Waiting for sweetener

New Delhi, Aug. 23: The Tea Board has urged the government to float a special purpose vehicle for providing long-term loans at low rates of interest to the tea industry. It has also suggested that the World Bank and Asian Development Bank should be tapped for raising soft loans to revive the country’s tea gardens.

The thrust of the revival plan, submitted by the Tea Board to the commerce ministry recently, aims at launching a huge replantation drive as aging tea plants are not only affecting productivity but also leading to higher cost of production per hectare.

According to the commerce ministry, around 50 per cent of the tea bushes in the country can be categorised as “degraded”. This makes Indian tea gardens less competitive than those in Sri Lanka and Kenya which have emerged as strong rivals in the international market.

The plan envisages a total investment of Rs 3,673 crore for replanting and “rejuvenating” 1.69 lakh hectares of tea gardens in the country over the next 15 years.

The average cost of replanting has been worked out to Rs 2.5 lakh per hectare, while that for rejuvenation has been estimated at Rs 0.65 lakh per hectare.

The proposal recommends that the rate of subsidy for replanting should be increased in order to provide a better incentive for phasing out old plants. It also wants “a guarantee mechanism” in place to ensure that the money is channelised to field assets.

In recent years, the Indian tea industry has been suffering from low levels of investment. The approved annual plan outlay for the tea industry during 2004-05 is only Rs 70 crore. For the two-year period — 2002-03 and 2003-04 — funds to the tune of Rs 112.3 crore were disbursed to the tea industry, of which only Rs 44.6 crore was allocated for productivity development.

The Tea Board is also reported to have pointed out that there has been a continuous decline in tea prices over the years in the international market as supply has been growing at a faster pace than demand. The thrust of the revival plan, therefore, does not have to be on large volumes but on the quality of the produce.

Commerce minister Kamal Nath has indicated that capital subsidy for replantation in old tea gardens is also on the cards. But the government also expects promoters to come up with their contribution for the revival of tea gardens.

Experts are of the view that tea garden owners are also to blame. Poor garden management and excessive reliance on debt with negligible equity infusion has been identified as major causes for the decline of the India tea industry.

The Centre also wants state governments to tighten norms as small growers were not following the auction rules and the plantation labour act.

At present, 54 gardens are closed out of which 20 are in West Bengal, 17 in Kerala, 11 in Assam and 6 in Tripura. About 28,00 workers are affected due to the closure.