India’s tea producers’ apex body, Indian Tea Association (ITA) said post auction operations have been hampered as the settlement bank and NSEIT, the facilitators of the pan India e-auction system, have failed to meet the payment settlement requirements of the traders.
“It has severely hampered post auction operations as the Settlement bank & NSEIT, the facilitators of the e-auction system, have failed to interact in-depth with the auction organisers and grasp the requirements of the associated stakeholders namely sellers, buyers, auctioneers and warehouses operating in the auction system,” the association said in a statement on Wednesday.
The Tea Board introduced the pan India e-auction in June at all the seven tea auction centres. The board selected Bank of India as the settlement bank while NSEIT, the software developer of the e-auction platform, developed the post-auction module and has been running the system.
Earlier, State Bank of India and IndusInd Bank had been handling the payment settlement processes in the old e-auction process which was centre specific.
The association said the facilitators could not “satisfactorily resolve” many concerned issues.
“Delivery orders, which are negotiable instruments for delivery of tea worth crores of rupees, are being issued with digital signatures without proper infrastructure for verification of their authenticity by the warehouses prior to delivery of teas to buyers. This has increased the risk in the auction system,” it said.
According to the association, prompt payments could not be reconciled under the new process as payments from buyers were being kept in the settlement accounts and were not being remitted to sellers.
It also said that brokers were unable to reconcile tax invoices and account sales due to numerous errors in total packages, net weights, sale dates, VAT, service tax and Tea Board charges, which remained to be addressed by the NSEIT.
According to ITA, despite all efforts of the Board, pan-India auctions have so far been unable to generate competition for a fair price discovery for the tea makers. Many producers are compelled to sell tea well below the cost of production and it will have serious consequences in the future on the sustainability of the industry.
The board, however, has mandated that 50 percent of the tea manufactured must be routed through public auctions.
The board said the fully functional pan India e-auction would lead to greater transparency in transactions and faster realisation of payments.
“At the same time it is an important milestone in the effort of the Board towards digitisation of various services provided to the stakeholders,” it stated.