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Brokerage rates row could halt tea auctions

Kohinoor Mandal

Major buyers support agents

Kolkata , April 28

Tea auctions in the three North Indian centres are likely to be hampered from next week as buyers are unhappy with the new brokerage rates.

On Friday, buyers of the Calcutta Tea Traders Association (CTTA), which runs the Calcutta Auction Centre, decided that they would not buy from the next trading session. Buyers at the Siliguri and Guwahati auction centres are stated to be doing the same.

Plea to tea board

A joint memorandum opposing the new broking rates fixed by the Tea Board has also been sent to the senior officials of the Commerce Ministry by the buyers too.

The memorandum was signed by the representatives of Tea Auction Buyers Association of Kolkata, Guwahati Tea Auction Buyers Association and Siliguri Tea Traders Association.

Auction house sources said leading tea buyers such as Hindustan Lever and Williamson Magor are supporting the buyers' cause. Tata Tea, another big player in the auction houses, might participate in the auctions.

Agitated buyers after Friday's meeting, however, assured everyone that there would not be any untoward incident. "We must clarify that we are not boycotting the auction. We are just not participating in it," a buyer said.

On April 7, the Tea Board issued a directive stating that the buyers' brokerage has been increased from a flat rate of Rs 5 per 100 kg to an ad valorem one. The new rates that were announced are 0.30 per cent in Kolkata, 0.22 per cent in Guwahati and 0.20 per cent in Siliguri.

The buyers further clarified that they are not against hiking the buyers' brokerage but felt that it would have been done after holding due consultations with them.

"Buyers are paying the brokerage for some service that is offered by the brokers. But in CTTA, of the 700 registered buyers, only 220 are sample holders and they are not getting any service. So, why would higher brokerage," a buyer asked.

The buyers pay a brokerage because the brokers deliver samples, catalogues and contracts. The buyers also gets a 15-day credit. This practice is followed only in North India. In South India, buyers' brokerage rate is only Rs 2 per lot.

Buyers also argued that such arbitrary increments in transaction costs would push them away from the auction houses to private sells.

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