Tea industry leaders welcome reliefs

Additional excise duty abolished, special fund created for replantation.

The tea industry, which had been passing through a crisis for the past few years, welcomed the reliefs in the finance minister's budget proposals, in the form of abolition of the additional excise duty (AED) and a special purpose fund for replantation and rejuvenation.

AED had been eating into the bottomline of the industry and mopping up around Rs 80 crore per annum.

C K Dhanuka, chairman of Indian Tea Association (ITA), said the proposals were in the right direction and the abolition of AED was a recommendation put forward by ITA.

The industry was expecting the commerce and industry ministry to announce schemes to disburse the amount that has been collected as AED over the last two years.

The finance minister also announced a massive replantation and rejuvenation scheme for the tea industry.

Dhanuka pointed out that ITA had already submitted a proposal for a replantation and rejuvenation fund with a corpus of Rs 4,000 crore, for implementation in association with the Indian Banks Association (IBA) and Nabard.

Aditya Khaitan, managing director of McLeod Russel, said the special purpose fund has come as a lifeline for the industry, as 65-70 per cent of the cost of production was fixed and the only way to improve margins was by increasing yield.

Khaitan said the abolition of the AED was a step in the right direction as it collected a very small amount for the government but had impacted tea industry bottomlines.

Percy Siganporia, managing director of Tata Tea, said, the direction to the ministry of agriculture to work out a roadmap for agricultural diversification into fruits, flowers, dairy and fishery would help in supplementing and increasing the returns from tea plantation land.

Further, agricultural diversification along with credit availability through self help groups, NGOs, micro financial institutions would help provide a source of alternate income to the tea workers thereby reducing corporate social cost burden.

Suresh Bansal, president of Tea Association of India (TAI), welcomed the special purpose fund but warned that the tax on withdrawal of more than Rs 10,000 per day in cash would create difficulties in matters of labour wage and bonus disbursements, as such payments in plantations were always much in excess of Rs 10,000 and had to be made in cash.

As most of companies would be carrying forward losses, the reduction in corporate tax to 30 per cent was also welcome, he added.

The government appeared to have accepted the industry view that the price stabilisation fund had been ineffective and had decided to set up a committee to suggest improvements to the fund's operations.