The Hindu Business Line : Tea sector still in dark on budget sops

THE tea industry is quite perplexed as it is still not sure as to how and to what extent it would benefit from the host of "sops" announced by the Union Finance Minister, Mr Jaswant Singh, in his Interim Budget and thereafter.

Two days have passed after Mr Singh made his announcements in Parliament, but still the organised sector of the industry, with corporate set-up and integrated tea operations, have its doubts.

The industry is waiting for the official North Block documents at least on two subjects as it feels that those sops are only meant for the small tea growers and it has nothing to benefit from it.

The first is the subsidy on production. Mr Singh announced that the Union Government would be giving Rs 8 a kg as subsidy for the next four months to the growers both in North India and South India. This is over and above the benefits of the Price Stabilisation Fund.

Representatives of the Indian Tea Association (ITA) and the Tea Association of India (TAI) are clueless on this matter. They told Business Line that they were unsure whether this benefit would be restricted only to the small growers.

The highly unorganised small growers produce approximately 150 million kg (mkg), which means almost 18 per cent of the total production of 850 mkg. They can now avail working capital loan up to Rs 2 lakh for a soft interest rate of nine per cent.

Industry representatives welcomed this decision but raised a question. "They are mostly small and marginal farmers. How will they avail themselves of this benefit? They are mostly dependent on financial resources other than the banking sector", sources said.

Meanwhile, the proposal for a special tea term loan with a moratorium of one year and repayable within five years, has opened up a Pandora's box. At present, the banking sector's total exposure in the tea industry is to the tune of Rs 2,000 crore.

A section of the industry said that about 60 per cent of it, about Rs 1,200 crore, would be converted into special tea term loan. However, the industry is expecting that this loan should have a two years moratorium and a 10-year repayment period.

"Here also we are not too sure about what would be nitty-gritties. Moreover, the Union Finance Minister has left the matter to the banks to take their individual decision. In such a case, the matter boils down to a individual dealing between the bank and the corporate house", sources said.

However, it was learnt that the North Block officials have asked the banking industry to follow the recommendations of the Madhukar Committee while dealing with the tea industry. A similar diktat of toeing its recommendations was passed while preparing the revival package for the industry.

Mr C.K. Dhanuka, ITA Chairman, clarified that the revival package was actually a set of IBA recommendations based on Madhukar Committee report. According to it, tea should be categorised as a priority sector and loans up to December 31, 2003, should be converted as term loans and be given at interest rates lower than the PLR (prime lending rates).

He felt that banks should not ask for new collaterals while giving fresh loans because most tea companies already have a huge debt exposure. "Banks should set practical and bankable proposals for the tea companies", he said.