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Guwahati Tea Auction Centre.

Sanjib D. Lahkar traces the growth and future prospects of the Guwahati Auction, a tea center that has shown tremendous potential in recent years.

The Guwahati Tea Auction Centre completes 27 years of operations in 1997. Over the past quarter century of service to the tea industry, GTAC has grown from a business center dealing with a mere nine million kg. of tea in 1970 to one of the largest tea auction centers - handling nearly 150 million kg. of tea each year.

In 1993, Guwahati sold 151.33 million kg. of tea, as against an all-time high of 151.51 million kg. in 1989. Little known to millions of tea drinkers throughout the world, the GTAC occupies the prestigious position of the world's largest CTC auction center.

When compared to the 150-year heritage of the Assam tea industry, and the history of world tea auctions which date back to the 1600s in Amsterdam and later in London, the story of Guwahati is of very recent origin. The first consignment of tea was knocked down there as late as September 1970, but since then GTAC has shown remarkable growth. Today, it is the third largest auction center in the world after Colombo and Mombasa (which overtook Guwahati in 1994 with sales of 148 million kg.).

Position and Logistics

GTAC is located just outside the historic township of Guwahati in the state of Assam in India, and is strategically placed to meet the needs of both the producer and the buyer. For the quality conscious buyer, the Assam gardens provide the ideal opportunity to pick up the best of world teas, and because of its geographic position, GTAC enjoys the advantage of proximity to those producing estates. Teas leaving the estates in Assam reach the Guwahati warehouses within two days, and sampling and tasting procedures can be completed within a week of arrival. To the buyer, Guwahati provides easy access to teas from more than 540 registered sellers of tea from 884 Assam gardens, which contribute more than 420 million kg. of tea to the global production of nearly 2,800 million kg. This span of land forms the largest contiguous belt of tea plantations in the world.

The GTAC system boasts 285 registered buyers, 542 producer sellers, nine reputable brokerage firms, and 32 warehouses covering floor space of approximately one million sq. ft. The system today handles around 4.4 million packages of tea per year.

Guwahati is well-connected by an extensive rail system, a national highway that links it to the port city of Calcutta, and the ICD-Inland Container Depot for export cargo. There is also a potential river route (via the Brahmaputra) that links GTAC with Bangladesh and Calcutta. In addition, a recently established international airport has added to Guwahati's prospects as a business center. GTAC now has tremendous potential to become the most important tea center in the world.

This, together with a rising production trend from the Assam gardens, and a growing domestic market in India, bodes well for GTAC's future. The question, then, is whether the same is supported by current trends in tea arrivals and sales.

Growth Trends

Since its inception in 1970, GTAC has increased its sales sixteen-fold, from an initial 9.1 million kg. to the current figure of 147 million kg. In 1978-79, the sales figure shot up to 85.4 million kg., slumping down to 69.8 million kg. the next year, and then to 59.8 million kg. in 1980-81. The trend in sales stabilized at the beginning of the 1980s, and thereafter a steady climb began. Figure 1 details yearly sales for the last 20 years, and graphs 1-3 illustrate the steady rise in sales from 1980-81 to 1989-90, when a record sale of 149.22 million kg. was achieved. However, after 1990, the curve took a downward dip to 136.96 million kg. and has not recovered back up to the 1990 peak figure. Various factors contributed to this slide, including the shift by some major producers becoming direct sellers of value-added teas in poly packs, and the developments in the erstwhile Soviet Union.
Figure 1.

Yearly Quantities of Tea Sold through GTAC
1976-77 to 1995-96 (in million kg.)

Year Quantity Sold

1976-77 36.21
1978 52.61
1979 85.38
1980 69.78
1981 59.78
1982 64.74
1983 72.09
1984 80.79
1985 97.72
1986 121.82
1987 142.12
1988 141.47
1989 144.22
1990 149.22
1991 136.96
1992 147.29
1993 147.44
1994 147.31
1995 135.32
1996 141.07




GTAC has been primarily dependent on the production of tea from within the Indian state of Assam, and therefore the study of quantities sold through GTAC, vis-a-vis Assam production, makes interesting reading. In 1993, against a production figure in Assam of 403 million kg., GTAC received and sold 151 million kg., representing 37.5% of the Assam crop; in 1994, the percentage dropped to 34.54%; and in 1995, it dropped further to 32.7%. A similar trend is evident in the All India crop figures.

