India will soon have an online trading exchange for tea futures to usher in a price discovery mechanism and risk management in the key plantation sector.

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Set to be the first of its kind in the world, the Tea Futures Exchange will be administered by the Upasi Commodities Exchange Ltd, floated by the United Planters Association of South India.

The producers' exchange will be located at Kochi in Kerala, with online terminals at Coimbatore and Coonoor in Tamil Nadu for bidding and buying Indian teas by the stakeholders.

"We have obtained the license from the Forward Market Commission to set up the exchange for tea on the lines of similar ones for pepper at Kochi and the National Commodities Exchange for agriculture products in Ahmedabad," project coordinator N Anandan told rediff.com in Coonoor on Saturday.

Though the existing offline weekly auction system for tea will continue to operate at all the three key tea centres in south India, the futures exchange will carry prices of the commodity for over a 6-month period. It will initially deal with CTC and Orthodox varieties in dust form.

"The exchange will evolve a price mechanism to benefit buyers and sellers and help them to have risk management," Anandan stated.

The exchange will commence operations from the last quarter of the current fiscal year (2003-04). Tea members of Upasi and registered bidders/buyers will be eligible to trade online after they become its members by paying an entrance and annual fee.

After securing clearances from the Tea Board and the Union commerce ministry, Upasi will be short-listing vendors to install the exchange and man its online operations.

"With tea prices for a six-month period available online, growers, processors, and domestic/export buyers will not only be able to monitor the price movement, but also take risk-averse measures for protecting their interests," Anandan declared.

Though Tamil Nadu, Kerala and Karnataka account for around 23.5 per cent of national tea production, about 50 per cent of the country's tea exports originate from south India.

The plantation sector accounts for two per cent of India's agricultural GDP and is valued at Rs 10,380 crore (Rs 103.8 billion).