Auction makes it possible to distribute a large quantity of tea within a shortest periodof time and in an organized manner. Furthermore it provides reliable means of selling and buying tea. In India more than 80 percent bulk packaged tea is sold through public auction annually. Auction takes place among five important stake holders. They are as follows:
- Auction Organizers
- Seller/ Manufacturers
- Brokers/ Auctioneers
- Warehouse keepers
In the auction process auction organizers monitor the whole auction mechanism and publish reports of the sale. Sellers or manufacturers do not have any active role in this system. They simply give the authority of their tea to the concerned broker who sells tea after tasting and grading. These brokers are the controller of the whole selling process. They collect samples of tea from the warehouses and send them to registered buyers. Accepting or rejecting a bid for a particular lot of tea is also in their hands. Besides these, a buyer cannot bring tea from warehouse without the permission of brokers. Buyers are the bidder for tea in auction. Tea is kept in registered warehouses and warehouse keeper has to take all the responsibility of this tea. After the selling process is over at the auction, brokers issue a permission receipt to the buyer to collect the particular amount of tea from the concerned warehouse.
Tea producers are either big estates or small tea growers. Small tea growers do not have their own factory. They sell their green leaves to nearby big tea estates having own factory or Bought Leaf Factory (BLF) for further processing. From this whole production a portion of made tea moves to ex-factory or international buyers and major portion of the made tea move to auction sale. At the auction platform the registered brokers sell tea to the registered buyers after proper tasting and grading. These auction buyers are mostly the big tea companies who have their own blending, packaging and trading network all over the world. Finally branded tea moves directly to the hands of ultimate consumers through retailers. Thus tea passes through various stages while moving from actual producer to ultimate consumer. In every movement of this marketing chain value is added to tea. Like every agricultural product, in case of tea also, most value addition takes place at the last parts of the marketing channel.
Only registered seller, buyer, broker and warehouses can participate in a particular auction. The function of a warehouse is just like a bank. A producer can keep his product in a warehouse giving a fixed sum of money as security for using it. When the tea of this producer is sold in auction, the buyers can collect the particular amount of tea directly from that warehouse showing a permission receipt from concerned broker.
Auction organisers monitor the whole auction system. They also publish statistical reports on auction. The most important feature of auction sale is that the producers do not directly take part in sale of their own tea. They keep their tea in warehouses approved by concerned auction organizers. After receiving tea from a seller, warehouse management sends report of arrival and weighing of tea to concerned broker. Warehouses are visited by brokers for inspection and they collect samples of tea which will be sent to eligible buyers. Brokers use to do valuation of tea after tasting and they publish this report considering the market trend and quality of tea.
Depending on public outcry at the floor of the auction, tea is sold to the highest bidder. Delivery order of tea from a warehouse to a particular buyer is given by concerned broker. In North India, there are two types of buyer - cash buyer and credit buyer. A credit buyer has the permission to collect tea from warehouse before prompt date and without payment. On the other hand, a cash buyer can take delivery of tea only after paying cash. Broker gives the payment to the seller or manufacturer after deducting his own commission, warehouse charges and taxes. One broker can sell tea of more than 100 gardens on behalf of the producers. So through the whole auction system brokers play very crucial role from tasting to delivering tea. Sellers or manufacturers do not have direct contact with buyers. The whole system is operated by limited number of brokers. The auction system has some beneficial effects to the producers giving them a large marketing platform. Buyers are benefited in the sense that they are able to purchase tea of a much broader variety than they would otherwise be able by moving from garden to garden individually. Also in auction they can watch the operation of their competitors.