Assam to begin dust tea auction on a trial basis by April-end

Pankhi Sarma

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Guwahati Tea Auction Centre has ensured a smooth transition in 100 percent auctioning of dust tea grade

Guwahati: The aromatic essence of Assam's renowned tea industry is shrouded in controversy as the state government's recent push to defer 100% auctioning mandate has left stakeholders steeped in debate. 

Assam's Chief Secretary, Ravi Kota, has urged the centre to reconsider, citing potential ripples that could disrupt the livelihoods of tea growers across the state. This decision was outlined in a recent notification in a letter addressed to Sunil Barthwal, Secretary of the Department of Commerce.

So, does it set the stage for a saga that pits tradition against transformation, with the fate of the tea industry hanging in the balance?

A high-level meeting chaired by Commerce Minister Piyush Goel in January 2024 delved into the complexities of the tea trade, with discussions that veered from depressed prices to geopolitical challenges amid concerns of small growers striving for fair compensation. The notification, issued in February 2024, mandated implementing 100% auctioning of dust category tea from April 1, 2024, for a three-month trial, intensifying Maximum Residue Limit (MRL) testing by Food Safety and Standards Authority of India (FSSAI), and auctioning at least 50% of other tea grades, including orthodox and CTC varieties. This mandate aims to improve transparency and compliance standards within the industry, according to the notification.

Additionally, every registered tea manufacturer in certain geographical areas—including Assam Arunachal Pradesh, Bihar, Himachal Pradesh, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand, and West Bengal—has been asked to sell at least fifty percent of their total tea in a calendar year through public tea auctions. This requirement applies to dust grades of tea commonly used in packet tea, instant tea, tea bags, aromatic tea, green tea, quick-brewing black tea, and organic tea. However, this order exempts 'mini tea factories' from its requirements.

The move has divided opinion among the key stakeholders. Exporters, traders, and small tea growers have backed the government's decision, and bodies like the Federation of All India Tea Traders Association (FAITTA) and the India Tea Exporters Association have welcomed the move, citing potential benefits for the industry. Nevertheless, concerns have been raised by associations such as the North Eastern Tea Association (NETA) and tea planters' associations, emphasizing the need for a balanced approach that safeguards the interests of all stakeholders involved.

Addressing the rationale behind the 100% auctioning of dust-grade tea, industry experts have highlighted its importance in ensuring compliance with quality standards and boosting transparency within the market.

Dust tea, a cornerstone of India's tea production, finds itself at the heart of this brewing storm. With approximately 164.37 million kilograms churned out in North India over the past three years, its significance cannot be overstated. Yet, amidst reports of factory closures and regulatory hurdles, the industry is seeking refuge in the auction halls.

According to Guwahati Tea Auction Centre (GTAC) records, in dust tea grade, Assam Valley maintained its reign with an outstanding 40.4% out rate, while Cachar and Tripura surpassed expectations, indicating robust consumer interest for the fiscal year 2023-2024. In the preceding fiscal year (2022-2023), total dust-grade tea sales amounted to 38,315,265 kg.

The auction for FY22–23 too saw varied prices across segments, with the highest prices in the dust at Rs 389.18 (Hookhmol), orthodox dust at Rs 131.42 (Hingarajan), and the lowest prices in the dust at Rs 78.42 (Madhupee) and orthodox dust at Rs 71 (Pushpak). According to an official from GTAC, the projected revenue for FY 2023–24 was estimated at Rs 748.25 crore for dust-grade tea and Rs 0.80 crore for orthodox dust.

Importance of 100% Auctioning of Dust Tea Grades:

The decision to implement 100% auctioning of dust tea grades is aimed at addressing the oversupply of lower-quality teas and ensuring compliance with quality standards.

With dust tea comprising approximately 15-20 percent of total tea production in India, the auction mechanism aims to streamline the distribution process and provide a fair price for tea producers. According to Guwahati Tea Auction Centre records, in the last three years (2021–2023), approximately 164.37 million kilograms of dust tea were produced in North India. In Assam alone, 32.62 million kg of dust tea were produced last year.

However, recent instances of tea factories facing closures due to non-compliance issues highlight the need for stricter regulations and monitoring.

Dipanjol Deka, Secretary of the Tea Association of India, emphasized the role of auctioning in promoting trade transparency and improving market compliance. "Auctioning is a better way of ensuring transparency, and trade transparency is important," remarked Deka.

So far, countries like Sri Lanka and Kenya have reported success in auctioning 100% of dust-grade teas.

"The auctioning of tea not only ensures compliance with quality standards but also provides transparency and a benchmark for pricing in the market. It is expected to benefit small tea growers, exporters, and factories by improving market prices and ensuring adherence to quality standards", Deka added.

Echoing similar sentiments expressed by multiple tea organizations, Deka emphasized the necessity of increasing exports. He stressed the importance of establishing adequate market standards and benchmarks for private tea traders or manufacturers aiming to achieve favorable pricing. 

According to Deka, proper auctioning holds significant importance in today's competitive market, serving as a crucial aspect of benchmarking.

Trial Basis and Future Expectations:

The decision to implement 100% auctioning of dust-grade tea is currently under trial, starting from April 1, 2024, for three months.

While stakeholders anticipate the impact of this trial on market dynamics, authorities from GTAC, reassured that sufficient measures are in place to accommodate the transition and ensure the smooth operation of the auction mechanism. However, success will depend on market behavior and adherence to quality standards, according to tea bodies.

GTAC expects dust tea to be available in auctions by the end of April or the first week of May as the season starts.

"We have sufficient space to hold the auctioning of dust tea grade," mentions GTAC authorities.

Challenges and Concerns:

While the move towards 100% auctioning of dust tea grades is seen as a positive step towards improving transparency and quality standards in the industry, certain challenges and concerns persist. Issues such as the availability of testing facilities, market behavior, and the impact on small tea growers need to be carefully addressed to ensure the smooth implementation of the new regulations, according to the tea bodies.

Despite challenges, the industry is prepared to adapt to the new regulations and is hopeful that it will lead to a more transparent and sustainable tea market, tea bodies stated.

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Pankhi Sarma