Representative image of tea plantation.
Credit: iStock Photo
Guwahati: An association of tea planters in the north-east region has opposed the central government's directive to sell 100 per cent of dust tea and 50 per cent of other grades produced in a calendar year through auction as it will be 'detrimental' to the survival of the industry.
In a liberalised and globalised economy, there is "no need for the government to issue a notification to compulsorily sell a certain percentage of tea through a public auction", North East Tea Association Advisor Bidyanand Barkakoty said in a statement on Wednesday.
''The government should not try to regulate one particular segment of the trade, and in this case, tea producers have no control over the market forces. We earnestly request that the notification should be withdrawn in the best interests of the tea industry'', he said.
Tea producers have a 'huge risk and responsibility of paying wages to workers on time and also to small tea growers who sell their green leaf to factories', he said.
A gazette notification, Tea (Marketing) Control (Amendment) Order, 2024, issued on February 26, directed that not less than 50 per cent of the total tea manufactured in a calendar year and 100 per cent of dust grades tea manufactured in a calendar year in units located in Arunachal Pradesh, Assam, Bihar, Himachal Pradesh, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand and West Bengal must be sold through public tea auctions but it does not apply to a mini tea factory.
''The basic principle of our objection is that since the government cannot guarantee the price realisation and the time taken for sale through auction, it should not intervene but leave it to producers to sell their produce in whatever way they feel comfortable,' Barkakoty said.
''Managing the cash flow is a huge burden on producers. Any disruption or uncertainty in cash flow may invite social unrest and violence'', he added.
There are about 10 lakh workers employed directly in the tea industry of Assam and 1,25,484 small tea growers who produce 48 per cent of the total green tea leaves produced in the state.
Tea producers use three different channels to sell their produce - public auction, directly from the factory through a one-to-one deal and export or through merchant exporters.
'Public auctioning of tea is more than 150 years old but it has never ever been able to attract producers to sell 100 per cent of their produce through public auctioning. The main reason for many producers not routing their produce through public auctioning is that it is a very inefficient, time-consuming and expensive mode of selling process,' Barkakoty said.
As there are a 'limited number of buyers in the public auctioning system, many producers do not get fair prices' for their produce while 'commission agents operate for several buyers thereby restricting competition, resulting in lower price realisation', he claimed.
The auction process is much slower as compared to direct sales and much more expensive, and 'any rule which forces producers to sell through auctions will cause a working capital and cash flow crisis for the industry', he pointed out.
There is a huge expense for selling through auction centres which at times is as high as the margin for a manufacturing unit, he added.
''Almost all the tea producers have borrowings from banks in the form of term loans and cash credit limits with 100 per cent auctions negatively impacting cash flows and profitability and this could also lead to the industry becoming unviable,' he said.
The present e-auction system needs to be redesigned with the help of experts and a robust system will automatically attract a large number of manufacturers to sell their produce through public auctioning, Barkakoty added.