Saturday, December 30, 2006

About Special Purpose Tea Fund

The Cabinet has recently approved the setting up of the Special Purpose Tea Fund. This fund is likely to be headed by a Chief Executive Officer and managed like a corporate entity.

Why this fund is required?

More than 50% of India’s tea bushes are over 40 years old. The older the bushes, the lesser will be their productivity. Hence they require replanting and rejuvenation. It is estimated that about 2 lakh hectare of plantation needs to be replanted in the next 15 years. This involves huge capital costs to the tune of about Rs. 4,761 crores.

Banks are unwilling to provide loans beyond 7 to 10 years at a uniform rate of interest to tea growers. Re-plantation loans require a minimum tenure of 13 years with a five year moratorium on repayment of principal. Hence the need for the creation of the fund.

What are the contours of the scheme?

Under the scheme, the growers would come up with 25% of the required funds while the government would provide 25% funds as subsidies. The rest would be provided by the SPTF through long term loans. The SPTF would borrow funds from banks and financial institutions at 1% above the prevailing G-Sec rate and would on-lend to growers at 0.5% over the borrowing rate. The loans would be repaid in 8 equal installments starting from the 6th year of sanction with a moratorium of five years on the payment of the principal. Of the total required investment of Rs. 4,761 crores, 46% would be spent in Assam, 28% in West Bengal and 22% in Tamilnadu and Kerala.