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Do away with division of lots in auctions, pleads UPASI

By Our Special Correspondent

COIMBATORE, MARCH 3. The United Planters' Association of Southern India (UPASI) has urged the Central Government to do away with division of lots in auctions as it is a "major hindrance" to the price realisation.

In a communication to the Union Minister for Commerce and Industry, Kamalnath, the President of UPASI, Anil Kumar Bhandari, submitted that tea industry had been passing through a crisis due to declining prices since 2000. "While the producing sector, including the labour, is suffering, the other section, consisting of traders, wholesalers and retailers, is flourishing in an unprecedented way as there has been no let up in the end consumer price".

It was this seeming anomaly of one of the stakeholders thriving at the expense of another that prompted the Ministry of Commerce to scrutinise the issues relating to the primary marketing, the auctions in particular.

A study by A. F. Ferguson and Company revealed that "divisibility of lots" contradicted the basic auction principle that all buyers put in the winning bid as otherwise it would allow the buyers to buy without competitive bidding.

Mr. Bhandari contended that the intention of divisibility of lots was to facilitate the small buyers to participate in the bidding, as they required only a small quantity from a particular lot. However, "almost invariably", the large buyers made use of this facility resulting in "inadequate competition" leading to "suppressed price".

The Tea Board initiated certain reforms in the tea auction system in January 2003 whereby a premium of five per cent was imposed on the divided quantities. In the second phase, the division was to be completely done away with from January 2004."

While the association was under the impression that the division system would be discontinued once the South India auction centres went totally electronic, " to our dismay" it was being allowed even in the electronic auctions. According to him, this would undermine the interests of the sellers and the large number of employees dependent on the plantations.

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