E-auction helps growers get higher prices for tobacco

Doing away with the 28-year-old open auction system introduced in 1984, the Tobacco Board had introduced a system of e-auctioning in the 2012 season, which began in September 2012 and ended in March 2013.

And, tobacco farmers have hailed the move claiming that it has helped them realise higher prices for their produce and that the system has brought in the much needed transparency, unlike during the days of manual trading practices.

In the 2012 season, farmers in Mysore realised the benefits of e-auctions with record grade-wise averages and 25 per cent increase in overall price compared to the 2011 season under manual auction (see box). A total of 93.77 million kg of tobacco was sold in the 2012 season and farmers said that the situation across the State was the same.

“The e-auction system has transformed the marketing of VFC tobacco. Now, there is better price discovery to farmer, equal opportunity to all the buyers to price tobacco as per quality and improved operational efficiency with greater transparency and accountability,” B N Jayaram, a farmer and member, Tobacco Board said, adding that it was a win-win proposition to all stakeholders.

The open auction system was introduced to encourage competitiveness among buyers, correct weight, timely payment and realisation of remunerative prices by growers.

However, over a period of time the auction system faced challenges in the way the auction was conducted and restriction of ceiling price impacting price realisation to growers defeating the very purpose of auction system.

“Besides, there was a huge nexus between buyers, middlemen and the staff of the Board,” said B V Javaregowda, President, Karnataka Tobacco Growers’ Federation, who is also a former vice-chairman of the Tobacco Board.

He said that in e-auction, there is a higher level of transparency as there is an online display of auction proceedings without providing any scope for changing the price during bidding process, thereby, recording the final price and fair chance of bidding and allotment to all the buyers without pressure or bias.

“In this system, each participating buyer enters a price against a particular bale in his hand held terminal and increase the price based on quality and competition. The bidding process and final bid price are prominently displayed to the farmers on a LCD screen in the auction floor,” Jayaram said.

An office bearer from the Karnataka Tobacco Growers’ Forum said that the system has removed uncertainty and confusion among farmers on pricing. “One can see the price movement as different traders bid for our produce,” he said.