What are Tea Auctions?
Tea auctions are a way for producers to sell their teas to a wide variety of customers in a reasonable manner, allowing for a fair price discovery. In India, public tea auctions have always been an important medium for primary tea marketing. Only loose tea in bulk packets is sold at public tea auctions. In this blog we will see how the process of tea auction takes place in India.
Who looks after Tea Auctions in India?
Tea Auctions in India are looked after by The Board of India. The Tea Board of India is a government-run organization that regulates the tea trade in the country.
It was established in 1953 when the Tea Act was passed, with its headquarters in Calcutta (now Kolkata). Mr. Basudev Banerjee is the chairman, and it is divided into four Standing Committees: the Executive Committee, the Development Committee, the Labor Welfare Committee, and the Export Promotion Committee.
The Tea Board of India is in charge of assigning certification numbers to some tea merchants' exports. This certification is intended to guarantee the teas' origin, reducing the amount of fraudulent labelling on rare teas like those harvested in Darjeeling. The vast majority of ‘faux' Darjeeling tea sold on the global market contrasts sharply with the small number of exporters approved by the Tea Board India as legitimate traders in this field.
The Tea Board of India's responsibilities include approving a wide range of tea production and productivity, providing financial support to research organisations, and keeping track of developments in tea packaging as they relate to health benefits.
It brings together research institutes, the tea industry, and government agencies to ensure the tea industry's technological support in the global marketplace.
What is the process in which a Tea Auction takes place?
The primary people involved in the auction system are as follows,
- Auction organizers - At their respective auction centers, they are in charge of organizing and holding the auction.
- Sellers- The factories that make tea from green tea leaves are known as sellers. At the moment, sellers' teas are sold directly through auctions.
- Buyers- Buyers are the people who purchase the teas sold into the auction.
- Brokers- Brokers act as tea's "auctioneers," selling tea on behalf of sellers at auction centres. Brokers handle a variety of auction-related tasks, including tea sampling and cataloguing, setting and modifying reserve prices on behalf of sellers, pre- and post-sale reporting, tax collection and depositing on behalf of suppliers, and so on.
Warehouses- The warehouses are where the teas that will be auctioned are held.
At the moment, auctions are held on a Pan India basis, i.e. under a single Board rule known as the "Pan India e- Auction Rule." Both stakeholders must register with the Tea Board in order to participate in the auction process. Aside from registering with the Tea Board, sellers and brokers must also register with the auction centers where they wish to sell their teas. Buyers who register at one auction center will participate in the bidding process at any of the other auction centers throughout the country.
An electronic auction system consist of three main activities i.e. Pre-auction, auction and Post auction activities.
Pre-Auction Activities: The sellers/manufacturers deliver their goods to warehouses in order to catalogue their teas for auction at a nearby auction centre. Based on the arrival of teas marked for that centre, the brokers plan and publish the auction catalogue within the specified time of a sale for that centre. Brokers also take samples of certain teas for the purpose of tasting and valuing them (base price and reserve price fixation).
Auction Activities - The teas that have been catalogued are auctioned off on set dates in designated auction centers, with buyers bidding. On the auction day, lots are auctioned off at random in various sessions. Finally, the lots are demolished in the name of the highest bidder.
Post-Auction Activities: The good bidders make full payments of the lots purchased based on invoices raised on them by the sellers or brokers on behalf of the sellers and receive the delivery order for taking physical delivery of the teas from the warehouses after the auctions are completed on a given day.
- Typical frequency of auction in a year - Auction can be held any day/s between Monday to Saturday from 8.30 a.m to 6 p.m with a lunch break from 1 p.m to 2 p.m. along with extended hours whenever necessary.
- The auction process is now in Pan India and has the same rules all across the seven main tea growing regions of India.
- Credentials and registration for participating in an auction - must be registered - Registered manufacturers of Tea Board under the provision of The Tea (Marketing) Control Order, 2003. II. Registered buyers of Tea Board under the provision of The Tea (Marketing) Control Order, 2003. III. Registered brokers of Tea Board under the provision of The Tea (Marketing) Control Order, 2003. IV. The registered buyer should have registration of any one auction organizer for participating in the Pan India Auction process. The buyer registered with one auction organizer shall be permitted to bid in the auction conducted by all other auction organizers.
- Can it be attended virtually (specially during this pandemic)? - The process is completely online - E auction - Public tea auctions have always played a key role as the main vehicle for primary marketing of tea in India for over a century ever since the first tea auction center was set up in Calcutta (now Kolkata) in 1861.
- Public tea auctions handle more than 500 million kilograms annually.
- The newly designed e-Auction system is being used by all the six Auction Centers (Kolkata, Siliguri, Guwahati, Cochin, Coimbatore and Coonoor). The various users of the system like Manufacturers, Warehouses, Auctioneers and Buyers have been provided with access to various functionalities of the system. Each Auction Centre will be entitled to carry out functions like registration, incorporation of changes in policy and information maintenance.
- The e-Auction system integrates the process starting from creation of invoices till the delivery of tea from the warehouses, enabling better control and avoiding duplication of work thus reducing time.
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