Special purpose fund for coffee replantation

A Rs 600 crore special purpose fund will be set up in 2007 for coffee replantation in 90,000 hectares over a five-year period.

A package would be worked out by the end of July after which it would be taken to the Union finance ministry, Nabard and banks, said Jairam Ramesh, minister of state for commerce, after meeting officials of the Coffee Board, banks executives and coffee growers.

Of the 90,000 hectares to be re-planted, Karnataka accounts for 65,000 hectares and Tamil Nadu and Kerala 25,000 hectares each, Ramesh said.

The banks have agreed to support a long term financial package for the coffee industry for re-plantation and the board chairman has been asked to work out the details, Ramesh said.

"The single most important reason why Indian plantation industry is not competitive is because of the age of the plantations," he said adding, "We cannot compete with Vietnam and Sri Lanka unless we embark on a massive replantation programme."

In addition to the fund, Ramesh announced that the Coffee Board would also form a task force to work out a package between the growers and bankers on the problem of repayment of loans borrowed by them.

Pointing out there was a fear among the bankers and growers that unless immediate steps were taken, loans borrowed by them under the special coffee term loan would become non-performing assets, he said.

The RBI would be approached to show "some flexibility" in declaring NPAs in this regard.

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