The Tea Board of India has abandoned a two-year experiment using its so-called "Bharat" auction system because the process failed to lift prices. Rolled out in phases starting in 2021, the system replaced longstanding English auction rules, which will once again govern transactions starting October 3.
The Board adopted the Bharat rules in an effort to remedy persistently low auction prices. The alternative system was developed by the Indian Institute of Management (IIM Bangalore), which modeled the rules on modern Japanese auctions. The rules were designed to increase average prices by using a transparent, market-driven price discovery system. They also aimed to prevent poor-quality tea from finding its way to auction. A separate marketing channel was established to promote teas to small buyers.
Under the Bharat Auction System,
- A neutral party was assigned to perform quality certifications.
- Lots were larger, standardized, and could not be divided.
- The auction catalogs contained no indication of value. Buyers were required to post their initial offer before the start of bidding.
Bharat auctions were introduced first in South India. North India centers were added in 2022.
Under the Bharat Auction, each lot in North India contained at least 30 packages weighing a standard 38 kilograms, or a total of 1,140 kg. In South India, the minimum number of packages per lot was 15. Rules prevented bidders from dividing the lots, as had been common under English auction rules. As a result, small bidders seeking only a few packages did not participate. This ultimately led to fewer bids and less competition, dragging on prices.
English rules, which were instituted in 1861, were modernized in 2009 to facilitate digital bids. By 2016, all six of India’s auction centers were linked in a pan-India digital platform. But digital auctions did not significantly increase the volume of tea sold at auction because many growers continued to sell directly to customers in defiance of Tea Board rules requiring that half of the tea produced in India be sold at auction.
Representatives of the Terai Indian Planters Association, Botleaf Producers Association, Darjeeling Tea Association, and Tea Association of India told the minister of industry and commerce, Piyush Goyal, that during the past five months, auction prices had decreased an average of Rs 33 per kilogram, according to a Millennium Post article.
The Tea Board of India started rolling back the rules in September in Calcutta, Siliguri, and Guwahati, halting auctions at all auction centers for two weeks so technicians could un-install the Bharat software.
Representatives of the Trinamool Cha Bagan Shramik Union (TCBSU) and the North Bengal Tea Association of India (TAI) welcomed the news.Critics had complained that the Bharat rules were unfriendly to trade and resulted in less competition for lots. Calcutta Tea Traders’ Association (CTTA) chairman Anish Bhansali objected to the process as “overregulation” and told the Times of India that public auctions should be completely deregulated.
Last year, Anshuman Kanoria, chairman of the Indian Tea Exporter’s Association, said that organizers and stakeholders should set the mode and rules of public auctions. "Either you have full control or no control over the system,” he told the Times of India.