BREWING POINT

Calcutta, Nov. 7: The Indian Banks? Association (IBA) is considering a plan to link the proposed special purpose tea fund to the price recovered by the producers at auctions.

The move is being seen as a way to ensure guaranteed returns for banks lending to tea firms through the fund.

?Non-performing assets in the tea industry are on the rise. Over the years, exposure to these firms has led to the creation of sub-standard assets. We can lend to them only if there are assured returns,? bankers said.

Indian Tea Association chairman P.T. Siganporia said linking auctions prices to the recovery of funds is one of the options that is being considered. ?We have to find out which one is the best for the industry at large,? he added.

The special fund will be created in January, as announced by commerce minister Kamal Nath at the 40th annual general meeting of the Tea Association of India in the city 10 days back. The initial corpus will be Rs 400 crore.

Senior officials in the tea business said some producers have a guaranteed pay-back arrangement with banks. ?They hypothecate crops against loans given to them. Money from the sale of the crop is deposited with the bank. ?A similar arrangement is possible with banks for accessing the special purpose tea fund,? they added.

Some of the banks that have lent heavily to the tea industry are United Bank of India, Uco Bank, State Bank of India, Allahabad Bank and ICICI Bank.

The special purpose fund has been mooted to revive the industry through a massive programme of rejuvenation and replantation of tea bushes.

As a medium and long-term measure, a dramatic increase in the rate of replantation and rejuvenation could make the tea industry more competitive. This will be done in a phased manner.

Over two lakh hectares, which fall in the vulnerable category of low-yielding areas, would be used for rejuvenation.

The tea industry in the country has been going through a crisis for the past several years due to a lingering slump in prices in the domestic and international markets. This situation has been compounded by the rising cost of production, low productivity due to ageing tea bushes and sluggish growth in domestic demand.

Jalpaiguri centre

The Jalpaiguri tea auction centre ? the third centre in Bengal ? has become functional. Brokers said a small amount of tea is going to the auction centre from Siliguri. ?We do not see huge sales taking place at Jalpaiguri at this moment of time. Siliguri will remain as the major auction centre for some time now,? they added.

North Bengal produces 200 million kg of tea every year, and 50 per cent of that comes from the Dooars area.