Kochi Tea Buyers Ignore e-Auction

Last week for the first time since it was founded, all the tea on sale at India’s Kochi e-Auction remained unsold as buyers abstained from participation in protest of new e-auction rules.

The previous week’s auction resulted in the sale of only 715 out of 1,743 lots by 190 active members of the Tea Buyers Association, according to the Hindu Business Line.

Expansion of India’s e-auction has attracted new buyers, opened Darjeeling teas to a broader base of buyers and realized slightly higher prices for tea.WTN160705_IndiaEAuction_Guwhati Tea Auction center-lo res

These successful signs were dimmed somewhat by traders’ concerns that smallholders were finding it difficult to conclude settlements. The Tea Board of India replaced the State Bank of India and the IndusInd Bank with the Bank of India but the latter was unable to process payments, forcing the existing banks to continue.

Meanwhile the Tea Buyers Association (TBA) in Kochi told The Hindu Business Line that new auction rules place medium and small traders at a disadvantage. A minimum size lot is permitted with no splitting lots. Bids by proxy were eliminated as well.

Dharmendra D. Vora, president of the Kochi Tea Buyers Association, said there were many fewer traders than normal during the second auction of the month. There were only eight buyers at Auction 26, he explained. This is because the new rules prevented all but a few firms from taking part. In Kochi, 100 of the 120 active tea traders are small and medium-sized firms, he explained.

The new 20-sack minimum works well in northern India, where the amount of tea at auction exceeds 170,000 sacks a week. At the Kochi tea center there are only 25,000 to 35,000 weekly offerings, he said.

The association is seeking to delay implementation of the pan-India auction rules by pleading to the Kerala High Court for relief. As a result, the Tea Board was ordered to accommodate the smaller traders and pass appropriate orders within two months.

During the first month in operation, Darjeeling teas were on average selling around IRs400, with reports of greater participation in Coonoor and other auction centers. The Tea Board is closely monitoring the expansion, according to news reports.

Source: Economic Times, The Hindu Business Line