Fund in a tea cup

The Special Purpose Tea Fund (SPTF), cleared last Thursday by the Cabinet Committee on Economic Affairs (CCEA), is expected to give a fresh lease of life to tea plantations.

The fund, promised by the Union finance minister in the Budget of 2006-07, would increase the number of applications for replantation and rejuvenation schemes manifold.

More than 80 per cent of tea companies are planning to apply for it, despite the subsidy being pegged at 25 per cent, as against the original demand of 40 per cent. The funding pattern would be thus: 25 per cent subsidy from the government, 25 per cent promoter's contribution and 50 per cent soft loan from the fund.

The government would borrow from the banks and financial institutions at 1 per cent above the government securities rate, and lend the money to growers at 1 per cent more than the borrowing rate.

The corpus is estimated to be Rs 4,716 crore over a 15-year period.

The Tea Board of India has already set the ball rolling with the preliminary document for the structure being sent to the Union commerce and industry ministry.

If the board's proposal goes through, the Tea Board deputy chairman (post currently vacant) would be the chief executive officer (CEO). Most of the work, like treasury/fund management and loan appraisal would be outsourced to SBI Caps. However, the sanction committee would be under the Tea Board.

The Board expects the structure to be in place by the middle of February this year. The disbursement target has been set for the financial year of 2007.

Replanting can be done only after rehabilitating the land for one-and-a-half years, and the process can be kick-started in the lean months of November and December.

However, sources pointed out that the industry would require funds during uprooting, which would entail significant crop loss.

One of the main advantages of the SPTF is that loans would be provided at a uniform rate over a long-term period. Moreover, in the current scheme, the companies would have to pay upfront. The applications for the existing scheme would be dovetailed into the current scheme.

The main objectives of the SPTF are to increase productivity, produce quality tea and reduce cost. Further, the SPTF is expected to increase sales tax/VAT collections, and create additional employment.

The bulk of the corpus would go towards estates in Assam since it has higher acreage. Of the Rs 4,716 crore, Assam would account for 46 per cent, West Bengal 28 per cent and the balance would go to the southern states.

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SNIPPETS

More to drink
India has registered the maximum gains in production in the first nine months of the last calendar year, compared to the other tea producing countries.

Between January and September 2006, while world production went down by 18.8 million kg, India registered an increase of 23.9 million kg.

India is among the only three countries to have regi-stered an increase in prod-uction over the previous year. Malawi recorded a rise in prod-uction by 4.5 million kg and Zimbabwe by 0.5 million kg.

Exports witnessed a rebound from last year, albeit much to the credit of the Kenyan drought at the beginning of the season. During April-September, exports from India were higher by 11.2 million kg.

The steadily rising domestic consumption at the rate of 3 per cent has further propped up the bottomline of the industry. During April-October, all-India tea auction prices were higher by Rs 11.14 per kg.

Estimates indicate that with no carryover stocks from last year, there would be a cumulative shortage of 15-20 million kg, which implies a positive impact on prices.

The Indian Tea Association (ITA) status paper has, however, pegged the shortfall at a higher level of 27 million kg.

Campaign season
It's rejuvenation of a different kind. Tea is busy shedding its "prim and propah" image to get into the youth groove.

Aided by O&M, the Tea Board of India campaign, across all electronic channels, is aimed at making its place in the minds of GenNext. And there's more to come. The end of the winter season would see a campaign geared to promote tea in the form of iced tea.

For those wondering whether iced tea as a product had made any impact on the consumers, the campaign does not plan to push the tetrapack product.

The campaign is 100 per cent funded by the Union ministry of commerce and industry. Some campaigns focusing on Darjeeling tea are also in the offing. Lintas had been roped in for the signage campaign.

Campaigns would also hit foreign shores. The Tea Board plans to focus on Germany, the UK and France. to promote Darjeeling tea.