Centre to appoint settlement banker for pan-Indian tea auction

The Centre is planning to rope in a new banker for financial settlements of the transactions following the all-India e-auction in tea.

 

The development comes in the backdrop of frequent operational issues since e-auction was introduced last year. The software for the development module has been developed by NSEIT, the IT arm of the National Stock Exchange, while the Bank of India has been designated pre-auction ‘settlement bank’.

 

The module of the pan-Indian e-auction was rolled out by the Tea Board in June 2016 in the auction centres of the country. The post-auction settlement module is being implemented from September 14, 2016. There have been operational problems with this module mainly relating to reconciliation of payment. The Tea Board held a discussion with the stakeholders on October 17, 2016, and decided to keep the post-auction settlement process on hold with effect from October 18.

 

It was also decided that the earlier payment procedures before the introduction of pan-Indian operations in various centres would be followed until the technical issues were addressed. “It has now been decided to select a new settlement banker,” said Union Commerce and Industry Minister Nirmala Sitharaman.

 

The Tea Board has decided to keep on hold the post-auction settlement module. The decision was taken to address the issue which has been dogging the tea industry and trade since September, when the Board started the post-auction settlement system for pan-Indian auctions through Bank of India, the settlement bank. The decision was made after several rounds of discussions among the stakeholders.

 

The State Bank of India (SBI) and IndusInd Bank had been handling the payment settlement processes in the old e-auction process, which was centre-specific.

 

According to industry sources, the tea industry could not make bonus payments since large amounts of money were stuck due to the post-auction settlement problems, and tea prices started dropping. However, after the old system was reinstated things have improved. In 2015, 153.2 million kg of tea was sold through auction, and it decreased to 132.4 million kg in 2016.

 

From January 1 to January 17 (up to sale no:3) tea sold through auction centres was 8.15 million kg as against

 

7.13 million kg in the previous year. The average price increased to Rs 104.25 a kg in 2016 from Rs 81.67 a kg in 2015. In January it was Rs 112 a kg as against Rs 99.94 a kg.