India Tea Traders Association raises concerns over implementation of online auction system

INDIA – The Federation of All India Tea Traders Association (FAITTA), the apex body of tea trade in the country, has raised concerns over the implementation of the online auction system that is set to be rolled out in all of India’s auction centers.

FAITTA in a statement said that the public auction system could have serious ramifications for the trade and urged the Tea Board to undertake a thorough evaluation of the e-auction process before rolling out the public auction system.

The tea trade had migrated from a manual auction system to e-auction format in 2016 as a part of the auction reform initiative.

The e-auction system has been implemented in Coonoor (Tamil Nadu), but it has been posing several operational problems for tea buyers.

Despite of the challenges experienced in Coonor, India’s Tea board has proposed to expand the system to the remaining five auction centres, a move that has caught the attention of FAITTA.

The purpose for introducing the e-auction system by the Tea Board was fair price discovery to ensure trades take place at the market-determined prices. Unfortunately, there are several lacunae in the system, and it has ended up working like a tender process and not a fair price discovery mechanism.”

FAITTA chairperson – Viren Shah

Among the likely impacts of the new auction system are tea prices that do not reflect the ground reality, he said, adding that it could lead to an “unnecessary hike” in tea prices.

In mock trials, the tea lots went to the buyer who had entered the highest bid price regardless of the actual auction bidding trend and price increments leading up to the second highest bidder price.

“The “faulty logic” of knockdown of lots is required to be revised. It can have serious disadvantages in the long-run, impact buyer participation in the auctions, and be counterproductive to the Tea Board’s intent and interest of stakeholders,” Shah said.

FAITTA concludes that the entire tea trade was against this system and urged the board to take a cautious and more inclusive approach towards evaluating the features of the new auction model, as a hasty rollout could have serious unintended consequences.

“We have conveyed our concerns to the Tea Board. We have demanded that the features of the new auction system be communicated to all stakeholders in a transparent manner,” Shah said.

India is the second largest producer of tea in the world after China including the famous Assam tea and Darjeeling tea.

According to the ASSOCHAM report India is the world’s largest consumer of tea, consuming nearly 30% of global output and is also the second-largest exporter of tea, after China.

Tea Board of India controls tea production, certification, exportation, and all other facets of the tea trade.

Introduction of the auction system was one of the ways that it sought to modernize trading in Indian Tea, it has however met a lot challenges and opposition with the latest coming from the tea traders themselves.

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