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Friday, Aug 30, 2002

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A prescription to stir tea industry

Rabindra Nath Sinha

KOLKATA, Aug. 29

THE other observations and suggestions of the working group constituted by the Reserve Bank of India on the tea industry pertain to tea associations, borrowers (tea companies), Nabard's Rural Infrastructure Development Fund (RIDF) and release of funds by the Tea Board under its capital subsidy scheme.

The working group has called upon tea associations to interact regularly with lending banks to apprise them about the health of the industry, major policy decisions having bearing on the operations of the industry and, of course, about its needs.

The issues mentioned include efficacy of the auction system, average yield, replantation and conversion ratio of green leaves.

Also, associations must help members to improve their performance. They must play a more active role to develop markets within the country and abroad and thereby thwart challenges posed by competing beverages.

Borrowers must better their record of financial discipline. They must not divert funds to sister units/other businesses without proper tie-ups of funds and consultations with lending banks.

Tea companies should achieve at least one per cent replantation in each estate every year.

State Governments should access Nabard's RIDF not only to meet expenses for the development of infrastructure in tea estates such as housing and irrigation, but also reimburse expenditure incurred by tea borrowers during the last three years for the same purpose.

This will afford relief to tea borrowers, as in the existing dispensation, infrastructure development is their responsibility.

The Tea Board, which currently provides 25 per cent capital subsidy in respect of select projects, including development of plantations, may provide subsidy at the same rate in respect of capital expenditure incurred by tea companies during the last three years to create assets for enhancing production capacity, provided it is satisfied that the companies could not tie up funds to meet fully the capital costs and that they have a satisfactory track record.

But, the release of the subsidy should be linked with term-loans, if availed, from banks for the same purpose. Moreover, the subsidy should be released through the lending banks of borrowers.

During the deliberations of the working group, the representative of the Commerce Ministry had mentioned that the Union Government had proposed to set up a price stabilisation fund for plantations including tea.

The working group has, therefore, suggested that constitution of the price stabilisation fund should be expedited.

As small growers and bought leaf factories are facing certain problems due to price differentiation, non-realisation of receivable on time etc, their problems require more in-depth study.

The working group, therefore, has recommended that separate working groups may be formed under chairmanship of conveners of State-level bankers' committees of the respective States with members drawn from SBI, the Tea Board and the tea industry.

They should finalise their recommendations within a month.

The setting up of the working group to study the problems facing the tea industry followed a meeting convened by Mr Vepa Kamesam, Deputy Governor of the RBI, at the request of the Commerce Ministry.

The working group, headed by Mr Madhukar, CMD of United Bank of India, finalised its report on July 25 as desired by Mr Kamesam.

The RBI, which came out with prescriptive guidelines with reference to the report in the third week of this month, has desired banks and other authorities to act on the package "in right earnest'' for the benefit of the tea industry.

According to the working group, all the recommendations made by it will be reviewed after three years.


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