The Hindu Business Line : Electronic auctions may turn the heat on tea brokers

IN the run-up for the mid-September launch of the electronic auctions under the guise of the newly-formed co-operative, Teaserve, the tea brokers are getting a severe beating.

For one, the Government officers vested with the promotion of the Teaserve have been accusing the brokers of colliding with the buyers and lowering the prices, thereby holding them responsible for the present crisis.

For another, they have been leaving an impression with the growers, especially the smaller ones, that once the new auctions start, brokers would be eliminated, which would facilitate a free and fair auctioning, high transparency and better returns.

Tamil dailies circulating in the Nilgiris carry quotes from ordinary tea small growers in the villages of reposing enormous faith in the new auctions, thereby leaving an opinion that they regard the new auctions as a panacea for all their ills.

At present, two important measures to enlist the support of the buyers for the new auction centres have been taken. First, the sales tax has been halved for the new centre. Secondly, the Government has declared that there is no CST sale at the present auction centres. Claiming that all the sales are local sales, the commercial tax authorities have re-opened the files pertaining to 1999-00 and 2000-01 and slapped notices on the brokers for recovery of arrears that collectively run to over Rs 10 crore.

These measures have tightened the clamps on the fiscal and operational freedom of the brokers. There had even been considerations whether to continue with the auctions in the context of tax uncertainties. The brokers contend that they have only been assisting the commercial tax department to collect the taxes from one collective source. They believe that they would be left with no option than to collect the tax dues from the sellers themselves. If they do so, the producers' returns would further come down.

For the first time, the brokers in the South have formed an association called the Tea Auctioneers Association of South India (TAASI) and have issued a statement to "clear some of the misconceptions and highlight the vital role played by the auctioneers in the development of the trade". This comes at a time when the Tea Board has also mooted electronic auction system in all the country's auction centres, which could mean a largescale displacement and re-alignment of the brokers' function.

Answering a question whether the auctioneers have become redundant, TAASI has pointed out that the auctioneers' role as a `tea taster' is invaluable and could not be replaced by `electronic tongues'. The auctioneers have also been providing bridge finance to the factories, besides throwing light on market intelligence, advisory services for quality improvement etc and promoting the market itself.

For all these, the brokers had been getting only one per cent commission but had to invest around Rs 50 lakh. "Is not the auctioneer, therefore, interested in higher price at least for his own earnings? How can the services of the auctioneers be dispensed with overnight?" TAASI has queried.

Given that the factory owners have obtained large sums of monies as advances against the supply of teas for eventual sale, even when the new auction centre opens, they may not be able to switch over immediately without clearing the dues with their brokers.

It is not as to who survives or perishes when the new auction centre opens — the important factor is that the growers reeling under poverty, must get a better price for their teas. If that happens, there is no reason why the electronic auctions should not be supported by all. But, in a free and fair trade, there should be no arm-twisting either.

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