Coonoor, Tamil Nadu: The Tea Board of India plans to introduce electronic auctions in six centres across the country by the end of the year, a top official said.
The board has invested more than Rs10 crore to develop the platform and another Rs1 crore for connectivity, said Basudeb Banerjee, chairman of the government trade promotion body.
The auctions will begin simultaneously in the six centres, he added.
Roshni Sen, deputy chairman of the board, said the electronic system would induce more people to join the auctions. “Presently, around 60% of the annual tea produce of over 900 million kg is sold through the six auction centres. With a transparent marketing system in place, more of the tea produced will take the auction route,” she said.
The information technology arm of the National Stock Exchange, which developed the software for the auctions, will train people to use the electronic platforms over the next two months.
V. Rajaraman, vice-president of NSE.IT Ltd, said registered members would be able to trade in auctions in any of the six centres.
An index of the best of traded teas, based on volumes and price, could be created on the lines of the Sensex or Nifty indices, he said, adding that such a system could also be developed to introduce futures trade in tea.
The settlement mechanism for the electronic auction is being developed in collaboration with National Commodity Clearing Corp.
J.K. Thomas, director of Malankara Plantations Ltd and former president of the United Planters Association of Southern India, or Upasi, said the auction platform is based on a transparent system that would ensure fair price discovery.
With issues of adulteration and declining quality of tea, there is a need to allow export of material only through auctions, he said.
Banerjee, speaking on the sidelines of Upasi’s annual conference at Coonoor said the tea boards of Kenya and Sri Lanka are also studying India’s model to start similar centres in their countries.
Sri Lanka is even considering a proposal for reciprocal tea auctions with India, the world’s largest tea producer, and for closer ties in research and manpower training, said Lalith Hettiarachchi, chairman of the Sri Lanka Tea Board.
A six-member delegation from the island nation, representing its tea board, will also meet India’s equipment makers to discuss changing requirements, as many machines for tea factories are sourced from India, he said.
Government trade bodies of the two neighbouring nations last week signed agreements to recognize each other’s tea research laboratories, and look at closer ties for technology transfer, research in plant pathology and other issues affecting tea gardens.
On possible trade cooperation, Hettiarachchi said traders from both countries would be able to participate in reciprocal auctions if India and Sri Lanka implement electronic systems to auction tea.
The trade body for tea in Sri Lanka, however, is facing stiff opposition to the proposed system, he said.
Reciprocal auctions would give Sri Lankan traders easier access to the CTC (cut, tear and curl) tea variety from India, which in turn can source the orthodox type of tea from its neighbour, Hettiarachchi said.
Sri Lanka produces 310,000-320,000 tonnes of tea a year on average, of which nearly 95% is exported. The country has about 220,000ha under tea cultivation, he said.
The Sri Lankan tea industry is troubled by issues such as rising cost of production because of higher wages, and lack of interest in tea cultivation among youngsters from families traditionally involved in growing tea, Hettiarachchi said, noting similarities with Indian tea trade.