Coffee growers' financial aid likely before March...

The agriculture and finance ministries are likely to decide on the financial relief package being sought by domestic coffee growers before March, coffee traders said.

The decision will come before March, as banks would like to clean up their balance sheets before the financial year-end, they said.

According to estimates given by them, around 1.4 lakh growers, who had taken loans under the 'special coffee term loan' are likely to come under the purview of this package. Growers who took loan on July 1, 2006, would also be covered under the scheme, officials said.

Coffee growers had sought a financial package for waiver of interest on overdue loans as on July 1, 2006, and also rescheduling of the principal amount.

The package was sought in early 2000 since coffee growers could not fulfil their loan obligations due to higher incidence of white stem borer disease, which resulted in drop in productivity, severe shortage of work force, and rise in cost of production.

Hence, in 2000-01, the government rescheduled the accounts of coffee growers and converted them into 'special coffee term loan', the first instalment of which along with interest was due by June 30 last year. Coffee Board of India, along with Canara Bank, Corporation Bank, Karnataka Bank, and Syndicate Bank formed the 'task force' and submitted their proposal, which is being viewed against the backdrop of the financial obligation of Rs 1200 crore.

Industry officials feel Karnataka coffee growers are likely to get interest waiver of Rs 217 crore, which would be borne by the state and central governments.

South India is the main coffee growing region, with Karnataka being the largest producer. Meanwhile, coffee Board of India is meeting SBI Capital Markets today to discuss the final proposals under the Special Purpose Coffee Fund, Chairman GV Krishna Rau said.

The fund was formed in June last year to enable coffee growers to undertake re-plantation activities.

SBI Capital was appointed to review the technical and financial aspect involved in the replantation of coffee to provide relief to growers.

This replantation strategy is being viewed as one of the probable solutions to deal with the growers' acute financial crisis, aggravated by the five-year global crash in coffee bean prices from 1999.

Under the package, out of the 3.5 lakh hectare of plantation area, 80,000 hectare of coffee would require replantation, Rau said. "The board is targeting to cover 40,000 hectare by end of the 11th five-year plan. Rest of the replantation would be covered under the next five-year plan," he said.

Canara Bank, Vijaya Bank, Corporation Bank, State Bank of Mysore, State Bank of India, Central Bank of India, and Karnataka Bank have agreed to support a long-term financial package for re-plantation in the coffee industry.