Tea Board tweaks policy before first national e-auction

Allows proxy bidding to address concerns of tea lobby

Addressing concerns raised by the Assam and Terai tea lobby over the forthcoming pan-India e-auction of tea, the Tea Board of India has revised norms for the auction. It has now allowed proxy bidding, which previously it had done away with.

“Now, associate identities will be given in case where proxy bidding will be allowed”, Santosh Sarangi, chairman of the board, told Business Standard. From June 21 e-auction will be compulsory nationally.

Also, the tax rate for inter-state sales has been revised. After a successful sale, the buyer will now have to pay either the state tax at two per cent of the prevalent rate or the value added tax, whichever is lower. Previously, concerns about indemnity against 'C' form sale were raised.  

A representative of the Guwahati Tea Auction Buyers Association said in the current system buyers often send the ‘C’ form late, many times through courier, as brokers knew them and relied on verbal assurances.

However, the Tea Board guidelines are unclear on they would obtain the ‘C’ form from buyers under the new system, as many might be unknown to brokers. A ‘C’ form is needed to claim tax exemptions.

Under the recently modified e-auctioning system, the buyer will also get an invoice from the bank, which can address this concern.

However, the main opposition came from brokers, as the e-auction process means a disruption of their credit system with small growers. At present, brokers make advance payments to small tea gardens and these invest the money in managing day to day affairs. The dues used to be settled when the broker sold the tea.

Sarangi, however, said the provision of organised bank finance can be arranged for the small gardens and bought leaf factories if the Tea Board is approached. “The settlement brokerage of 19-30 paise per kg of tea sold will still be given. So, I don’t understand why brokers are so concerned”, Sarangi said.

However, he admitted that the new practice will disrupt the prevalent credit system. He suggested that brokers obtain a post-dated cheque from small growers to fend off the concern.

Buyers and sellers alike have also complained about the presence of just one settlement bank in the system, which is the Bank of India.

“Amongst different issues which are being worked out, the new auction process has only one settlement bank, but it is good to have more”, Azam Monem, vice chairman of ITA said.

The Tea Board is in the process of roping in other banks to act as settlement bankers. “We hope to do it as soon as possible”, Sarangi said adding once the new process stabilises, there will be better price discovery and wider reach for sellers, while buyers and consumers will have better access to a wider variety.

According to Tea Board officials the major concerns have come from Assam and north Bengal’s Terai areas, which have a deep-rooted legacy of colonial mode of production.

“Any change in the exiting policy is bound to create a disruption. However, we have listened to genuine concerns and have tweaked the e-auction”, the Tea Board chief said.

Officials in the Tea Board as well as the Union commerce ministry are of the view that this mode of auction is directed at a direct buyer-seller interaction while minimising the chances of long credit period. Nevertheless, the genuine interest of the brokers, who at times play crucial role in bridging the physical and digital divide of the BLF and STGs, have been looked into.

Effective June 21, the country heads towards the historic first pan-India e-auction where tea stocks across the sellers from the seven auction centres will be made available to a larger Indian buyer.