The Hindu Business Line : South Indian tea auctions

THE tea estates in South India have had another bad year in 2003, fourth in a row after the boom of the 1990s. Compared to the fairly attractive average price of Rs 76.42 a kg in the auctions in 1998, Indian tea prices dropped to Rs 56.28 in 2003 a fall of 26.4 per cent. North Indian tea prices fell from Rs 80.22 to Rs 61.32, by 22.2 per cent, but in the case of South India, the decrease was more alarming at 41.4 per cent, from Rs 68.79 to Rs 40.28 during the same period.

When viewed in the context of a marked decrease in the quantities auctioned in South India from 147 million kg in 1998 and 146 million kg in 2002 to 114 million kg in 2003, the picture is indeed bleak. A look at the price trends in the world auction centres over the last six years (Table 1).

There has not been any significant change in the quantities sold at the various auction centres except in Sri Lanka and Kenya, where there has been a steady increase. India, as the largest producer of tea in the world, handled approximately 460-500 million kg per year in the auctions, but a closer examination will reveal that while there has been an increase in North India, auctions have been losing ground in the South, with quantities declining from 170 million kg in 2000 to 114 million kg in 2003. Teaserve, the organisation which set up electronic auctioning of tea in Coonoor in October 2003, handled an additional 4.4 million kg in 2003.

It should be noted that Sri Lanka ($1= SL Rs 98) and Kenya have averaged $1.50 per kg over the last three years for the fairly large quantities auctioned, but India has difficulty achieving $1.20 and South India is at the bottom of the heap at well below $1 (Table 2).

A look at the performance of the individual auction centres in India over the last two years (Table 3).

All the three auction centres in North India have forged ahead, especially Kolkata and Siliguri. On the other hand, the South Indian auction centres have suffered a serious setback, particularly Coonoor. To illustrate this further, Coonoor handled nearly 80 million kg in 1999, but this has now dropped to 41 million kg. Going by the trend so far this year, it does not appear likely that Coonoor will handle much higher quantities in 2004, although Teaserve is expected to auction approximately 15 million kg

Suggestions for revival

The tea trade in Coonoor and Coimbatore is facing problems in the sales tax procedures, especially with regard to de-recognition of CST sales. The well-established tea auctioning companies have been the backbone of the tea industry in providing tasting, valuing and auctioning services in a professional and competent manner and their role in the whole system should be strengthened.

Although refinements in the auction system were effected over the last two years following the Ferguson and Company recommendations, they have not had the desired results. These will have to be reviewed, perhaps with the help of some experts in the field, because of the special nature of the product and forces of supply and demand.

The Tamil Nadu Government should consider reducing the sales tax on tea sold in the auctions to 4 per cent until the industry comes out of the recession. Such a measure will attract lot more teas to the auctions and the overall Sales Tax collection also is likely to go up.

As tea is no longer under The Essential Commodities Act, the role of the Tea Board should be mainly to do export promotion and the industry should be encouraged to fine-tune its own system of auctions and marketing.

(The author, a former Director of Carritt Moran & Co Pvt Ltd, Kolkata, is a Coonoor-based tea consultant.)

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