The Hindu Business Line : Tea industry may seek 5 pc interest for SPF

THE domestic tea industry is likely to ask for a five per cent annual interest rate for the proposed Rs 4000-crore special purpose fund (SPF) for rejuvenation of tea bushes.

According to industry sources, the financial details of the fund are being prepared and it is likely to be placed before the Union Government at a meeting on Wednesday.

On November 3, the Commerce Ministry has convened a meeting where its officials would hold talks with the tea industry representatives on this matter. Senior officials of the Finance Ministry are also scheduled to be present in that meeting.

Mr C.K. Dhanuka, Chairman of the Indian Tea Association (ITA), confirmed this development. "Yes, we are meeting the Commerce Ministry officials on Wednesday. Lets us hope that everything develops in the right direction," Mr Dhanuka told Business Line.

Last month, tea industry urged the Union Government to set up the Rs 4,000-crore SPF for rejuvenating tea bushes of North India. The proposal was made jointly by ITA and Tea Board.

According to the project, total rejuvenation of tea bushes would take 15 years' time. It is expected to start from 2005 and end in 2020. At the end of this period, the average age of tea bushes would come down to less than 50 years.

It was found that commercial banks are not too eager to go in for such long exposures. Moreover, refinance costs from Nabard is also prohibitively high. So, ITA and Tea Board together recommended the creation of a SPF , which would provide long-term loans to the industry at soft interest rates to encourage large-scale replantation.

Industry sources clarified that though the total fund needed is in the tune of Rs 4,000 crore, the annual fund requirement of the tea industry would be less than Rs 500 crore.

"We have taken into account all sorts of expenses. In the first stage, when the existing bushes would be uprooted, there would be a drop in crop production but labour cost would remain constant. That factor has also been incorporated into it. In fact, there is a formula to find the cost of rejuvenation of particular tea garden," sources said.

Mr Dhanuka only added that ITA is preparing every minute detail of the proposed fund, its utility and disbursement mechanism.

Tea industry is bullish that Centre would accept the proposal and the rejuvenation activities would start some time next year. Replantation of tea bushes has a long payback time.

"Generally it is 8-10 years. The industry wished to bring it down to 5-7 years so that tea bush rejuvenation project in every garden gets commercially viable," sources added.