Tea fund gains momentum as banks pitch in

KOLKATA | COIMBATORE: The replantation and rejuvenation of the country’s ageing tea bushes under the special purpose tea fund (SPTF) scheme has gathered momentum as a consortium of four banks led by Kolkata-based Uco Bank has come forward to help the tea industry. The replanting of ageing tea bushes is the need of the hour as the domestic consumption of tea is increasing at a rate of 3-3.5%.

Estates in north India (Assam and West Bengal) are more pro-active in availing SPTF. According to a senior Tea Board official, 1,686 tea estates have availed SPTF, of which 616 are from north India. The rest 85 estates are from south India. According to the SPTF scheme, 50% of funds will come as a loan from banks, 25% will be provided by the central government as subsidy, and the rest 25% will be borne by the borrowers.

G. Boriah, director (tea development) of Tea Board told ET: “Till date, `71.74 crore has been disbursed as subsidy while `28.80 crore has been disbursed as loan. Initially, there was some problem in getting loan from banks under SPTF. But we had a discussion with Indian Banks’ Association (IBA) and things were sorted out. Now the banks are showing interest to help the tea industry under the SPTF scheme.”

Interestingly, since the financial condition of the tea sector has improved in last two years, tea companies are taking much lower amount as loans. “Sometimes it is said that SPTF has not picked up the way as was expected. Actually in the last two years, the domestic demand for tea has picked up which has resulted in price rise. The tea companies were not keen to uproot tea bushes as this would have resulted in crop loss.

Prices of tea had recovered after a gap of almost 9 years and, therefore, the tea companies were not willing to lose this opportunity. However, the replantation and rejuvenation is gradually picking up. From Tea Board we are also organising roadshows to popularise the scheme,” Mr Boriah added.

However, SPTF take-off in southern tea estates has not been encouraging. The difficult terrain, labour shortage, and region specific issues like ban on earth moving equipment in Nilgiris and certain parts falling under the disputed areas of Nilgiris-Wayanad region are the major roadblocks to make full use of the special purpose fund. The target of 2.5% per annum could not be achieved in south India due to these factors.

Source: Economic Times

Rain, pests cause more than a storm in tea industry's cup

Heavy rain, coupled with pest attacks, pulled down the bottomline of the tea industry in the first quarter.

Financial performance of tea companies – bulk and branded – together showed revenues from tea increased three per cent to Rs 1,417.33 crore while operating profit dropped 38.51 per cent to Rs 151.94 crore. Margins on tea sales declined 40.28 per cent.

“Though the first quarter is not indicative for the industry, financial performance was affected due to crop loss,” Aditya Khaitan, managing director of the world’s largest bulk tea producer, McLeod Russel India, said.

The industry has seen substantial crop loss in North Bengal and Assam. Assam saw a production decline over two successive months—May and June—in 2010. While during May, the region witnessed a three million kg loss in crop against the corresponding period of last year, June has seen the maximum loss in crop in both Assam and West Bengal.

In the first quarter, average of North Bengal and Assam tea prices was at Rs 119.12 a kg, compared to Rs 129.18 a kg. In South India, however, crop was higher than the corresponding period, which translated to a steeper drop in prices. The average price of South Indian tea during April to June stood at Rs 66.36 as against Rs 86.23 a kg. Branded tea company, Tata Global Beverages, faced severe erosion in margins as the bulk tea market made a strong opening beginning of the season.

Even as the first quarter performance looks gloomy, prices are likely to increase in the coming months on crop loss.

Stagnant production in India, shortfall in production in the quality belt of Assam and carry forward shortage should lead to firmer prices in India, said an industry representative.

“The crop situation particularly in Upper Assam (concentrated in the Doom Dooma area) has again been severely affected with nearly all the major tea groups operating in that region namely Apeejay Tea, Assam Co, M K Shah Exports, McLeod Russel and Warren Tea reporting significantly lower production,” the Indian Tea Association (ITA) said.

According to ITA estimates, July showed a further decline of two million kg of crop for the association’s members. “Even though South India was higher, the overall production in India is likely to be lower than last year,” Khaitan said.

TEA TROUBLE
Company	Margins  on tea sales		Growth in %
			Tea revenue	Total revenue	Net profit
	Jun ‘09	Jun ‘10	Jun ‘10	Jun ‘10	Jun ‘10
Tata Global Beverages	16.06	9.24	4.15	7.75	LTP
Mcleod Russel	25.81	15.39	1.36	1.36	-39.54
Goodricke Group	18.37	13.62	2.95	3.14	-25.53
Jay Shree Tea	27.18	18.40	-10.98	23.18	-8.20
Warren Tea	21.9	14.52	16.99	16.99	-14.84
Harrisons Malayalam	16.84	-20.91	-17.74	10.90	PTL
Assam Company India	32.54	42.78	3.55	13.78	14.68
Bombay Burmah	19.5	22.18	0.52	16.12	44.57
Asian Tea	3.07	2.62	13.48	13.48	44.00
Rossell Tea	29.92	24.71	14.72	21.19	4.83
Total for industry	17.95	10.72	2.93	8.56	79.95
LTP; Loss to profit  PTL; profit to loss *

With only five months of tea production left with the tail-end of November and December, the industry expects the year to close with a shortfall of 40 million kg, which implies that pipeline shortage at the beginning of next season would be to the tune of 90 million kg.

Source: Business Standard