SBI Cap to draft proposal on tea replantation fund

SBI Capital Markets will make representations to the Planning Commission on the Rs 4,000-crore replantation special fund mooted for the tea industry.

C K Dhanuka, chairman Indian Tea Association (ITA) said, SBI Capital Markets has been entrusted with the task of formulating a proposal for the special fund and the company will make representations to the Planning Commission once it was ready.

SBI Capital was appointed by the United Planters' Association of Southern India (Upasi), Tea Board, banks and the Indian Tea Association.

The special fund was critical as the average age of the bushes was between 45-50 years and was not producing quality or quantity tea.

The commerce ministry and the Tea Board has been pressing the industry for improving quality of production, which would boost exports.

In fact, in a bid to increase exports, the industry has asked for special incentives for orthodox production as the world consumption pattern was changing in favour of orthodox.

The industry has also been asking for additional excise duty relief, which was announced by the finance minister in his budget speech.

However, no progress has been made on this front.

At present, out of a total production of around 800 million kg, only 80 million kg was orthodox.

Industry sources said the cost of production of orthodox was Rs 7-8 per kg higher than CTC and hence to increase orthodox production, the industry would require capital infusion.

While the world consumption pattern was changing, India remained a predominantly CTC market. India increased CTC production as Russia was consuming more CTC tea.

However, Russia's consumption pattern changed and orthodox tea became the preferred beverage option. This came as a big blow to Indian tea producers as bulk of Indian tea was imported by Russia.

Industry sources said tea producers would have to be induced to produce more orthodox tea and the distribution of the corpus created by the additional excise duty would bring some respite. Also, machines used for production of orthodox tea were in bad condition and funds would be required to get them working.

Industry sources said producers were hoping that the replantation fund would be sanctioned by the Planning Commission soon and the AED fund would also bring relief to the industry, which has been facing recession for around six years.