Financial Daily from THE HINDU group of publications
Tuesday, Jan 04, 2005
Financial Daily from THE HINDU group of publications Tuesday, Jan 04, 2005 |
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Agri-Biz & Commodities
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Tea Producers seek changes in tea control order — Moots separate mechanism to check price fall Kohinoor Mandal
Kolkata , Jan. 3 TEA producers have sought a change in the Tea Marketing Control Order (TMCO) on the five per cent premium being charged on division of lots. However, the producers have suggested that as a replacement of the five per cent premium, a separate mechanism should be created to check any free fall of tea prices at the auction houses. Leaders of the Indian Tea Association (ITA) have already exchanged views with the buyers, including the members of the Federation of All India Tea Traders Association (FAITTA), on this matter during the last few months. A senior ITA official said the auctioning system should be a fair mechanism for discovery of the right price of a product and it should be acceptable both to the buyer and the seller. "If the five per cent premium on the division of lots harms the buyers' interest then some correction is absolutely necessary. However, the buyers should not hammer down prices without judging the quality of the teas," the ITA official said. The producers (sellers at the auction houses) have also noticed that the five per cent premium clause had affected buyers' interests in bigger lots as they stay away from bidding. Buyers also agreed that they quote a price at the auction houses after calculating the five per cent premium. "So, no one is really gaining from this clause in TMCO," a leading buyer explained. ITA has come up with two suggestions. First, it had proposed that the first buyer should not be charged with the five per cent premium. However, the second or the third buyer would have to pay the five per cent premium if there is a division of lots. "The aim is that a buyer should try to outbid others and strike a deal before its competing colleagues in the auction houses. It would help them in avoiding the five per cent premium," the ITA official said. The second suggestion of the ITA was that auction prices should not fall more than three per cent of the prices recommended by the tea brokers for a particular lot at an individual auction house. The apex industry body is open to discussion with the several buyers' associations and may even accept five per cent as the final point. "Here our intention is that prices should not suffer from a free fall. There should some mechanism to check a free fall. It is also applied in the equity stock exchanges, where they have cooling period," ITA explained. Buyers, however, felt that this is an unacceptable proposition because the brokers fix the opening price only after discussion with the producers. Their opinion was never sought on determination of the opening prices. Despite these differences in opinion between the producers and the buyers, the two groups agree that a change in the five per cent premium clause in TMCO is needed.
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