The Hindu Business Line : Tea sales dip at Coonoor as buyers keep away

EVEN as declining inventory levels and prospects of improved exports have infused optimism within the tea industry, a marked decline in the quantities sold at Coonoor auctions is making the trade uneasy.

As per data, in 2001, the total quantity of tea offered at the Coonoor auctions was 77.65 million kgs (mkg) whilethe total quantity sold was 74.55 mkg. Similarly for 2002, the total quantity offered was 63.33 mkg and sold was 60.68 mkg.

However, during 2003, the total quantity of tea offered was 59.73 mkg, of which 40.50 mkg was sold— a 10-year low figure and an 84 per cent drop from the total quantity sold in 2001. Auction data for 2004, i.e. up to week ended January 31 reflects a similar trend.

Thus there is a perception that teas are moving out of the auction system, particularly given the fact that offerings are low and sales are down but production is the same.

"The sharp decline is mainly due to lack of participation by registered buyers in auctions, as they have been denied the privilege of operating on behalf of their principals based outside the State. They prefer instead to buy teas either privately or directly from the gardens. This has adversely affected their participation in the auctions and resulted in heavy withdrawals," trade sources told Business Line.

Adding to the trade's unease is the fact that with the Tamil Nadu sales tax tribunal postponing the hearing (formerly slated for Feb 6) on the writ petition filed by tea auctioneers to March 23, the Central sales tax (CST)-Tamil Nadu general sales tax (TNGST) issue continues to hang fire. "This is one factor that is contributing to demand shifting out of the State to other centres (like Kochi) and bringing down buyer participation at Coonoor auctions," a reputed tea auctioneer said.

Following the controversy over the Tamil Nadu commercial tax authorities slapping a recovery notice on brokers for tea sold at the Coonoor and Coimbatore auctions during 1999-2000 and 2000-1 and claiming arrears under TNGST for sales made under CST, the tea trade at Coonoor and Coimbatore had decided to ask for an additional 4.5 per cent sales tax upfront as contingency deposit from upcountry buyers before raising CST contracts.

While Coonoor Tea Trade Association and Tea Trade Association of Coimbatore rules allow brokers to collect deposit at any time, upcountry buyers are balking at this demand. Senior members of the tea trade said the five per cent premium on division of lots — that a buyer pays over and above the price of tea — was also making the auction system less competitive.

"The Tea (Marketing) Control Order ruling on proxy buying coupled with the sales tax anomaly in the State is already keeping outstation buyers away. Added to this is the premium on lots, whereas in out-lot the premium is not applicable. All this is weakening the auction system altogether," a senior tea trade member said.

Questioning the effectiveness of control order, particularly in light of the fact that tea prices in 2003 declined by an average of Rs 10, trade sources pointed out that there was a wide disparity between North Indian auction sales and South India sales.