India tea to go online

Good news for tea traders! By the end of January next year tea trading in India will go online. The union minister for commerce Jairam Ramesh inaugurated online auctioning in the Siliguri tea auction centre today. Online tea trading has already begun in Kolkata, the oldest tea auction centre in the country and Guwahati, in Assam. Mr Ramesh said e-auctioning would begin in a phased manner in the remaining four of the seven major tea auction centres in India in Coimbatore, Kochi, Coonoor and Jalpaiguri. He added e-auctioning would make tea trading more transparent and fair. The online e-auctioning system has been developed by NSE IT, a subsidiary of National Stock Exchange.

The move is considered to be a major development in the 150 year old tea industry in India. For long, India has been the largest producer of tea in the world, manufacturing 500 million kg annually, which amounts to 31 per cent of the total tea produced internationally. In the domestic market tea is traded in two ways – private selling and auctioning at the seven major tea auctions mentioned above. Kolkata houses the oldest tea auction centre in the country, established 147 years ago. E-auctioning was inaugurated last month in Nilhat House, Kolkata, where the office of one of the largest tea broker in India, J.Thomas & Co, is located.

The annual turnover of the India tea industry is Rs 10,000 crores, out of which a little less than Rs 2,000 crores is earned in foreign exchange. In fact tea has always been a major source for foreign exchange earnings in India. The tea industry provides direct employment to one million workers and indirect employment to 10 million people.

The chairman of the Tea Board of India Basudev Banerjee stated the move to transfer to the online tea auctioning system is part of an international initiative to introduce online tea trading. Major international tea auctioning centres such as Colombo (Sri Lanka) and Mombasa (Africa) would also begin online tea auctioning soon.

Mr Ramesh says the aim was to have a national e-market or a cyber market for tea, a development which would do away with the physical tea auction centres which could be used for storage and distribution of tea. NSE IT is now developing a settlement system for clearing payments in online auctioning.

Most people in the tea industry believe e-auctioning would enable transparency in the tea trade and in the process, ensure that tea sellers got a fair price. The current manual system of tea auction has been criticized for its inability to effectively check unethical dealings. There have been repeated allegations (not proved though) that major buyers of tea in the auction centres form cartels to manipulate auction prices in their favour. During the recent slump in the tea industry (a crisis the industry is not quite out of as yet) tea producers hardly managed to secure a minimum a sustainable price even though retail prices in the market were comparatively high. It is expected online tea auctioning would prevent malpractices, if any, in the auctioning process.

The West Bengal Urban Development minister Ashok Bhattacharyya, who attended the inaugural function, announced the introduction of logos to identify tea from specific regions such as Jalpaiguri-Dooars, Darjeeling, Terai etc. Each region has its own peculiar quality and the logos would denote the brand and help maintain a minimum standard besides checking imitation. The world famous Darjeeling tea, known for its legendary flavour, has been a victim of imitation following reports that tea produced in the neighbouring hills of Nepal were being marketed as Darjeeling tea. Online tea trading is expected to be the answer to such malpractices.