Tea World

Lesson 26

History of Tea Auction

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Tea auction has a long history which dates back to 17th century. Till date it is considered as the most preferred mode of disposal of tea among the tea growers. In general an auction is a process of buying and selling goods or services by offering them up for bid, taking bids and then selling the item to the winning bidder.   Prior to the 17th century the few auctions that were held were sporadic and infrequent.

During the 17th century, British East India Company was the most powerful commercial organisation in the world and it had a crucial role in tea trade also. Britain experienced its first auction sale which was conducted for selling ancient books and artifacts; later auction was organized for other goods. World’s first tea auction was organised by the East India Company in UK. In those days tea auction meant an institution for transferring tea from China to Western World (Europe) as consumption of tea was higher in that part. The whole monopoly of this marketing system was enjoyed by the East India Company. In 1836, an order was passed that every tea chest must be auctioned at East India House. The East India Company had enough power to enforce the order. During that time tea was sold in the light of a candle. A candle was lit at the beginning of the sale; one could bid for a particular lot till one inch of the candle had burnt away. Moving away from the normal mechanism of commerce, this order affected everyone related to tea marketing. Due to public pressure the authority felt the urgent need of an actual auction system where tea would be sold giving equal opportunity to all buyers. By the middle of the nineteenth century the tradition of selling ‘by the candle’ was replaced by more practical methods. As a result the first formal and organized auction centre for tea with every particular characteristic was established on 10th January, 1837 at Mincing lane in London. In those days tea chest were transferred to company’s warehouses and samples were given to the tea tasters for grading and valuing. Auction was held among brokers, their clients and the London merchants. There was no change in the monopolistic nature of the company even after modification of former unstructured tea trade at auction centres. This marketing system has remained highly organised ever since the first consignment of Assam tea was put up to London Auction on 10th January, 1839, which was recognized as the first auction sale of Indian tea in the international market.

Till the world’s tea production was controlled by the British, auction trading through London Auction was the most accepted one. Prior to Second World War (1939-1945) more than sixty percent tea of the entire world, which was under British control, was marketed in London. But with the development of tea industry the producers in different countries found defects in this system. Even after the War was over in 1945, London Auction Centre did not reopen till 1951. It has resulted in oversupply of tea in different producing countries. As an alternative to London Auction, sale was resumed at Kolkata (then Calcutta) in 1946 and Colombo in 1947 auctions to dispose off this surplus. This was not sufficient for marketing all the produced tea of the world and a need arose to establish new auction centres in different producing countries. As a result new auction centres were established (in Cochin, Amritsar, Coonoor, Guwahati, Siliguri, Jalpaiguri, Coimbatore, Mombasa, Chittagong, Limbe and Djakarta) which lead to a sharp decline in the quantity sent to London auction. Gradually, it was seen that London Tea Auction Centre had lost its former priority. Till 1930 Indian teas were occupying almost 60 percent of total tea offered in London Auction. But after  India’s independence (1947), indigenous producers preferred to sell their tea in native auctions, avoiding the time and cost of sending them to London auction. Other producing countries like Sri Lanka and Kenya also stopped sending tea to the London auction. When auction was resumed in 1951 at London auction, sale quantities had declined from over 200 mkg during the peak period to only about 50 mkg. This trend that emerged from the early 1980s continues to reach critical level to 16 mkg only in 1996. At last on 29th June, 1998 the first tea auction centre of world, i.e., London Tea Auction was closed down.

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