Tea World

Lesson 26

Tea Auction Process at Guwahati Tea Auction Centre (GTAC)

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In the Auction system four segments are involved-

(1) Sellers - who produce tea,

(2) Warehouse keepers - who store the teas,

(3) Brokers - who value, inspect and auction teas,

(4) Buyers - who buy teas.

Any Seller, buyer, Auctioneer or Warehouse keeper who wishes to operate in  Guwahati Tea Auction Centre (GTAC), must get themselves registered with the GTAC as members. They are required to pay an annual registration fee, the amount of which varies according to the size of business of the firm.  

A registered seller who decides to sell teas through the GTAC may do so through any of the registered brokers and store the teas in any of the registered warehouses situated within the city of Guwahati. The teas which are auctioned can be bought by registered buyers only. Teas must physically be present in the warehouses for Brokers to inspect the contents, draw a fixed quantity of teas per lot as samples for free distribution to buyers who qualify to receive free trade samples as per the directive of the GTAC.Arrivals of teas from various estates into the warehouses during a week is catalogued by brokers to be offered in that sale to take place usually three weeks later. This minimum time is required by brokers to inspect the teas, prepare the catalogues of the different lots that have been consigned to them by Sellers for auctioning, tasting, valuing, distributing free trade samples to buyers, distributing catalogues and valuation lists to buyers, for buyers to taste and value the samples received, sending samples to their clients who may be spread all over the country and abroad soliciting inquiries.

Auctions are held normally on Tuesdays and Wednesdays of the week. Of the fifty two weeks in a year, auctions are held on as many as fifty weeks. Two sales are generally dropped during the festive week in April and in October. Weekly auctions are held in all the seven auction centres of India but may be on different days of the week. The system of nomenclature adopted by the auction centres for the weekly auctions is by numbering the sale to coincide with the week of the year. Thus, the sale held in the first week of the year is numbered 1 and so on to 52. This facilitates to draw comparisons of quantities offered and prices obtained during different weeks of the year, in different auction centres.

On the appointed day of auction, the brokers and buyers meet in the auction hall of the GTAC. Brokers are given set timings to offer the lots in their individual catalogues, by rotation. The auctioneer opens the sale by calling for bids from the buyers, who were earlier supplied with samples and the broker's valuation, serially for each lot on offer. Buyers make initial bids to test the auctioneer how low a bid would be acceptable. It is the brokers' discretion to either accept or reject a bid offered by the buyer. Once the starting bid is accepted by the broker, counter bids are offered by other buyers who may also be interested in the particular lot which is up for sale.The lots against which the initial bids were not accepted by the broker remains unsold and the broker proceeds to the next lot. A broker may, however, reopen a bid on any previous unsold lot before cessation of bidding on the five subsequent lots. The auctioneer knocks down a lot and announces the name of the Buyer and the highest price received for the lot. Once a lot has been knocked down it cannot be reopened. The highest bidder must accept the entire lot. However, the bidder may share it with one other Buyer if the lot is of 16 packages to 34 packages. The bidder may divide the lot with two other Buyers if the lot size is of 35 packages or more. Lots of 5 to 15 packages are not divisible and may not be shared. The division is announced in the auction room itself by the highest bidder to whom the lot was knocked down. In this manner the auctioneer proceeds to offer all the lots in his catalogue. Upon completing the catalogue the next Broker takes the auctioneer's seat. Sales continue generally for two full days and during the peak season in July to October sale may continue for three days.

Upon completion of both the Leaf and Dust catalogues the brokers will proceed to prepare Contracts and Delivery Orders for the buyers. Sellers are also informed about the prices obtained of the lots sold.

Most buyers enjoy credit facilities from brokers. Depending upon their credit rating, with individual brokers, Buyers are given credit for up to two weeks, i.e. till prompt date. The Buyer collects the Delivery Orders from the concerned brokers from whose catalogues teas were purchased and arranges to collect their purchases through transporters who in turn will arrange to transport the teas to their destinations as instructed by the Buyers. On the buyers' prompt date which is 13 days after the date of finish of a catalogue in the case of Leaf teas and 14 days from the date of finish of a catalogue in the case of Dust teas, buyers make their payments to the respective brokers by Demand Draft or local cheque encashable on a bank in Guwahati. Brokers, after retaining their commission, remit the balance proceeds to the respective sellers the following day which is called the sellers' prompt date. Prompt dates are sacrosanct for the buyers as well as the brokers. No violation in payment on due dates either by buyer to broker or by broker to seller is permitted. The Rules provide stringent action on defaults by buyers or brokers.

Despatch of teas from Guwahati to destinations outside the state of Assam is mostly done by road transport. The facilities of the railways and Inland water ways are also available to select destinations.

The facilities of the Inland Container Depot is also available at Amingaon, located about 16 km from Guwahati where tea packages are palletised and loaded into containers to be carried by rail to the port of Haldia in West Bengal. Full customs services are available at Amingaon. The ICD at Amingaon is mostly patronised by the producer exporters for export of bulk teas, because of the convenience of location and the inherent advantages of speedy documentation and despatch. Merchant exporters, however, do not utilise these facilities as pre shipment blending is usually done in locales closer to the ports.

The tea auction process revolves around the many services provided by the brokers. They receive and catalogue all arrivals, inspect, draw samples and distribute them to buyers and taste, value and auction teas. All pre sale and post sale documentation emanates from their offices and the statistics they generate form the basis of all GTAC information to the outside world. In addition, they provide services to producers in the way of manufacturing advice, quality control and the market feedback.

The Guwahati Tea Auction Committee with its various sub-committees facilitates the activities of all the four segments involved, enforces that the rules are not violated by any section, ensure smooth functioning of the weekly auctions and interacts with government agencies.

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