The Indian tea industry, which has been facing difficulty in getting bank finance, might soon get some respite. The Tea Board of India has roped in ICICI Bank to extend credit facility in the form of corporate credit card to the buyers registered on its auction platform.

According to Arun Kumar Ray, Deputy Chairman, Tea Board, the move would help facilitate smooth remittance of auction proceeds. A similar facility to the sellers in the form of bill discounting is also under consideration to meet the short-term financial needs of the sellers.

The scheme is likely to be implemented by end November or early December.

“The tea industry has been finding it difficult to get bank funding. The credit card would enable buyers to settle the auction payments within the time limit and avail 45 days’ credit period from the bank. This will also ease the liquidity crunch of the auction buyers, if any, and enhance participation in the auction process,” Ray told newspersons here on Wednesday.

The country had produced close to 1,350 million kg (mkg) of tea in 2018-19. Nearly 600 mkg of tea estimated at a total value of around ₹8,400 crore was sold on the auction platform last year. Default on the total volume transacted on the auction platform has been to the tune of four-to-five per cent.

ICICI Bank is the Settlement Banker for Tea Board in respect of auction payments. However, according to industry insiders, more than the liquidity problem, it is the issue of demand and supply which is a cause of concern at present.

“The supply is huge and demand is not in tandem with the increase in production. Even if the buyer gets credit facility, if there is no demand increase in the secondary market then he will find it difficult to sell the tea and repay the money to the bank,” the industry source said.

All ‘Darjeeling’ tea on auction

The Tea Board is mulling the option of routing the entire Darjeeling tea produced onto its auction platform. The move will help ensure traceability and protect the GI tag. It would also lead to fair price realisation for the tea.

The proposal would be discussed at a meeting with the members of the Darjeeling Tea Association to be held end of this month, said Ray.

comment COMMENT NOW