While Guwahati, London, and Calcutta have registered slippage in their performance in recent years, Colombo and Mombasa seem to have shown an upward trend in sales (see figure 2 and [ILLUSTRATION FOR GRAPH 2 OMITTED]). A trend in declining sales has also been reported from GTAC's neighboring auctions at Siliguri and Calcutta, in spite of rising production trends from the Assam gardens [ILLUSTRATION FOR GRAPH 4 OMITTED]. This would seem to indicate that there has been a tendency by sellers to move away from auction sales to other modes of sale. Therefore, while during GTAC's 27 years of existence, significant growth has been achieved, recent trends would indicate that there has been a slowing down of arrivals and sales at the GTAC in relation to the Assam production trend. This has been a matter of concern for GTAC.

Prospects

One of the recent issues that has been gaining momentum is the question of whether the system of public auction of tea is a viable and commercially desirable mechanism or not. An accusation leveled against the mechanism is that it is tradition-bound, inefficient, and outdated in today's world of information technology. When this is viewed in the context of the liberalization of the Indian economy, concepts of the decontrolling of the economy, globalization, etc. are cause for serious debate. Furthermore, as per the provisions of the Tea (Marketing) Control Order promulgated in 1984 by the Indian government under the Tea Act, and executed by the Indian Tea Board, producing companies are required to sell 75% of their produce (excluding exempted categories) through the auction.
Figure 2.

Comparative Sales Figures of Major World Auction Centers
(in million kg.)

Auction Center 1991 1992 1993 1994 1995

Calcutta 139.01 112.90 102.34 94.66 92.67
Guwahati 141.51 146.83 151.33 137.72 129.87
Colombo 226.14 172.87 215.14 223.72 229.44
Mombasa 126.12 118.60 127.81 148.36 173.76
London 45.11 38.55 35.20 35.70 29.48
Others 312.01 268.72 275.53 274.84 271.04

Total 989.90 858.47 907.35 915.00 926.26




In view of the decontrolling of the economy, the logic of such restrictive policies is being questioned. So, according to one school of thought, the very future of the auction system has been exposed to uncertainties. While critics of the system are of the opinion that with controls removed, more teas are likely to move away from the auctions, supporters argue that because the auctions offer a tried and tested method, with the interests of all segments of the trade ensured, the system will not suffer. This argument is strengthened by the opportunity that the auction provides for the producers to reach out to a global market at a nominal cost - and all under one roof. On the other hand, recent apprehensions are also being expressed about the threat that large single buyers, who have global reach, pose to the auctions.

With the financial ability to dominate the market, price trends in the auctions may be adversely affected. Another matter of concern for GTAC has been the inability of the auctions to attract orthodox teas. Historically, this has been attributed to the fact that Guwahati is not a port city. However, with the dry port facility at the ICD (Inland Container Depot), it was thought that the export buying of orthodox tea would also receive a boost. In spite of the efforts of GTAC, it has continued to remain primarily a CTC center; and in the entire history of Guwahati, the sales of orthodox teas have not passed the five million kg. mark, barely 7% of Assam's orthodox production. Consequently, GTAC has lost a potential area of expansion, especially since orthodox teas normally fetch a higher price.

Conclusion

In the final analysis of the Guwahati Tea Auction Centre, it can be concluded that: GTAC has immense potential for further growth as well as a tremendous logistical advantage for all segments of the trade; while there has been growth of sales in absolute terms, recent trends leave room for improvement; GTAC's future prospects will also depend on the future of public auctions as a global system of tea sales; GTAC will need to keep pace with global developments; the future of the system will depend on the profile of the buyers, and a multiplicity of larger buyers is in the interest of GTAC in order to ensure fair prices; strategies to attract orthodox teas should also include the ICD sector, i.e., the merchant exporter of orthodox teas from Assam.

The future prospects of the Guwahati Tea Auction will depend largely on the above parameters, as well as on the production trends from the Assam gardens.

Sanjib D. Lahkar has been closely associated with the Guwahati Tea Auction Centre since 1990. The opinions expressed in the article are his personal views.
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Title Annotation:Assam, India
Author:Lahkar, Sanjib
Publication:Tea & Coffee Trade Journal
Date:Jul 1, 1997
Words:1670
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