Japanese auction model suggested for tea e-auction in India

Two IIM Bangalore professors on Wednesday suggested introduction of Japanese model of e- auction in tea to replace the existing system so that better price discovery could be achieved.

The existing e-auction was introduced in 2010 based on a software developed by the NSEIT.

The recommendations made by the two professors, B Mahadevan and J Sreelata, said there is need for improved price dynamism as the current one lacks it.

They said the present auctioning system is complex and lacked transparency as the reserve price (RP) was made known to the buyers and subject to revisions.

Mahadevan, addressing an audience of the stakeholder including officials of the Tea Board, said the RP should not be revealed to the buyer.

Another problem was the divisibility of lots which was making the operations more complex, coupled with high number of grades, he said.

Mahadevan said at present there are 918 grades of tea on offer at the auctions which was incredibly high and in complete variance with other tea countries like Sri Lanka and Kenya.

According to him, the number of grades should not be more than 30 in the new system.

Mahadevan said the auctioning system needs to be simplified and there was need to increase the number of bids and buyers on the platform.

The two professors harped on improving the quality of tea to be offered on the system and urged the Tea Board for certifying quality which would also simplify the auctioning system.

"Tea Board must act on ensuring quality. It has to play the role", Mahadevan said.

According to their analysis, auction prices had been more or less flat in the country in the last five years.

"India fetches the lowest price for bulk tea as compared to countries like Bangladesh, Sri Lanka and Kenya".

Tea Board deputy chairman Arun Ray said when asked that the recommendations suggested by the two professors would be looked into and taken to its logical conclusion.

Tea Board had mandated the IIM (B) professors for coming out with a new model for e-auctioning.