The Telegraph
Since 1st March, 1999
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Lease renewal charge stalls tea loans

Calcutta, Oct. 19: Banks are unwilling to finance tea companies that have failed to pay salami — money paid for renewal of garden leases — to the Bengal government.

Most of the tea estates in Bengal fail to pay the high salami that is calculated on per hectare of tea. The state government, in a recent order, has fixed the salami for new tea gardens, big or small, at Rs 15,000 per hectare.

Earlier, the new gardens were required to pay at the rate of 40 per cent of the market value for long-term settlement of government land.

The order, however, allows a rebate on the salami rate by 40 per cent only on lease transfer cases and a further rebate of 50 per cent for transfer of sick gardens for a specified period up to March 31, 2004.

“What is surprising is that tea gardens that were purchased a long time ago and are now coming up for renewal of lease after 30 years, are also being asked to pay up salami. Since most of the cases of lease renewal have come up now, the government is insisting on payment of salami, which the estates cannot afford. The government, in turn, is not renewing these leases,” tea industry officials said.

Due to the absence of a valid lease, the banks are refusing finance to the gardens at a time when the industry is passing through a crisis, they added.

“We know that the tea industry is one of the major industries in the state. We always treat their cases with care. But how can we provide finance when the promoter does not have a valid licence,” said a senior official of United Bank of India. UBI has one of the largest exposures in the tea estates.

Officials of Uco Bank and State Bank of India felt the same.

Bengal has the second-largest tea growing area in the country, spread well over 1 lakh hectares and producing about 200 million kg of tea annually. It has about 4 lakh people in its direct employment and sustains about four times this number.

The industry feels that salami imposes a heavy burden on the buyer of a garden as it is in addition to the purchase price, stamp duty and past liabilities to the creditors, banks and workers. It acts as a disincentive for sale and transfer of estates and takeover of weak units by well-managed units.

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