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The Tea Board of India's move to generate a direct buyer-seller interaction on a large scale via the pan-India e-auction seems to have resulted in a blame game over several issues between the tea industry and the union commerce ministry's wing.
While the Tea Board of India has adopted a thematic and idealistic stance to bring in more transparency into the tea trade, the industry feels otherwise.
The problem lies in the payment of Rs 167 crore, payable by buyers to sellers or brokers. This payment was held up and has created an issue that had to be taken to the commerce ministry level.
According to the Indian Tea Association, the problem arose in sale number 37, under which a payment of about Rs 167 crore, made by the buyers to the sellers or brokers, was locked up in the settlement account of the Bank of India (the settlement bank). As a result, though the payment had indeed been made the sellers were yet to receive it.
The root of the problem occurred in cataloguing the tea as per the gardens' name, where the PAN number -- a mandatory requirement for fund transfer -- was not mentioned. Instead the PAN number is associated with the sellers' account, which is registered in the name of the company selling tea in the auctions. When Bank of India was introduced as settlement bank, this crucial factor of linking PAN numbers with the gardens somehow escaped attention and resulted in payments getting stuck at the intermediary account.
Buyers who bought the tea had made their payment which first landed in the settlement account but owing to non-association of the PAN number with the sellers account, the final payment to the sellers could not be made resulting in the sellers' account ending up dry despite a successful sale.
"There were doubts from the sellers over taxation since the sales reflected the factory name (garden name) and not the company name. The PAN number needs to be quoted for the necessary taxes involved in the transaction", chairman of Tea Board of India, Santosh Sarangi told Business Standard, adding that the union commerce ministry's wing has taken stock of the situation and the issue is being sorted out.
The whole idea of the pan-India auction was premised on the ground to provide more transparency in the tea trade, particularly for the small tea growers and minimise the interference of the middlemen or brokers in a transaction.
The small tea growers, who mostly don't own processing factories, participates in the auctions via middlemen who buy the stock from the tea growers on credit, sell them at higher prices and pay back the gardens.
"The Tea Board of India intended to do away with this process which facilitates the brokers or the middlemen to extract higher charges from the small tea sellers and other estate factories as brokerage fee and instead facilitate a direct buyer-seller interaction", an industry official said.
However, the scheme of things as planned by the Tea Board of India,has not worked, at least, in the initial stages. First, in Sale number 25 (the maiden pan-India auction), the server snapped for an hour and now Sale number 37's monetary realisations are yet to trickle down to the producers.
"The pan-India auction is at a formative stage and it takes time to get things running smoothly. There are bound to be improvisations as things progress", Sarangi added. However, this very introductory auction came at a time when about 60 per cent of the tea industry's volume is produced and goes under the hammer.
"We understand that there will be problems in the initial stages of the pan-India auction. But this can't go on especially when it involves crores of Rupees. Things have to be straightened out first", an official in the tea industry said.
Besides, the official said that with the introduction of the new settlement bank, some hitherto successful transactions are failing at the producers' bank's end due to some "technical linkage errors".
While the Tea Board of India, has time and again claimed to have consulted the industry before rolling out the initiative as well as tweak some of the processes as per the industry's demand, the tea producers and brokers are pouncing upon the union commerce ministry's wing given an opportunity alleging non-consultation and the Tea Board of India's inability to practically implement better price realisations from auction sales.
The ITA, which represents over 60 per cent of the tea industry said that the Tea Board of India failed to deliver as the pan-India auction has severely hampered post-auction operations as "they (Tea Board of India) could not satisfactorily resolve many concerned issues". The Tea Board of India on the other hand is putting up its best to respond to the industry's query by fast-tracking glitches in the pan-India auctions.
