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Project on

the feasibility of

“Cochin Tea Trade Centre”Progress report

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Contents• Current Scenario• DTTC• CTTC• Comparison• Observations• Concerns, apprehensions & misconceptions

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Current Scenario• Willingdon Island in Cochin is the main tea auction

Centre in South India• Tea trading activity at Cochin Port is conducted by

the members of the Tea Traders Association of Cochin(TTAC)

• TTAC’s functions are restricted to auction, settlement, and related support services

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Current Scenario

Member Number Activity Performed

Seller 146 Warehousing

Broker 6 Cataloguing of TeaBuyer 194 Blending, Tasting, Packing

etc.

• Transact about 70 million kilogram tea every year.• Tea worth 54 Cr. exported from cochin port• Warehousing and auctioning are the major activities• The operations are scattered and labor intensive with manual

blending.

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Current Scenario

• Warehousing is controlled by approved private warehouses, characterised by:o Inefficient warehousing systemso Prone to pilferage and quality concerns

• All warehouses are operated in the Willingdon Island area [administered by Cochin Port Trust]

• 3,80,000 sq. ft. land is utilized for these activities throughout the port trust area in a labor intensive manner

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Current Scenario

Export of Tea

2008 2009 2010 2011 20120

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Qty.(Metric Tonnes)

Qty.(Metric Tonnes)

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Dubai Tea Trade Centre(DTTC)

• Dubai Multi Commodities Centre Authority (DMCC) launched the Dubai Tea Trading Centre (DTTC) in 2005.

• Major global hub for Tea trade• DTTC is a dedicated facility offering its members

warehousing, blending and packaging solutions.• Processes tea from 30 countries across globe.• 2nd largest export destination for Indian and Sri

Lankan tea

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Dubai Tea Trade Centre

(DTTC)• DTTC is completely export oriented.

o Focus - Tea Imports, Value Addition and Re-export .

• Facilities provided o Tea bag packing o Loose tea packingo Blendingo Tea tasting and evaluationo Warehousing and office lease.

• Strategic location with close proximity to markets like Europe, North America, Africa

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• 60 days free storage from the time the tea is cleared and unstuffed into the warehouse. There after nominal charges.

• Preferential clearing rates for the DTTC members.• Dubai Commodities Receipt (DCR)

o The teas being stored in the DTTC or DMCC member warehouse can be issued a DCR, which is a negotiable instrument with the DCR member banks. Finance could be available against hypothecation of stocks ---- rates of finance being very competitive.

• Blending facilities are provided for the members at 0.025 US cents per kilo.

Following are the benefits provided by the DTTC

Following are the benefits provided by the DTTC (contd. ...)

• Unique industry clustering and purpose built infrastructure.• Strategic location within the Jebel Ali Free Zone and close

proximity to the Jebel Ali port.• 100% business ownership and sole shareholders are permissible.• ZERO personnel and corporate tax.• 100% capital repatriation and no currency restrictions.• All-inclusive facility for conducting tea trading and value addition

business.• A Government body to guide and assist Companies that want to

start business in this region, however do not know how to go about doing the same

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Cochin Tea Trade Centre (CTTC)

• Cochin Tea Trade Centre is an industry cluster which centralises and consolidates all the key aspects of tea trade under one roof. These activities are:o Warehousing of raw teao Auction, and settlemento Processing of value added tea o Storage of processed teao Office infrastructure for the stakeholders [buyers, sellers, and brokers]

• Technology to be used o Fully automated system [ASRS / Automated Storage and Retrieval System]

• Location of the Tea Centreo At the Willingdon Island [ 30 year lease from Cochin Port Trust]

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Cochin Tea Trade Centre (CTTC)

• Entity structure optionso Tea Centre, being a for-profit organisation, shall be established as a

Special Purpose Vehicle [Private company] to be controlled by TTAC (Tea Traders Association Cochin)

• Sources of capital:1. Subsidy - 50%2. Borrowings - 25%3. Equity - 25%

• Estimated costo 10,200 lakh INR

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Cochin Tea Trade Centre (CTTC)

• Centre is expected to aid in the revival of industry which is traditional in nature/promotion of value addition.

• Close proximity to the key tea producing centers and can attract trade from the Nilgiris and Sri Lanka (Indo - Sri Lankan Free trade agreement) as well.

• Possibilities of attracting tea business from Tuticorin port.• Increase the trade volume in cochin port in long run.• More beneficial to small scale/individual tea traders as they

get access to the consolidated facilities at affordable prices.

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Comparison

DTTC CTTC

1. Dubai is not a tea producer2. Imports tea from major

producers and re exports it3. 24000sqm facility4. Located in Jebel Ali Free

Trade Warehousing Zone, Dubai

5. Strategic location between European, North American and African markets

1. India – one of the top 10 tea producers in the world

2. 4th largest exporter of tea(2011)

3. 26710sqm facility( largest in the world)

4. Will be located at the proposed FTWZ (in an area of 102 acres in the South end of Willingdon Island)

5. Strategic location near the largest tea exporter(Sri Lanka)

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• Concerns of the traders regarding CTTC:1. Tenure of the Chairman of Port Trust

• What will become of the project when the tenure of the present Chairman of CPT gets over

2. 30 year lease period• What happens to the investment after the lease period

3. ASIDE scheme• Will the fund be available as expected(50% of the total project

cost)- Is it restricted to 20Cr

4. Changing the Status Quo• Will it prove to be profitable than the current scenario

Concerns, Apprehensions & Misconceptions

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Observations

• Major activity - Warehousing and auctioning• Major stakeholders for CTTC – Sellers• They are more interested in a consolidated

warehousing facility rather than a full fledged TTC• Export of tea is less compared to domestic

consumption• Major buyers are local players• The Tea Board is in full support of the project and is

ready to take measures to ensure the working of the CTTC once it is established

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Observations

• Major share of members are small scale players – Corporates are very few in number

• CTTC can provide useful to the small players who cannot afford expensive machinery and equipment.

• Export and import of tea will increase• Full automation of CTTC is not possible at present -

labor issues

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Observations• The concerns of the traders regarding the CTTC can be

countered as follows:1. The tenure of the Chairman will not affect the project as a contract

will be formed which will ensure that the parties involved will bound by law to carry out the project

2. Lease period of 30 years is common for all Public Private Partnership. No exception can be made in the case of CTTC. Like all other PPPs this project also will need strong financial planning and execution to make it profitable

3. Status Quo cannot be maintained as the traders whose lease period has expired has been/is being/ will be given eviction notice by the port authority.

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Thank you