Tobacco sales may not have gone up in smoke, but they are certainly set to go wireless for the first time in India. The Tobacco Board will inaugurate a electronic auction (e-auction) system on November 9 to regulate sales of Virginia tobacco in the state.
In a project initiated along with Bangalore-based Cranes Software International Limited, to develop a e-auction system using wireless Handheld Terminals (HHT), the board envisages all tobacco buyers and board officials to be part of the upcoming wireless tobacco bazaar. "The complete auction process happens on a handheld terminal in a wireless networking environment. Besides buyers and auction officials, these handhelds can be used by classifiers -- the board officials in charge of inspecting and evaluating the quality of tobacco bales,” explained Asif Mohamed, Head – Banking and Financial Services Practice, Cranes Software.
After the classifiers use the HHTs to grade the tobacco bales on quality, the action shifts to the auction chambers. The auction superintendent starts the auction inviting buyers to bid for the bales. The buyer offering the maximum bid is awarded the bale and the auction comes to a close. The entire life cycle of the auction, including price discovery, as it happens is displayed for the benefit of the growers on a large LCD screen, Mohamed said.
The auction stage is started by the auction superintendent using a HHT. The auction superintendent chooses a particular lot for auction and then the message is flashed on HHTs of the buyers assembled. The buyer may then choose to participate in the auction. The system verifies the balance amount from the buyer’s bank guarantee and stores it in the HHT for verification. The HHT checks before each activity whether the bank guarantee is sufficient and displays a warning message in case of insufficient funds.
The HHT displays to the buyers, the buyer’s bid price, the current highest bid and target price set by the buyer in the purchase plan. The HHT allows the buyer to then increment the current highest bid value to place his own bid. In case no bid has been placed for a lot in a specified time limit, the auction server automatically steps down the price by a pre-specified amount. The buyers may then choose to participate if they feel the price is more acceptable.
After a specific duration, if no higher bid is received, the system will declare the highest bidder as the successful buyer. The auction superintendent can choose to end a round of auction using his HHT before moving on to the next round. “The system can accommodate 5-6 Board officials and about 700 buyers, recording transaction volumes of 1,200-1500 bales (one bale is roughly 100 kg) per platform each day,” Mohamed added.
Often, a farmer, on the basis of reports generated during auction, may decide to reject the price offered. This rejection (RR) is recorded on the HHT by a Board official. The farmer may then remove the lot from the auction floor. A buyer can also reject a lot after checking the bales by contacting a Board official who records the reason for rejection. Accordingly, the official reduces the weight of the bale or marks the rejection (CR) through HHT. Once the RR and CR processes are completed, a report on the farmer’s statement and settlement is generated. Similarly, a report on the buyer’s statement and settlement is prepared at a pace unimaginable in the present manual auctioning system.
The present manual system has been in practice for more than 23 years and is totally manual. It was set up in 1984 to remove the price stranglehold enjoyed by tobacco companies (buyers) on virginia tobacco sales. While the system has empowered buyers, it has not fully empowered growers (read tobacco farmers) and also weakened the grower-buyer transactions due to lack of transparency and discrimination. For a buyer, changing a buying decision at a later point is almost impossible at present owing to the rigidity inherent in the system.
Earlier, Cranes Soft had joined hands with the Tobacco Board to try out pilot tobacco auctions at the J R Gudem-II Tobacco Board auction platform in West Godavari district of Andhra Pradesh before deciding to take it ‘live’. The need for such a system is justified as operational costs involved in conducting manual tobacco auctions at various places have been increasing every year. The operational delays in the system also influence the service conditions to the farming community.
