The Tea Board of India launched a new auction format, Bharath Auctions, at the beginning of this year, with the goal of improving price discovery, lowering transaction costs, and ensuring the quality of tea sold throughout the system.
Though some in the industry have expressed dissatisfaction with the new system, officials and auctioneers say "Bharath Auctions" are good for the industry and that the uproar is due to "people not understanding" the format properly.
Following the start of the auctions in South India, tea gardens in North India (including Assam and West Bengal) are expected to transition to the new format, based on the Japanese auction system, by February-March.
New format replaces the old english system
The new auction system, which began in Kochi last week, has done reasonably well, according to PK Bezboruah, Chairman of the Tea Board of India.
Glitches in the system were reported at Coonoor, and the sale was periodically halted. The leaf tea auction has been extended by one day, while the dust tea auction has been postponed by one day.
Dr. M Balaji, Executive Director of the Tea Board, stated that the glitches were caused by internet connectivity issues and had nothing to do with the new system.
Following a study conducted by the Indian Institute of Management, Bangalore, the new format has replaced the old English system (IIM-B). The institute thoroughly examined the old system and proposed the Japanese model for improving the price discovery mechanism and ensuring the system's robustness.
Curbing Manipulation
"In the previous auction system, people withheld bids until the last few seconds, preventing active price discovery." However, under this system, that will be eliminated, and we anticipate that this will result in better price discovery. "It appears to have performed reasonably well in the recent Kochi auction that went live," told Bezboruah.
"You can't manipulate the new system, especially when it comes to last-minute bids." Such an entry will be rejected by the system. "Bids must be planned the day before," said an auctioneer source who did not want to be identified.
Understanding the System
To ensure a smooth transition to the new system, the Tea Board of India will hold a series of meetings with stakeholders in North Indian tea gardens. On Friday, the first round of meetings will take place
"At least 70% of buyers appear to have grasped the new system." Those who complain are the ones who do not want change. People should understand that the system is intended for blenders and packeteers rather than retailers, according to the auctioneer source.
"The Bharath Auctions are expected to reduce transaction costs while also ensuring fair price discovery." It is difficult to predict how this will play out in the end. However, it should be available in North Indian auction houses within the next two months. "Because the quantities are low during these months, it can be better managed," said Vivek Goenka, Chairman of the Indian Tea Association.
