The Federation of All India Tea Traders Association (FAITTA), the apex body of tea trade in the country, has urged the Tea Board of India to undertake a thorough evaluation of the e-auction system before rolling it across India.
The tea trade, which migrated from a manual auction system to e-auction format in 2016 as part of the auction reform initiative, has been implemented in Coonoor and the Board has proposed, furthering the system to the remaining five auction centres.
The purpose of introducing the e-auction system by the Tea Board was discovery of fair price and to ensure trades take place at the market-determined 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. The maximum bid price logic for knockdown could have serious disadvantages in the long-run and impact buyer participation in the auctions,. This could be counterproductive to the Tea Board’s intent, and interest of stakeholders,” said FAITA.
Among the likely impacts of the new auction system are tea prices that do not reflect the ground reality. The auction system can lead to an unnecessary hike in tea prices. Tea auction prices in 2020 were around 35% higher as compared to 2019 or around Rs 80 per kg higher. This was the result of a fair price discovery mechanism based on demand and supply.
Tea production in India last calendar year was 1,250 million kg, around 100 million kg lower than the previous year’s output of 1,350 million kg. Retail tea prices rose by an average Rs 70 per kg during the year.