Tea Board may adopt Japanese e-auction system

The Tea Board of India is considering the revamp of the e-auction system for bulk tea. The new system, which will be on the lines of the Japanese auction format, will help in better price realisation. The proposed revamp has been suggested by IIM-Bangalore.

The B-school, at the request of the Tea Board, drew up an action plan to synchronise the tea auction process with the global auction policies.

Recommendations by B Mahadevan and Sreelata, both professors at IIM Bangalore, include the need for devising a new channel for small buyers with flexible buying option, elevating industry standards by laying emphasis on good quality certification and eliminating complexities in the existing auction system among others. Some of these recommendations have been accepted in-principle by the Tea Board, said Arun Kumar Ray, its Deputy Chairman.

“A lot has changed in terms of buying and selling since the time tea auctions moved from manual to electronic platform. So we thought there is a need to devise a modern platform that will move tea auction to the next level. We have accepted the recommendations made by IIM Bangalore. We will work on it,” Ray told newspersons on the sidelines of the interactive session, here on Wednesday.

Recommendations

IIM-Bangalore has suggested adoption of the Japanese auction format in tea, which is equivalent to an ascending auction. The revised auction format will lead to improved price dynamism compared with the existing system, Mahadevan said.

Talking about the need to provide equal opportunities for compatible buyers, he proposed the need for arranging a separate marketing channel for small buyers. “It will provide flexible buying and selling options and can follow the similar process as in the tea waste portal. It will not have the complexity of auctions,” he pointed out.

The study has also emphasised on development of comprehensive guidelines and standards for tea so as to ensure quality. It has also suggested robust quality certification through a neutral party. Elevating quality standards is very important and Tea Board has to ensure enforcement and compliance so as to get the desired result, he pointed out.

Highlighting the need for eliminating “needless complexities” in the auction system, Mahadevan stressed on the need for standardisation in grades and packaging.

Redesigning of catalogue with no indication of valuation; standardization of lot sizes and elimination of divisibility of lots; introduction of a price discovery session for out lots at the end of each sale per day with a premium to the buyers and managing delivery of teas to the buyers are some of the other suggestions. The suggestions, if implemented in totality, will help improve the quality of the tea sold as the poor quality tea will not find its way into the auction, Tea Board said in a press statement issued later during the day.

There will also be a higher probability of auctioning larger number of lots with sufficient time allotted to each lot. It will also help reduce the number of out lots.

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