Monday, December 27, 2010

Tea industry in for a good run, says Ashok Batra

Expecting a good brew: Mr Ashok Batra, Chairman and Managing Director, J Thomas and Co.

The world's first public tea auction started in Kolkata (then Calcutta) on December 27, 1861. R Thomas & Company, which later became today's J Thomas & Company Pvt. Ltd, was the auctioneer. As J Thomas & Company enters 150 th year of operation today, its Chairman, Mr Ashok Batra, discusses with Business Line, various issues facing tea broking business.

How it is like heading a company engaged in tea broking business for the past 150 years?

A bit of history first. The original company did not start as a tea broking firm. In 1776, Thomas Marten & Company, which after several changes became J Thomas & Company, started in Calcutta as broker of indigo, jute and shellac. The world's first public tea auction was organised in Calcutta by R Thomas & Company on December 27, 1861. The company later became J Thomas & Co. Pvt Ltd.

Ours is a unique firm in more ways than one. It is the largest and oldest tea auctioneer in the world, handling about 200 million kg of tea annually. Maintaining this leadership position continuously for 150 years has not been easy. It has been possible not only by the company's large pool of trained and expert tea tasters and auctioneers, but also by its accent on ethics and integrity. The company is uniquely structured, with current working employees being the shareholders. This ensures independence, transparency and professionalism, while empowering employees.

How many auction centres does it have?

We operate in all six tea auction centres — three each in north and south India, with head office in Kolkata. We're also a major coffee auctioneer through our outfit in Bangalore and act as procuring agent for rubber .We also provide varied consultancy services for the tea industry.

You yourself have been tea broker all your life. How do you see the change over the years?

I joined this company as a management trainee in 1972, fresh from college. I became the Chairman this April after serving various positions in different places, both in north and south India. Till 1984, the sellers were at liberty to sell their teas in whichever way they thought correct – direct exports, private sales and sale through the auction system. Both the auction system and private sales had, and still have, their own distinct advantages. Before 1984, close to 50 per cent of the tea produced in the country was sold through the auction system. In 1984, Tea Marketing Control Order was issued. Tea Board ruled that 70 per cent of the country's production must be routed through the auction system but exemptions were granted to tea for exports, packet tea and instant tea. The order was in force till 2000.

Why was it withdrawn? Wasn't the objective achieved?

The withdrawal of TMCO was in tune with the Union Government's policy of economic liberalisation. The objective was by and large achieved. At one point, the auction system handled nearly 80 per cent of the total production, gradually declining to 75 per cent, then 70 per cent and finally stabilising at around 67/68 per cent.

What is the present figure?

Around 50 per cent; similar to the pre-1984 level. But the volume is now much larger due to increased production.

What is your market share?

Last year, our market share was around 40 per cent, 200 mkg out of a total 500 mkg offered in the auction system. Last year, the total production was 979 mkg, likely to be lower by 20-25 mkg this year. Out share too will drop to around 36/37 per cent.

About the tea brokers in the country

Most brokers are active in one auction centre, or at best in two to three centres. Ours is the only company which has presence in all six centres. The oldest tea broking firm in Kochi, Forbes, will be a little over 60 years old. Over the years, many old firms folded their operations such as W S Cresswell, A W Figgis, Best Tea Brokers, Tamil Nadu Tea Brokers and recently, Carritt Moran.

What is your view on e-auction?

Like almost everything else in today's world, tea auctioning too must change with times. These days everybody wants speed in payment and delivery. Right now, the e-auction is in force in all auction centres in South India, and at Siliguri and Guwahati centres in North India. In Kolkata, CTC and Dust varieties are fully in electronic mode, only Orthodox and Darjeeling varieties are left out. In Kolkata, export teas by and large are still under the old manual system. We understand a move is afoot to bring Orthodox under the e-auction from the next season but nothing has yet been decided about Darjeeling. At the national level, I believe about 300 mkg are now sold through the e-auction system.

Why Kolkata a laggard?

Unlike other centres, where e-auction system is fully in place, the system being followed here is slightly different. This is presumably because the entire rules have not yet been fully implemented. But then any new system takes times to stablilise.

Any comment on the tea price trend?

The prices will be buoyant for next three to five years. We're very bullish about it. The tea industry is in for a good run. This will be especially true of all varieties of good quality tea, not only orthodox but also good CTC teas. Frankly, poor quality teas have little future. The consumers are very discerning these days.

What is the biggest challenge facing the tea broking community?

The brokers must constantly update themselves to be in tune with the changing requirement of the trade. They have to be quicker, faster, more transparent. They need to innovate, think on their feet and must always be one step ahead of their seller and buyer clients. We, in J Thomas, always try to address these issues.

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