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Kohinoor Mandal

Kolkata , Nov. 8

THE Union Ministries of Commerce and Finance, in consultation with banks, financial institutions and the tea industry, are trying to work out a linkage whereby earnings from the auction houses will be directly used to repay loans taken from the Special Purpose Tea Fund (SPTF).

According to sources, the proposal has been forwarded by representatives of the Union Commerce Ministry and has been received well by banks and financial institutions.

SPTF is the proposed Rs 300-400 crore corpus to be created by the Government. Tea companies can avail themselves of loans from this corpus for the purpose of re-plantation and rejuvenation of tea bushes. Interest rates are likely to be substantially lower than the market rates.

The programme has been conceived on the insistence of the tea industry. One of the major concerns of the tea sector is the falling yield of the gardens as the average age of the tea bushes are past their prime. Already two lakh hectares have been identified as low-yielding area.

Initially, SPTF was proposed to be a corpus of Rs 4,000 crore but later it was scaled down to around Rs 400 crore. Mr Kamal Nath, Union Commerce Minister, recently said that it was likely to be announced within the next 3-4 months.

Talking on the linkage with the tea auction houses, the sources said the suggestion that a portion of the revenues generated by each individual plantation company be directly used for the repayment of loans was readily accepted by the banks and financial institutions.

Earlier, banks and financial institutions were to some extent reluctant to give loans to the tea companies because the share of the tea sector in the total NPA portfolio was already very big and increasing.

"In such a scenario, no bank or financial institution will be giving any assistance to any tea company just on the basis of commercial interest. However, the leading tea companies hardly face any problem because of their good financial health," sources clarified.

About a year ago, Indian Tea Association (ITA) first spoke of SPTF. According to an ITA report, the total rejuvenation activity will take 15 years. It was expected to start from 2005 and end in 2020. At the end of this period, the average age of tea bushes is supposed to come down to less than 50 years.

The Tea Board along with Nabard is likely to play a crucial role in the re-plantation and rejuvenation programme. Such long exposures were another matter of concern for the banks and financial institutions.

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