The Hindu Business Line : Glitches in tea e-auction to be overcome soon

The merits
Tea board has argued that e-auction lessens the ability to hedge prices & augmented bidding time.
It maintains that e-auctions keeps the supply chain unchanged & decision to `sell' still gets vested with the broker.

New Delhi , Dec. 14

Though electronic auctioning of tea is currently undertaken at five of the six auction centres in the country on a limited scale except Coonoor, the new dispensation is hobbled by technical/software and communication glitches which could be overcome soon.

Sources in the Government told Business Line that the Tea Board has responded to some of these concerns and other major problems raised by buyers on e-auction.

Bidding process

For instance, they said, when buyers raise the issue of parallel bidding against sequential one in the manual auctions (out cry system), the Tea Board has said it was purely "a mindset issue" as any form of electronic bidding would involve parallel bidding.

The board has argued that e-auction lessens the ability to hedge prices and augmented bidding time, thus contributing to "true price" discovery.

On the brokers' complaint that e-auction gives lower realisation compared with manual auctions and hence, producers were reluctant to sell through e-auctions, the board has directed not to keep e-auctioning as the last activity of the day and set off a producer appreciation programme. To the charge that e-auctions would make the role of the broker redundant, the board maintains that it kept the supply chain unchanged and decision to "sell" still gets vested with the broker.

Referring to issues raised by producers pertaining to e-auction that the highest bidder's name during an auction should not be displayed, the board has said it was a policy issue since buyers insist that knowing the interested party helps in identifying areas of demand.

Price realisation

On the point that e-auction lowered price realisation and percentage sold in e-auctions was less than manual auctions, the board said enough data exist to prove that it was basically a supply-demand issue.

The sources said public tea auction handled more than 500 million kg (mkg) annually out of the 800 mkg available in the form of loose tea in bulk packages. As the e-auction constitutes a tiny portion of the public auction system and with hindsight from its operations on a limited scale, valuable lessons had been learnt in scaling up the operation gradually, the sources said.

When contacted, the Minister of State for Commerce, Mr Jairam Ramesh, who recently briefed the Members of Parliament on the proposed e-auction of tea told Business Line that the spread of the new system would expand the universe of buyers. By removing the physical constraint that exists now, the proposed e-auction system would take the power of the monopoly buyers.

He said the e-auction system would do away the distortions in the market and lead to better price discovery, helping tea growers over the long haul at a time when the plantation sector was saddled with a host of problems.

The merits

According to the Tea Board Chairman, Mr Basudeb Banerjee, the merits of the proposed auction system include, among others, optimal market timings, uniform price increments, price discovery, uniform lot size, automatic matching and audit trail. He also pointed out that the recently held Inter-Governmental Group of FAO on tea at Nairobi, Kenya highlighted the need to make primary marketing of tea more efficient.

He said Colombo and Mombassa also have plans to introduce e-auctions and collaboration with the East Africa Tea Trade Association, the Colombo Tea Trade Association and the respective Tea Board is also in the offing.

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