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Crisis may spell doom for India's tea auctions

Nitin Gogoi in Guwahati

India's tea trade, already reeling under increasing competition and dropping production levels, is now beset with an internal crisis that threatens to terminate its 150-year-old auction system.

The latest controversy centres around a circular issued by the Tea Board (the tea sector watchdog controlled by the Union Ministry of Commerce) that specifies cutting down the quantity of free samples of tea issued to buyers. Due tot his auctions at Siliguri and Calcutta were stalled, while they took place one day late in Guwahati last week.

Under the age-old auction system, tea gardens send free samples of their teas to prospective buyers through official brokers to enable buyers to make their decision. The buyers, after tasting teas for the quality of liquor and freshness, bid for the lots put up for auctions held twice a week.

The three major auction centres for teas in India are in Guwahati, Calcutta and Siliguri. Guwahati is the biggest of them, handling close to 150 million kg teas annually. India produces over 750 million kg tea every year.

The latest Tea Board circular issued on April 24 cuts down the quantity of samples meant for buyers. Earlier, each buyer who bought a minimum of 150,000 kg of tea per year was entitled to a free sample of 30 gms per 'lot'.

Similarly, those who bought 300,000 kg annually were given 60 gms of samples for tasting. The Tea Board has now decided that those who bought teas of quantity of 150,000 kg or less would now be given only 25 gms of samples.

The Tea Board directive is believed to have come after reports that free samples, worth at least Rs 200 million distributed every year, were sold in open market by unscrupulous buyers.

"These buyers make 100 per cent profits on free samples," a Tea auction official said. Many bogus firms operating out of the same office premises and with same telephone numbers have been floated by some of the buyers in order to get these free samples," tea auction officials claim.

The Guwahati Tea Auction Committee, or GTAC, has detected many such firms of late. "These names have been forwarded to Income Tax and the BIEO (Bureau of Industrial and Economic Offences) authorities for further action," GTAC sources said.

The latest Tea Board norms are likely to bring down the number of buyers at the Guwahati auction to about 30 from the existing 300. "At this rate, the auction system itself will have to be abolished," said operators in the industry.

The biggest buyers of teas at the auction of course are the big daddies of the tea trade -- Hindustan Levers, Tata Tea and Goodricke.

The standoff between the buyers and the sellers is likely to affect the auction system in the coming weeks and sources do not rule out the possibility of a hefty hike in the prices of retail teas in the days to come. The latest controversy comes close on the heels of India losing big overseas markets to cheaper teas from Kenya and Sri Lanka.

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