The e-auction system for tea, to be introduced in the middle of November, will streamline the supply chain.
Union minister of state for commerce and power, Jairam Ramesh said that the industry was suffering from a colonial supply chain and the e-auction would do away with one or two layers. He was speaking at the annual general meeting of the Calcutta Tea Traders Association (CTTA).
With the 5-6 layers in the supply chain—from bush to cup—only 40 per cent of the consumer price was coming back to the producer whereas in the case of milk it was as high as 85 per cent.
Basudeb Banerjee, chairman, Tea Board of India said, the e-auctions was all the regulatory authority from its side could do to help deal with inefficiencies in the system. A part of it could also be facilitated by consolidation in the industry.
Azem Monem, chairman, CTTA said, NSE.IT was expected to demonstrate the operating software for e-auction in September 2008 and would commence training of the users in September-October 2008.
He said, if the e-auctions were user-friendly, reduced transaction costs and allowed to sell more lots per minute, cut down on holding periods, addressed small and large buyers' needs and most importantly achieved a fair price discovery then more teas could be attracted through this auction system.
At present, 143 million kg of tea were sold at the Kolkata auctions and 153 million kg at Guwahati auctions, which accounts for 15 per cent of Indian tea production.
Ramesh said, last August e-auctions for cardamom in Tamil Nadu and Kerala were introduced and it had resulted in better realisations to the tune of 30-50 per cent.
Tobacco was unveiled 3-4 weeks back and the ministry was now planning to extend it to chillies.
Basudeb Banerjee said, A F Ferguson had been appointed to develop a business model for the a-auctions in tea while NSE would develop the settlement system. The entire system would be funded by the Tea Board for the first three years.
Source by Business Standarad
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