June 25 :    June 25:  The Union Cabinet today allowed 100 per cent foreign direct investment (FDI) in tea plantations, raising a cup of cheer for the ailing tea industry. The proposal was cleared with the rider that the foreign company would have to divest a 26 per cent stake within five years to an Indian company or to the Indian public. Announcing today's Cabinet decision, Union minister for communications, information technology and parliamentary affairs, Pramod Mahajan, said in case of any change in the pattern of land use, prior approval would have to be taken from the state governments concerned. The Consultative Committee on Plantation Association had suggested that a foreign stake should be restricted to 74 per cent, while the United Planters' Association of South India had said it could be considered up to 100 per cent. Officials said regions like Assam, Bengal and other states in the north-east could see a surge in investment in tea plantations as a result of the government's decision. With stiff global competition in the foreign market, which is likely to hit the domestic markets as well, it is important that investment in this sector should be encouraged, officials said. The world-wide slowdown gripping the tea industry has affected Indian tea prices and exports as well. India is one of the major tea producing countries in the world and accounts for 27.7 per cent of the global tea production, with a total area under cultivation of over 5,00,000 hectares. Indian tea is exported to more than 80 countries and accounts for 15 per cent of the global tea trade. Mixed response The decision comes at a time when the chips are down and fresh investments may not deliver justifiable returns, experts feel. 'The return on investment does not justify further infusion of funds at this point. Unless tea prices firm up and profit margins improve, there won't be many overseas companies investing in the tea industry in India,' said S. K. Mitra, chairman and managing director, George Williamson (Assam). Though a number of UK-based companies had earlier expressed willingness to increase their stake in their Indian operations to 100 per cent, it is unlikely that they will buy out the shares held by retail and institutional shareholders. However, Hindustan Lever Ltd and Tata Tea Ltd (TTL) today welcomed the government's decision to allow 100 per cent FDI in tea, including plantation. 'The tea plantation sector requires major investments in terms of replanting and tea processing facilities,' an HLL release said. TTL managing director Homi Khusrokhan said: 'We think it is a sensible move on the part of the government and will provide an attractive exit option to some players who have been adversely affected by the difficult conditions.'