Instant tea auction to take on private sales

Siliguri, May 8: The Siliguri Tea Auction Centre will introduce instant auctioning by May-end or early June to counter private sale of tea, which accounts for nearly 50 per cent of the production in the region.

In instant auctioning, the cycle of production-sale-payment gets over in two weeks. Experts said this would allow planters to sell tea when the prices are high, as they do in private sales. The entire process through regular auctions takes around six weeks.

“The governing body of the auction centre has passed the decision (about instant auctioning),” said S.K. Saria, the chairman of the Siliguri Tea Auction Committee (Stac). “We are working out the modalities based on suggestions from all sections of the industry. Since it is a new concept, some sections have expressed apprehensions.”

A meeting of the governing body will be called in a day or two before implementing the scheme in “May-end or early June”, Saria said.

The Stac chairman added that instant auctioning would initially be run on a trial basis for a month or two. “It will run alongside regular auction and will be entirely optional.”

Instant auctioning does away with the elaborate sampling process where samples are sent even to buyers on the far end of the supply chain. Now, planters will send 4kg of sample to the broker, who will circulate it to local traders on the basis of which bids will be made. “The sale will be held three days after the samples are issued,” Saria said.

“In the regular system, buyers enjoy a prompt (time by which payment has to be made) of 13 days. In instant auctioning, this will be seven days (see chart). So a planter will get his money within two weeks of bringing the tea for auction, unlike the six weeks in the regular system,” said Anand Agarwal, a seller-member of the governing body.

An incentive of two per cent cash discount will be given to buyers. “They will also have to pay only one per cent value-added tax, compared to four per cent in private sale,” Agarwal added.

Stac hopes that the new system will attract greater volumes of tea. “Currently, most of the good tea is sold through private sales because of the 22-23-day gap from production to sale in the regular system,” Saria said. “A study of Sales 14-20 reveal that prices steadily fall as the season progresses. If a planter is able to sell tea when the graph is high, he can get better prices.”

Bajrang Sethia, a buyer-member of the governing body, said he would reserve his verdict until the trials were over. “We are concerned how trade will fare when buyers in Delhi, Mumbai and Calcutta cannot get to test the samples,” he said.

Brokers are worried about instant and regular auctioning running side by side. “It will increase the workload of the broker, which may cause delays,” M.C. Lohia, a broker-member of Stac, said. But he admitted that because all sales would be institutionalised in instant auctioning, it would bring more transparency in tea trade and give greater financial security to buyers.