Darjeeling, May 5,TT: The Union finance ministry has cleared two foreign direct investment proposals from the Darjeeling tea industry, the first FDI approval since 1974 for the branded brew sector in the hills.
“Such investments had stopped after the introduction of Foreign Exchange Regulation Act (Fera) in 1974, which stated that foreign companies making profit in India cannot remit their profits out of the country,” said an industry insider.
The applications of M/s Darjeeling Organic Tea Estates Pvt Ltd and M/s Jay Shree Tea & Industries Ltd, Kolkata are among the 21 FDI proposals approved by the Centre recently.
In the early nineties, the FDI cap in tea gardens was raised to 74 per cent from 49. But even at that time, under FERA, profits could not be remitted out of the country. As a result, no company showed any interest in investing in tea gardens.
In 2002, the FDI for the industry with its ailing tea gardens was relaxed to 100 per cent. A stipulation, however, said the 100 per cent FDI had to be rolled back to 74 per cent in five years. Also, from then on, foreign companies were allowed to proportionally remit the profits back to their countries.
This led to renewed interest in investing in tea, especially in Darjeeling where gardens were making profits.
“Way back in 1974, several acts like the Fera and Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, were passed. Hence, (foreign) investment was almost negligible at that time,” said D.P. Maheshwari, the managing director of Jay Shree Tea and Industries.
A statement issued by the ministry of finance said that while 21 FDI proposals amounting to Rs 1027.20 crore were cleared on May 3, 17 applications have been deferred, nine rejected and one withdrawn from the agenda.
“Based on the recommendations of the Foreign Investment Promotion Board (FIPB) in its meeting held on April 20, 2011, the government has approved 21 proposals of Foreign Direct Investment amounting to Rs 1027.20 crore approximately,” the ministry’s statement reads.
About the particulars of the application submitted by the Darjeeling Organic Tea Estates, the ministry said the proposal was for “induction of foreign equity and foreign collaborator to carry out the business of production, distribution and export of tea”. This means FDI will be for production of tea as well as for its distribution and export.
A representative of the company confirmed the ministry’s approval. “We are looking forward to an FDI inflow of Rs 93.37 crore. It is basically for value-addition in packaging of products and even though we cannot reveal the details, the tie-up is with a European company,” the representative told The Telegraph over the phone from Calcutta.
Such tie-ups will help the industry market its world famous products more effectively, an industry insider said. The average price of Darjeeling tea is Rs 500 per kg in the domestic market but it may reach as high as Rs 5,000 per kg for the first flush. The first flush, the plucking for which starts from February-end and continues till mid-April, commands the highest price in the global market.
“But consumers these days are also swayed by marketing strategies, which includes packaging. Cutting-edge technology could come to the industry. We are hopeful that there will be many such tie-ups once foreign companies take a cue from the two clearances. The GDP growth rate and the population of India has already made this country an attractive investment market.” The FDI in Darjeeling Organic Tea Estates is expected to benefit at least 10 gardens in the hills.
Jay Shree Tea, which has five gardens in the Darjeeling hills, is expecting an FDI of Rs 60 crore. It is, however, not clear how much would be pumped into the gardens, as its proposal includes “the business of tea plantation and manufacture of tea, fertiliser and sugar”.
Even though Darjeeling tea — only 87 gardens can use the brand name — by itself is a world-famous brand, companies had in the past gone in for value addition to make their product more attractive.
As early as in 2006, Gopadhara tea garden had started manufacturing “designer tea”. Such products included the handcrafted Olympic Flame — tea leaves resembling an Olympic torch — and the Dragon Pearl brew. When put in hot water, the tea opened up into two leaves and a bud.
Dragon Pearl Tea is intricately finger-rolled and comes with a jasmine and mint flavour.
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