The Hindu Business Line : Centre plans Rs 600-cr fund to finance coffee re-plantation

The Union Government proposes to set up a Rs 600-crore special purpose fund to finance the re-plantation of coffee in 90,000 hectares over five years.

The Minister of State for Commerce, Mr Jairam Ramesh, said the details of the fund, likely to be set up in 2007, would be finalised by July-end after which it would be taken to the Finance Ministry, Nabard and banks. Mr Ramesh was speaking to reporters after a meeting with bankers, Coffee Board officials and the Karnataka Growers Federation.

Re-plantation fund

The banks have agreed to support the long-term package for coffee re-plantation, he said. The special purpose coffee re-plantation fund will be on the lines of the 15-year, Rs 4,500 crore re-plantation fund for the tea industry, he said.

The coffee re-plantation fund is the third such fund being announced by the Commerce Ministry in the recent days. Recently, Mr Ramesh announced setting up of a Rs 300-crore fund for replanting pepper and another fund for replanting of rubber.

Of the 90,000 hectares to be re-planted, Karnataka accounts for 65,000 hectares and Tamil Nadu and Kerala 25,000 hectares, Mr Ramesh said. "The single most important reason why Indian plantation industry is not competitive is because of the aging plantations, which impact the output. We cannot compete with Vietnam and Sri Lanka unless we embark on a massive re-plantation programme," he said

Financing

In addition to the fund, Mr Ramesh announced that the Coffee Board would also form a task force to work out a package between the growers and bankers to ease the burden of financial debt on the growers. About 40,000 coffee growers, who had borrowed liberally in the past were finding it difficult to repay, he said. There was a fear among the bankers and growers that unless immediate steps were taken, loans borrowed under the Special Coffee Term Loan would become non-performing assets, he said.

The first instalment of repayment under the SCTL is due in July 2006.

The total exposure of banks to the coffee industry was estimated at Rs 1,200 crore, equivalent to one year's export earnings from coffee, he said.

Interest waiver

However, bankers said that a further interest waiver for coffee growers was not acceptable. "We have already extended a substantial concessions through rescheduling and restructuring. Now when coffee prices are high, the outstanding loans should be repaid," a top banker said.

Among those who attended Friday's meeting included senior officials from Canara Bank, State Bank of Mysore, Corporation Bank, Karnataka Bank, Vijaya Bank, Central Bank of India and the State Bank of India.

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