Producers at the 87 gardens that make up India’s first Geographical Indication (GI) tagged product will meet next week to consider a Tea Board of India proposal to make auctions mandatory. Sizeable amounts of tea marketed as Darjeeling contain only a small portion of the high-value tea due to unscrupulous blending and a lack of transparency in transactions.
“We want to get 100% of Darjeeling teas onto the auction platform so that we can realize the actual value of the tea,” Tea Board deputy chairman Arun Kumar Roy told reporters. Routing all tea through auction houses will enable the board to keep better tabs on how much is produced, said Roy.
The proposal is somewhat controversials as growers fear that cumbersome and time-consuming auctions will delay shipments, leading to a decrease in quality without a guarantee of greater returns. The Darjeeling Tea Association (DTA) represents 66 of the gardens. DTA Chairman Binod Mohan, said few members are enthusiastic about the proposal.
He told the Times of India that “Practically speaking, this may result in price crash of Hills [Darjeeling] tea and most of the members may not agree with this proposal. But, before making a comment, we need to see the modalities in detail. The meeting is crucial.”
The gardens operate in clusters owned by 10 firms.
During the first flush and early in the second flush, teas are often flown to destinations around the world. These transactions represent 55% of volume and 75% of total sales for the year.
In 2016 Darjeeling growers transitioned from a formal open-cry model, practiced since Colonial days, to a modern e-auction that permitted buyers worldwide to participate. The transition was expected to improve price discovery and lead to more equitable rewards for the finest of the region’s fine tea. Instead prices have fallen. Very little of the tea is now listed for auction with the best sold direct to customers in Europe, Japan, Russia and the U.S.
Only 1.5 million kilos of the 7.7 million kilos produced in 2018-19 were auctioned. In the past, volume was closer to 3.5 million kilos. Growers in the region are required to sell at least 50% of their tea at auction, according government policy as stated in the Tea Marketing Control Order. In nearby Sri Lanka TMCOs require 100% compliance.
Prices last year averaged $5.93 (INRs419) per kilo, according to Tea Board of India statisticians. Direct sales yielding $200 (INRs14,000-18,000) per kilo are common. One tea sold for $2,800 per kilo last year but the mid-point is INRs2,000-4,000 per kilo for good tea, with lower grades earning INRs450-500 per kilo.
Roy told The Telegraph in Kolkata “for a niche product like this, we feel there is a need to intervene and see that every kg is accounted for.”
The Tea Board and sellers stand to benefit if all Darjeeling tea is forced into auctions. This is because critical measures of quantity and quantity and practical matters like taxes based on sales will establish norms.
The board also made it clear that growers who submit their teas to auctioneers can always buy it back establishing the pricing and controls they are seeking.