No takers still for Kerala tea e-auction

Talks likely this week to resolve buyers' boycott

Electronic auctions for tea, implemented countrywide by now, are yet to take off at Kochi due to boycott by buyers. As a result, an inventory of 3.7 million kg has piled up and prices, which otherwise should have gone up, have fallen by eight to 10 per cent.

Following the Tea Board of India’s order, e-auction was made mandatory from June 23 at all auction centers. To end the problem at Kochi, the board is expected to meet the Tea Buyers Association there during this week. This is a result of the Kerala high court’s order directing it to do so.

It is 155 years since tea auctioning was introduced in India. Public tea auctions handle about 500 million kg annually.

On June 23, the new e-auction system was used across six centres — Kolkata, Siliguri, Guwahati, Kochi, Coimbatore and Coonoor. The system integrates the process, starting from creation of invoices till the delivery of tea from warehouses, enabling better control and avoiding duplication of work.

The Association of Planters of Kerala says the boycott by buyers at the Cochin Tea Auction Centre has created a serious cash crunch for growers, already faced with high cost of production and a slump in prices. They say buyers are now getting into private negotiations, knowing the sellers are desperate.

“We are not even getting the production cost. We are desperate to get a price increase,” said the chief executive of one of the largest plantation companies. They say they were expecting the price to rise by 10-15 per cent after the auction commenced but it has been the other way round.

Planters Association chairman C Vinayaraghavan said the cash realised through auctions was a lifeline for meeting the operational expenses at estates. This balance has been upset over the past four weeks. The association’s members, he said, strongly supported the pan-India auction introduced by the board.

“We believe this change in rules of auction will help in realising the right price for the product, as any registered buyer across India can bid for the tea produced in Kerala. This will also help in increasing the competition among buyers,” he said.

J K Thomas, chairman, Tea Trade Association, agreed that the e-auction would help growers to address their issues, being far away from the market. He said the five per cent sales tax was the biggest hurdle in Kerala, including the way it was collected.

He added that some provisions in the pan-India e-auction rules, such as division of lots, absence of any terms in splitting the lots and banning of proxy bidding were impacting several small and medium traders at the Kochi auctions. The implementation of a minimum lot size of 20 bags for a single buyer would hinder the latter’s purchasing power. It had been fixed without considering the ground realities at the Kochi centre, he said.

Noting the auctions were taking place smoothly at all other centres, the planters association urged fast intervention to resolve the issue.