Darjeeling eAuction Troubles Continue

The decision to include India’s famous Darjeeling tea in the nation’s e-auction system is under intense scrutiny as buyers struggle to reach financial settlement requirements.

Last week the India Tea Association (ITA) complained that the Bank of India and India Tea Board have failed to resolve software impediments that first came to light in May.

“The facilitators of the e-auction system have failed to interact in-depth with the auction organizers and grasp the requirements of the associated stake holders namely sellers, buyers, auctioneers and warehouses operating in the auction system,” the association said in a statement last Wednesday.

India eAuction

India Tea e-Auction website

The settlement bank and NSEIT (facilitators of the pan India e-auction system) “severely hampered post auction operations according to ITA,” in reports published by the Times of India and other newspapers.

The auction was introduced at all seven tea auction centers in June. The Tea Board requires 50% of India’s manufactured tea to be routed through public auctions. The goal was to increase the number of bidders and lead to greater transparency in transactions and faster realization of payments. In June, the board switched banks from IndusInd Bank to the State Bank of India. Troubles surfaced quickly despite assurances.

The association said the facilitators could not “satisfactorily resolve” many concerned issues, according to the newspaper.

“Delivery orders, which are negotiable instruments for delivery of tea worth crores of rupees, are being issued with digital signatures without proper infrastructure for verification of their authenticity by the warehouses prior to delivery of teas to buyers. This has increased the risk in the auction system,” it said.

According to the association, prompt payments could not be reconciled under the new process as payments from buyers were being kept in the settlement accounts and were not being remitted to sellers.

It also said that brokers were unable to reconcile tax invoices and account sales due to numerous errors in total packages, net weights, sale dates, VAT, service tax, and Tea Board charges, which remained to be addressed by the NSEIT.

According to ITA, despite all efforts of the Board, pan-India auctions have so far been unable to generate competition for a fair price discovery for the tea makers. Many producers are compelled to sell tea well below the cost of production and it will have serious consequences in the future on the sustainability of the industry.

“At the same time it is an important milestone in the effort of the Board towards digitization of various services provided to the stakeholders,” it stated

Source: Economic Times, Daiji World