BANGALORE: The Union Government proposes to set up a Special Purpose Coffee Fund for re-plantation in the coffee industry on the lines of the Special Purpose Tea Fund, Union Minister of State for Commerce Jairam Ramesh said here on Friday.

Initial estimates worked out by the Coffee Board indicate that the proposed fund will require a corpus of about Rs. 600 crore spread over 15 years for re-plantation.

The Minister said about 90,000 hectares would have to be re-planted over the next five years, out of which about 65,000 hectares were in Karnataka, while the balance were in Kerala and Tamil Nadu.

"The single most important reason why the Indian plantation industry is not globally competitive is because of the age of plantations. Indian plantations are old. We cannot compete with Sri Lanka and Vietnam unless we embark on a massive re-plantation programme", he told reporters here after a meeting with bankers to discuss the financial health of the coffee industry and on ways to improve the financial condition of coffee growers.

The details of the proposed fund, to be worked out by the end of July, would be submitted to the Finance Minister, the National Bank for Agriculture and Rural Development (NABARD) and other banks and finally to the Union Cabinet for approval. "We hope to launch the fund by the beginning of 2007,'' he said. adding that three special purpose re-plantation funds would become operational by the beginning of 2007.

These include a Rs. 300-crore fund for pepper for re-planting about 60,000 hectares and another for rubber for re-planting about 50,000 hecatres over the next five years.

Mr. Ramesh said that banks including Canara Bank, Vijaya Bank, Corporation Bank, State Bank of Mysore, State Bank of India, Central Bank of India and Karnataka Bank, have also agreed to support a long term financial package for re-plantation in the coffee industry, the details of which would be worked out by the Coffee Board.

With the first instalment on repayment of loans taken under the Special Coffee Term Loan (SCTL) that was introduced in 2002 falling due on July 1, there was a fear among bankers and growers that unless immediate steps were taken, the loans would become NPAs. "The Coffee Board will approach the Reserve Bank of India for some flexibility in declaring NPAs,'' the Minister said.

The combined exposure of all banks to the coffee industry now stood at Rs. 1,200 crore, which was roughly equivalent to one year's export earnings of the coffee industry.

The banks had also agreed to constitute a Task Force that would deliberate and arrive at an agreed relief package in 30 days for re-scheduling of debt for about 40,000 coffee growers.

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