India is the largest producer and consumer in terms of quantity.
Till 1996, India was also the largest exporter but now it is
Sri Lanka followed by Kenya. In all the major producing countries
namely India, Sri Lanka, Kenya, Indonesia, and Bangladesh, the
British established the tea plantations and therefore the mode
of sale has been through the public auctions. In terms of quantities
sold Guwahati is the largest auction center in the world followed
Auctions are held at the following auction centers:
Under the physical auction system, tea produced in the gardens is transported
at the seller’s risk and cost to the registered warehouses of the associations;
tea must be sold compulsorily through the latter. The teas are then transported
to the warehouses of the auction center preferred by the seller - usually the
nearest auction center from the estate.
Thereafter, the broker gets into the act: his sampling
department draws out between 8-11 kgs of tea; this is distributed to all
registered tea buyers holding a sample entitlement; this dispatch is
independent of whether the recipient is interested in buying the teas or not.
In our opinion, this practice represents an immediate loss for the seller.
Thereafter, the samples are divided into different
sizes as per the directives of the auction committee; this is sent individually
along with the catalogue and valuations. This process consumes between three to
five weeks from the date of the manufacture of the tea.
The buyer then re-posts the teas to the real buyers
at their respective destinations, if he is a commission agent. The real buyer
not gets to taste the teas and put a price on them.
The buyer is now ready for the physical auction.
The auction takes place at various days - not simultaneously at all the
centers. The lots are auctioned in a sequential order. In a particular lot, the
broker allows the quantity of teas to be bid for jointly; it may be bought by a
maximum of three buyers. If the teas are sold, the seller receives payment
after two weeks. Since the time of manufacture, between six to eight weeks
lapse before the seller can recover his dues.
For some reason if the teas are not sold, the brokers
may insert the teas again for sale through the public auction system – but only
after two weeks. Should the teas be sold this time, the sale proceeds are
likely to come in five weeks from the day the teas were first printed for sale.
The total time taken from the point of manufacture to the point of sales
recovery is 11 weeks. However, this time-span could stretch depending on the
arrival of teas with the minimum period elongating from nine weeks to a maximum
of 15 weeks.
The amazing thing is that in a world which is
getting increasingly transparent, the real buyer and the seller are not aware
of what could be transpiring inside the auction room: lack of transparency.