For the last few weeks, the average price realised at the tea auction centres in Coimbatore and Coonoor have dropped, mainly because of issues related to billing under GST at auction centres and because of higher crop.
Sources in the industry said that for the past 10 years, buyers and sellers at Coonoor and Coimbatore tea auction centres had been using the sellers’ bill and not the brokers’ bill system for billing. A seller is the tea producer while a broker takes custody of the teas from the producer and hands it over to the buyer after the auction.
However, after the implementation of the GST, a couple of major buyers have not been taking part in the auctions in these two centres, objecting to the system of invoices raised in the name of the sellers. This has had an impact on prices and offtake in the auctions.
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‘Clarity needed’
The Kerala High Court recently ordered an interim stay on brokers’ bill. The Tea Board should give a clear directive on the issue, the sources said.
“The issue has resulted not only in a drop in prices but also price instability,” says Thiagaraj Hutchi Gowder, president of the Nilgiris Small Tea Growers’ Association. About 45% of tea produced in south India are from small growers, numbering more than 65,000 in the Nilgiris.
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Most growers sell to bought leaf factories, from where the tea goes to auction centres. “There is usually just one or two weeks’ stock at the warehouses. Now, some teas from even May and June are there.”
Bhojarajan Ramesh Chandar, chairman of the Coonoor Tea Trade Association, said that the two major buyers in Coonoor and Coimbatore buy almost 20% of the teas that come to the auction. When they keep away, prices fall. This has resulted in the drop in average price by ₹30 to ₹40 a kg.
The market has also been on a downward trend since April as the crop output is on the higher side because of rains. Each auction centre used to get approximately 15 lakh kg a week.
The volume is now in the range of 18 lakh kg-20 lakh kg. Till March, average price realised at the auctions was more than ₹100 a kg. It is about ₹ 70 a kg now, he said.