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The auction experiment

FCB and RMA officials will be on hand to facilitate the new system for Indian bidders

A point of sale (POS) facility has been set up at the FCB auction yard in Phuentsholing to encourage Indian merchants, who come to buy vegetables, to make payments through ATM cards instead of cash.

This comes at the time when a potato auction season is just around the corner.

The decision to have such facility came after FCB explained they cannot conduct the auction if they have to follow RMA’s notification issued last year, which stated that any foreign importers participating in the auction must change foreign currency to Ngultrum from the banks to make payments.

This year the Food Corporation of Bhutan will also be selling jute bags at Nu 13.50 a bag to farmers.  The head of agriculture marketing department Sangay Wangdi said this was initiated to meet the standard weight of potato bags, which is 50kg.

This standard weight is set by FCB and preference will be given to unload and auction first, if packed in this standard.
The FCB has purchased about 10,750 jute bags from the flour factory in Phuentsholing.

The notification also stated, while bidding, FCB should ensure bidders receive the products only after producing the bank’s exchange receipt.  This has dissuaded Indian bidders from participating in the auction and they are the main buyers of farm produce coming down from the interior districts.

The notification was issued last year as a means to earn more INR.  The common practice was that most of the Indian bidders paid in Ngultrum instead of INR.

Head of agriculture marketing department, Sangay Wangdi, said RMA officials would witness the first auction day, when the season starts, and observe the practical problems to come to a final decision on whether payments have to be made using the POS facility.

But this has worried FCB, since bidders will have to bear the international transaction charge, when paying through the POS.

A Bank of Bhutan official said the standard international service charge is 3.5 percent of the transaction amount.

Each bidder makes a payment of more than Nu 1M at the auction yard.  Which means they will be liable to an additional Nu 35,000 for using the POS facility.

Meanwhile, the deputy governor Pushpalal Chhetri, in a telephone interview, said the intention of POS was to reduce cash transaction, and have safe and cost efficient use of transaction.

“This was to avoid risk of carrying Nu or INR,” he said. “They don’t have to go to bank to collect the cash, instead swipe the card and pay.”

Coming to the service charge, the deputy governor has said that they would soon have discussion with the Bank of Bhutan, if it was possible to reduce or waive off the charges only during auction season.

He also added they would study the ground situation and implement their decision in phases. “After the first study, RMA might consider making bidders pay 75 percent through POS, and rest in cash either in Ngultrum or INR,” he said.

Balchan Prasad, an Indian bidder, said, if the decision goes through, they might have to also give a second thought before participating in the auction. “Bhutanese vegetable vendors pay us in Ngultrum in Falakatta, so we bring that money,” he said. “Ours is small business and it’s no use for POS.”

Meanwhile, FCB official said, with early harvest of few vegetables, they have started the auction from May 1 instead of June 1, the normal auction season. “This is because we were told few farmers are selling peas directly in the market,” official said.  FCB saw about 80 bidders last year and are yet to register new bidders this year.

FCB generated revenue of Nu 417M from the auction of potato, vegetable and fruit in 2012 from different auction yards across the country.  Phuentsholing auction yard alone generated Nu 362M.

By Yangchen C Rinzin,  Phuentsholing

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