The Hindu Business Line : No huffing or puffing

The forty-something Krishne Gowda, a tobacco grower of Mukanahalli in Hunsur taluk of Mysore district, is contented — his produce has fetched a better price this year.

Though the strong export demand is driving the average prices, Gowda attributes the better realisation to the automation of the auction process, which has resulted in transparent bidding.

Gowda sold his produce in multiple lots at the Platform 3 in Hunsur, where the Tobacco Board ran a four-month pilot of the electronic auctions this season. Though Gowda was initially apprehensive about the automated process at the beginning of the season, he was pleased with the outcome. On an average, Gowda’s realisations were higher by some Rs 5 a kg compared to that of his peers who sold their produce in other platforms, where the auctions are carried out manually. Around 3,850 other farmers from 125 villages attached to the Platform 3 have benefited.

In the automated process, once the growers bring their produce to the platform, they stay glued to a large television screen in a corner that displays the auction process with live price updates. Growers need not elbow each other or jostle around with the buyers to get to know the price their produce has fetched.

The Bangalore-based Cranes Software International Ltd has built the e-auction application on the Windows mobile platform.

“The challenge was to address some of the critical constraints, such as limited time for pre-inspection of bales by buyers as only frontline buyers are able to see samples during bidding time, likelihood of discriminatory allotment of bales, mistakes in recording bidding details in bale ticket and other control sheets, lack of audit trails — and thereby facilitate fair trading and equitable benefits to all stakeholders,” says Arvind Bhat, Project Manager, Cranes. Having mapped the requirements, Cranes developed the application in three weeks.

The e-auction solution consists of wireless hand-held devices for all buyers and officials of the board. The overall cost of the solution — which includes a database server, wireless access point and the hand-held devices — runs into a couple of lakhs. Neither Cranes nor Microsoft disclosed the revenue sharing arrangement or the cost of developing such an application.

“The e-auction application is a good example of how technology can be leveraged to transform existing processes,” says Sumeet Gugnani, director, Mobile Communication Business, Microsoft India.

How the auction is held

The system works like this. Once the grower brings the produce, a bale ticket is generated. The bale ticket consists of information such as farmers’ registration number, the auction platform number, village name, weight and the grade of the produce. The bales are then lined up at the platform for auction. The Board officials grade the produce based on parameters such as quality, colour and the length of leaves after which the auction process starts. If the grower is not happy with the grading process, he could do a self-grading.

The Board provides hand-held terminals to the Classifier, Auction Superintendent and Buyers in a wireless networking environment. The Board insists on a minimum bank guarantee of Rs 50,000 from registered buyers to participate in the bidding process. The details of the bank-guarantee reflect in the buyers’ device. The buyers can go around the tobacco bales being auctioned and record their remarks, grade and indicative prices, with the hand-held.

Each bale is auctioned separately and the minimum price is set by the auction superintendent depending on the grades. The minimum price, the average for three previous days, reflects in the buyers’ terminals and the bidding is done in multiples of 20 paise.

The bidding price could be raised by the auction superintendent if the prices are too volatile. The buyers punch in their bids, which can be seen by others but the identity of the buyer is not known. If the next bid is not placed within the cut-off time, the bid gets locked and is finalised by the officials.

Growers can see a better price progression on the bales of tobacco — from the start price to the winning bid — through a large screen display. They are able to know the prices that their bale has gone for as soon as the auction gets over and they can have a record of the same, which was not possible earlier.

“Because the bidding process is transparent, the farmers are assured of a free and fair price for their produce,” says Vikram Raj G.C., secretary of the Mysore FCV Tobacco Growers Association. The e-auction also ends the nexus between the officials and the buyers that typically results in price manipulation, and prevents cartelisation to a certain extent. “Because the actual bidding happens here in a transparent manner, the average realisation is higher by at least Rs 5 a kg,” Vikram Raj says.

Also, the system prevents further bidding by a buyer if his bank-guarantee is exhausted. As the system records all data, complete automated MIS reports could be generated. Data mining and analytics is possible to identify price trends and facilitate any further analysis. Also, there is no discrepancy in allotment of bales in case of ceiling price.

Longer bidding process

However, the automation has enhanced the length of the bidding process. The e-bidding takes about 14-19 seconds for each bale, while it is one or two seconds in the manual auctions. “We will do an internal evaluation of the pilot project before deciding on implementing such a solution on a large scale. We will also have to look at ways to overcome the shortcomings,” says J. Suresh Babu, Chairman, Tobacco Board. As an e-auction is a time-consuming process, the duration of the auction season gets elongated, which is not preferred by the board.

“E-auction is one of the best interventions by the Tobacco Board to ensure remunerative prices for growers by creating conducive conditions for transparent bidding. It also provides uniform access to all buyers irrespective of their size,” says an official of a large tobacco company. “The unique feature of the e-auction system is the Planner option, which provides an opportunity for planning the buy by making the necessitated grade remarks, at a target price fed prior to the auction process,” he adds.

If the grower is not happy with the price, he could reject the offer. In the end, a sale note is generated indicating the sale price and quantity sold. The sale note is linked to the growers’ bank account, where the payment is credited after 15 days after recovering any dues owed to the Board for the agri-inputs provided.

The pilot e-auction system has shown that technology can really benefit farmers. One will have to wait to see whether the Board takes up large-scale implementation of the system after tackling the shortcomings.

vishwa@thehindu.co.in

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