The Hindu Business Line : Tea e-auction system launch likely by fiscal-end

Mr J.K. Thomas, Vice-Chairman of the Board, told Business Line that the board's Consultants Evaluation Committee had short-listed five of the 20 consultancy firms that had submitted expression of interest. NSEIT, the software arm of the National Stock Exchange, was finally selected because of its "higher level of in-house technical manpower", he said.

The company had been asked to complete the task in three months.

A pilot project would be launched after getting the re-designed system to enable stakeholders to give their feedback, he said.

Anonymity issues

The board has received many suggestions.

For instance, he said, one demand was that there should be anonymity for the buyer for a better price discovery and to foster competition in the auction system.

At the same time, anonymity of the seller was not warranted due to the following reasons: brands/marks play an important economic function; tea is not a homogeneous product, as each garden offers a unique product, and this essentially requires the garden's identity to be revealed; gardens with established brand value will lose out besides making it cumbersome for buyers to find out the quality of their purchase.

Similarly, there was a suggestion to dispense with the concept of lot, as the seller is the best judge to determine a marketable lot size; further, as lot size is linked to sampling, the freedom to decide the lot size may be left to the producer/seller.

Such suggestions were discussed and accepted by the board, Mr Thomas said.

Market design

The Tea Board, he said, had recently circulated a draft discussion paper on the new market design for e-auction. Upasi has suggested, inter alia, that a De-Mutualised Auction Body (DMAB) was needed to conduct tea auctions.

DMAB is defined as one where owners do not automatically get trading rights by virtue of their ownership. However, de-mutualised body per se does not bar any owner from acquiring trading rights, provided he/she complies with the admission criterion laid down by the body.

Primarily, it meant good corporate governance practices whereby a clear distinction is maintained between the trading division and the division dealing with the ownership, so as to avoid conflict of interests.

These issues are also being sorted out and need to be incorporated in the new system, he said.

The new system was likely be introduced before the end of the current financial year, Mr Thomas added.

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