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IIM Bangalore suggests Japanese auction model for tea e-auction in India

IIM Bangalore has also recommended arranging separate marketing channel for small buyers and standardisation of packaging.

, ET Bureau|
Jul 31, 2019, 06.54 PM IST
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Tea auction is a means of disposing the teas produced to a wide range of buyers in a competitive manner for fair discovery of price.
IIM Bangalore has put forward a slew of recommendations to the Tea Board for price discovery of tea with an objective to make the tea auction process an efficient price discovery channel. It has recommended introduction of Japanese auction mechanism in tea which is equivalent to ascending auction.

The other recommendations of IIM Bangalore are robust quality certification through a neutral party, re-designing of catalogue with no indication of valuation and standardisation of lot sizes and elimination of divisibility of lots. It has also recommended arranging separate marketing channel for small buyers and standardisation of packaging.

The premier institute has also recommended introduction of a price discovery session for out lots at the end of each sale per day with a premium to buyers and managing delivery of teas to the buyers.

Tea auction is a means of disposing the teas produced to a wide range of buyers in a competitive manner for fair discovery of price. Public tea auctions have always played a key role as the main vehicle for primary marketing of tea in India for more than a century.

Prior to 2009, tea auction was carried out manually across the country, which was subsequently transmuted into electronic platform. Later on, the Board had launched pan-India electronic auction platform in the year 2016 across 6 auction centres with the view to move towards the digital India concept.

Later on, Board felt the necessity of conducting a strategic analysis on the existing auction model in the light of globalisation of markets and developments of latest technology and corresponding price discovery of tea with an objective to make the tea auction process an efficient price discovery channel.

Accordingly, Prof. Mahadevan and Prof. Sreelata of IIM, Bengaluru were entrusted with the study. The study was also aimed at delving in understanding the probable challenges in fair price discovery in the auction platform.

A release issued by the Tea Board said if all the recommendations are implemented in totality then it will result in improvement in quality of teas as the poor quality tea will not find its way into the auction. End to end auction with no manual intervention in regard to revision of reserve price i.e. end to dynamic reserve price. Probability
of auctioning of larger number of lots with sufficient time allotted to each lot.

The release added that Increased participation of buyers in their respective channels that is normal auction and the new/alternate market place for smaller lots and will reduce number of out lots.
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