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Deeptha Rajkumar

Wellington , Sept. 18

FOR the first time in tea trade, sellers will have access to a liberal line of credit at easy interest rates, which is expected to further minimise or dilute the `seller-broker' relationship in the system.

"Under the new system, once the seller sends the tea to the warehouse, all he has to do is `pledge' the goods against the warehouse receipt with the settlement banker and get a short term loan. The bank will extend credit or loan up to 75 per cent of the total value of goods, against the `pledged receipt,' at the rate of interest of 10.5 per cent," Mr T. Udhaychandren, Managing Director, Indcoserve, and the chief architect of Teaserve, the first tea electronic auction system, told Business Line.

With catalogue closing period having been brought down from 13 to nine days, the seller gets a loan at lower interest rate for a shorter period, he added. However, a moot point to note is that a `pledged receipt' is different from a warehouse receipt.

In the sense that while the former shows ownership of goods and can be used as collateral, the latter is both transferable and negotiable. Indian Bank is to act as settlement banker/financier for Teaserve. All of the 65-odd buyers and 125 sellers registered with Teaserve are required to open a current account with the bank.

This concept is in sharp contrast to the existing system whereby a seller `borrows' or is `advanced' money by brokers against goods at interest rates anywhere between 20-24 per cent.

With catalogue closing period extending to 13 days plus the time involved in movement of goods to the buyer, the seller receives payment almost a month after the sale of goods. In fact, very often, to sustain cash flow and service his ongoing debt to the broker, he resorts to `distress' sales.

Technically, Tea Board licensing norms do not permit brokers to indulge in `money lending' activity. They are, however, allowed to advance money without interest to the sellers.

On its part, Teaserve will provide the bank with past price trend in order to enable the bank to value the goods. And the moment the buyer sends or remits the amount within the permitted or negotiated transaction time, the amount will be remitted to the sellers via EFT.

Upon realisation from the buyer, the bank will advise issue of delivery order. There is no question of waiting for mid prompt (7the day) or prompt (last closing day of the catalogue period).

"This way sellers will not have to resort to distress sale on account of cash constraints," the Indco Chief said. According to Mr Udhaychandren, sellers registered with Teaserve can fix a predetermined reference price. "Only when the best available price given by the buyer/bidder matches the reference price will the system confirm the bid," he said. Parallel bidding will provide reasonable time for price realisation.

The new system also proposes to bring down the cost of selling for a seller from Rs 1.65 per kg to 85 paise. This is inclusive of transportation costs, warehousing charges, brokers commission etc. Teaserve also proposes to reduce the sample size from 3 kg to 1.5 kg.

Sellers registered with Teaserve will be charged Rs 55 plus service tax, per lot, which works out to around Rs 59. Buyers will pay the traditional Rs 2 per lot. Average lot size is around 10 bags, which would approximately hold around 400 kgs.

Teaserve is to hold its `introductory' trading session on September 24. The proceeds from this trading session will go towards charity. Thereafter, auction will be conducted on every Wednesday.

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