unscrupulous exporters importing cheap tea from other countries and re-exporting it without any significant value-addition under false certificates as Tea of Indian Origin, thus, eating away at the value of Indian tea by undercutting. It, therefore, suggests strict monitoring system for tea for exports and import of tea for exports. Also, utmost care must be taken in regard to issue of licenses in this regard.

India now controls about 12 percent of the global export market for tea. In the 1950s India exported 48 percent of the world’s tea. Tea production has declined as domestic demand increased by 3 percent per year making less tea available for export. Yield has also fallen. Today 37 percent of the country’s tea plants are 50 years and older. Kenya, which leads in black tea exports, is 70 percent planted in young tea and acreage in rival Sri Lanka is 68 percent young tea plants. One third of China’s tea bushes are less than 10 years old and China, the world’s supplier of green tea, is now exporting significant amounts of black tea.

During the period 2007-10 overall tea production declined to 966.4 million kilos in India while China harvested 1,475 million kilos in 2010. The gap in production between China and India thus widened from 154 mkg to more than 500 mkg during the period, according to the Hindu Business Line report.

The committee recommends subsidies for growers to encourage planting new bushes which take about three years to begin producing leaves. Members want the government to open new lands to cultivation and to better promote tea globally.

The special purpose Tea Fund created by the Tea Board in partnership with the Commerce Ministry, it is felt, needs to be recast to meet present day requirements.

Source: Hindu Business Line