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14 Aug 2020, Edition - 1858, Friday

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Coimbatore

Tea Board to adopt Japanese Auction Model

D.Radhakrishnan

Udhagamandalam: The Tea Board India is all set to bring about a major reform in the auction system by adopting the Japanese auction model.

Disclosing this in a press release issued at Coonoor on Saturday,the Executive Director of the Tea Board,Mr.M.Balaji pointed out that

Tea Board India has been implementing various Development schemes in the country besides undertaking several regulatory measures which includes various inspections at the tea manufacturing units, warehouses, instant and other tea manufacturing units etc to ensure quality tea production and marketing in India. Regulation is also one of the key activities under which the marketing of tea is being monitored by Tea Board.

The Tea Marketing in India is being done through primary (B2B) and secondary marketing (B2C) ways. The Public Auction system which is the primary marketing channel ensures two basic purposes, viz to facilitate better price discovery by bringing the buyers and sellers to a common platform with broker’s intermediation and there by provides a guaranteed transaction protocol.Stating that at present India has six auction centres,Mr.Balaji said that over the years, the tea auctioning system in India has undergone many changes, keeping pace with the technological developments. From a traditional open outcry system, Indian tea auction has shifted to an electronic auction format. The electronic auction of tea has gone through several refinements ever since its inception in 2009. In 2016, the PAN

India tea auction concept was adopted. This system paved the way for the registered buyers in other auction centres in India for participating in all other auction centres apart from where they are registered and followed by introduction of a new bank settlement mechanism in 2018 to streamline the payments related to sale of tea through Pan India auctions.

To improve the participation of the buyers in the PAN India auction and to further improve the existing system in order to realise better price, the Tea Board India has assigned the task of reformation of the existing electronic auction platform to Indian Institute of Management (IIM) Bangalore. The team has made an exhaustive study on the existing tea E-auction model and suggested a new electronic tea auction mechanism based on the Japanese auction model.

Based on the qualitative and quantitative analysis, the team has suggested its recommendations / changes in the operational aspects, technological aspects and Regulatory issues etc. IIM-Bangalore has suggested adoption of the Japanese auction format in tea, which is equivalent to an ascending auction. It is expected that the revised auction format will lead to improved price dynamism compared with the existing system. It will also provide equal opportunities for compatible buyers.

Mr.Balaji said that the Tea Board has in principle accepted the recommendations submitted by the IIMB to recast the present Pan India e-auction system.

The new system aims at improving price realisation, simplifying the process which leads to improvement in quality of tea offered in public auctions and thereby ensuring better price discovery.

The gist of the recommendation for the proposed new auction design is given below:

 The auction price is integrated with time

 It will provide flexible buying and selling options and will be simple

to manage and participate in auction.

 The buyers and sellers can participate in a transparent manner.

 The out lots will be minimised and the product based on the quality and demand will fetch higher price.

In this regard, as a first step, Tea Board has decided to conduct a virtual demo session with the stakeholder of the Coonoor Auction centre on 18.07.2020 and launch it in Coonoor as pilot project. The proposed model will be rolled out in other centres shortly after the pilot run in
Coonoor added the Executive Director.

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