Assam produces in excess of 400 million kgs of tea This is the highest resource contributor to Assam’s economy by way of taxes of various dimensions. Besides, it has the highest numbers in terms of manpower, say around 20 lakhs, dependent on it directly and indirectly. Unlike other consumer goods, price of tea is not fixed under MRP or any other regulation. Therefore, the open auction system is ideal for marketing teas. To market teas, India has six auction centres, of which Guwahati is arguably the biggest; handling around 150 million kgs a year.
The auction system for tea in India was conceived, designed and implemented with specific objectives. Some of the important ones are to serve as the primary meeting point for producers/sellers of tea and buyers of tea with the help of brokers/ auctioneers; to serve as a platform where all transactions are conducted in a fair and transparent fashions; to serve as a controlling valve of demand and supply, and to ensure that the price of every tea offered through the system is disposed off in a fair manner.
Over the last decade, it has been nearly a century and a half since the first auctions - many of the basic objectives have been overridden and bypassed. One of the fundamental objective of serving as the primary selling point of all teas is no longer relevant. Just about 40 to 50% of teas are sold through the auctions today. The remainder is sold privately outside the auction system without any public information and is by no means in a fair and transparent manner. The auction system as a result of private sales is no longer the valve controlling demand and supply. As a knock-on effect, fair price discovery is now only restricted to the teas available in the auctions. All this has been at the cost of our local economy and our people. We have information that of the teas produced in the estates of renowned companies, only around 25% comes to the auction. The remainder is sold privately with no public information on the prices, or if any taxes were paid against their sale to the Government. Where then is the much claimed transparency even if auctions are conducted electronically? All teas are still not sold through the auctions despite our repeated appeals.
The Government of Assam had accepted the recommendations of the Dr Jayanta Madhab Committee which observed that there should be two auction centres in Assam. There have been no developments on that front. In a meeting of the industry’s think tanks convened in Delhi in 2004, the then Commerce Minister Kamal Nath had mentioned that the Tea Marketing Control order will be reinstated, thereby making it compulsory to sell a fixed percentage of all teas produced through the auctions. Nothing has happened on that issue till now. His successor Jairam Ramesh promised to bring more transparency and assured that the interests of the local economy will be looked after. In the year 2006, in a meeting in Guwahati, he further reiterated that the government is committed to bring more teas into the auction system and another auction centre will be set up in Assam. We are still waiting.
For the past few weeks, auctions for dust teas in Guwahati has been held under a new electronic bidding system developed by the National Stock Exchange division under directive from the Tea Board of India. Reactions and results have been very mixed, Though it is very early to judge the new system, by introducing the E-auction system, the authorities and some stakeholders claim to rejuvenate the basic objectives and keep pace with the changing times. They argue that the auctions would have a wider reach in terms of buyers, thus improving the chances of better prices.
The intentions seem nobles. We must, however, under take a reality check. To begin with, the tea industry is highly labour intensive. Populations of several lakhs, be it the tea garden labourer, the small grower, or even ancillary units supplying the wherewithal for producing tea, depend directly and indirectly on this industry for their livelihood, Any change that is effected in the style of marketing the teas, like the e-auctions must take the grassroot sections into account. Will e-auctions result in improvement of their lives? Will it ensure the garden owners will pay better attention to issues like provident fund, healthcare and education of their labour force? Will the small grower be treated any fairer?
Looking at the change from the producer’s angle, will the new system improve productivity? Will this ensure better quality? Will it ensure better prices?
From the perspective of the warehousing infrastructure at auction centres, will it ensure that the quality of their services improves? More basically, will it ensure that more teas will be handled by them or atleast the existing quantities will be sustained? Will we end up with large empty spaces? What will become of the workforces centered on warehouses? Who will assure us that there will be no job cuts at any level?
And here’s the real danger. Buyers are finding the system cumbersome and difficult to understand, with many apprehending the operational viability of the system. This could well result in buyers resorting to the easier route of private buying outside the auction system, thus weakening the auctions further. Have we not thus, come back to square one where we again grope hopelessly to understand what are we doing and why?
Any changes to an existing system must aim to improve lives. If this is acceptable, then it must be simple, in order for it to work. One fails to see how any of the two pre-conditions are met, or can we?
