The government of India today scrapped the provision that requires tea producers to sell 75 per cent of their output through the tea auctions.

The decision to dump clause 17 of the Tea Marketing Control Order 1984 will give tea producers the freedom to cut deals directly with tea buyers.

The commerce ministry communicated the decision to Indian Tea Association chairman R.S. Jhawar this afternoon. “With this amendment, a long-standing demand of the industry has been fulfilled. Tea producers will now have the choice to sell tea either through auctions or privately,” commerce and industry minister Murasoli Maran said in the statement.

The tea industry had been urging the government for quite some time to jettison the directive that makes it mandatory for them to route 75 per cent of their teas through the auctions.

The producers were jubilant over the announcement though they felt that it would not have an immediate impact on the time-tested auction system.

However, other clauses like licensing of brokers/auction committees to bring about an improvement in the auction system and the registration of tea producers with the Tea Board of India remain in place.

Aditya Khaitan, who handles the tea operations of the Williamson Magor group, said, “This will give tea producers greater flexibility. They will now have the option to route teas through the auctions or sell it directly to the private parties. But as far as our group is concerned, we will obviously sell our teas through the auctions. I think all the big houses will route their teas through the auctions.”

Industry officials said the directive had lost a lot of its relevance as the big producers were not selling more than 55 per cent of the total production through the auctions.

“They have never gone beyond that level,” they said.

Reacting to the government move, P.K. Sen, chairman of Carritt Moran Company, one of the major auction houses in the country, said, “I have not yet received a copy of the order. I have heard about it. I personally feel that the auction system will not be immediately affected. The committed producers will continue to sell their teas through auctions.”

Khaitan also said it will have no immediate impact on the flow of tea through the auctions.

The industry agreed that payment was secure at the auctions. “The producers might burn their fingers by placing teas with private parties,” a senior official of Assam Company said.

A senior official of Calcutta Tea Traders Association (CTTA) added that the auction system has a lot of merit and that has been proved several times. “There is transparency in the mode of payment in the auctions. The payment is guaranteed,” he said. The small growers will have to depend on the auction. They will not prefer to take the risk of selling tea directly to the private parties.

The tea industry faces increasing competition from other beverages. Demand for tea in the urban markets has slowed with consumer preferences shifting to other beverages following an increase in income levels.

“The removal of the directive will enable us to market teas in a more profitable manner,” the Assam Company official said.

Gautam Bhalla, the chairman of the export sub-committee of Consultative Committee of Planters’ Association, said, “There may be some impact on the auction system three or four years down the line.”

Year-on-year tea production till November 2000 rose by 34 million kg over the corresponding month in 1999. (13/01/2001)

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