Public sector lenders gear up to renew focus on tea sector

KOLKATA: Public sector lenders such as State Bank of India and United Bank of India are gearing up to renew their focus on the tea sector with states like Assam and West Bengal having allowed tea estates to use their idle land for tourism or cultivation of other crops to boost earnings amid falling tea prices.

Assam government has indicated that it would consider higher usage of unused land in tea estates on a case-to-case basis for business diversification. Earlier, it had restricted the use of idle land to just 5%. West Bengal too has decided to allow the tea garden owners to use up to 15% of the unused land within the tea estates for promoting tourism.

Bankers expect this move to boost earnings and reduce credit risk associated with tea plantations. Tea growers have long been facing stiff challenges in terms of better price realization, both in the domestic and global markets amid unabated rise in production cost.


"We look at this as a good opportunity to lend. We have advised our officers to consider loan applications for tea tourism with priority," United Bank of India managing director & chief executive officer Ashok Kumar Pradhan told ET. A senior SBI executive expressed a similar view.

UBI is contemplating providing additional loan limit to planters if they plan tourism in their gardens by taking advantage of the latest government rules.
However, neither UBI nor SBI have received any proposal so far.

“The promoters also need to put in money for tea tourism projects. Since prices of teas have remained stagnant or dipped, promoters do not have funds to invest in new ventures. Therefore, even though banks are willing to lend to these projects, most of the tea companies are not in a position to come forward and invest,” said Vivek Goenka, chairman, Indian Tea Association.

India has produced 1006.36 million kg of teas in the first nine months of 2019. Last year, the country had produced 1338.63 million kg of teas. Exports in the first nine months have dropped marginally to 182.52 million kg from 183.90 million kg in the same period last year.

Bank loans to the country's tea sector grew 7% year-on-year to Rs 5558 crore as on September 27 from Rs 5192 crore a year ago, according to the latest Reserve Bank of India data. Bank loans to this sector typically reaches its peak during November and March.