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Coffee Producers Ask Finance Minister to Restructure Unpaid Loans

Coffee producers have urged the Union finance minister Nirmala Sitharaman to restructure outstanding loans of Rs 5,000 crore, some of which have turned into non-performing assets (NPAs) and some are under stress, amid a financial crisis brewing in the sector.

Ayushi Raina
Union Finance Minister Nirmala Sitharaman
Union Finance Minister Nirmala Sitharaman

Coffee producers have urged the Union Finance Minister Nirmala Sitharaman to restructure outstanding loans of Rs.5000 crore, some of which have become non-performing assets (NPAs) and others are in distress, as the sector faces a financial crisis.

The sector has requested that crop loans be converted to term loans, that the repayment period be increased to seven years with a three-year moratorium, and that the interest rate on loans is reduced to three percent. At the moment, the loans have an interest rate of 10-12 percent.

"We recently had a meeting with the FM. "We have emphasized on the importance of loan restructuring for the coffee sector, as it would have a beneficial influence on its long-term viability," Jeffry Rebello, chairman of the United Planters' Association of South India said. “ It was recommended that banks be given the appropriate guidance to restructure all crop and development loans issued to coffee producers into a single term loan."

According to Rebello, the restructured loans may be similar to the earlier special coffee term loan scheme (SCTL), which was introduced in 2002 and was favourably received by all stakeholders in the coffee sector.

In the last three years, coffee producers' financials have suffered as a result of erratic weather conditions.

"We believe that the coffee business needs to be supported at lower interest rates in order to expand domestic output and improve global competitiveness," Rebello added.

Domestic coffee output for 2021-22 was estimated at 369,000 tonnes (post bloom estimations), a 35,000-tonne rise over the previous year.

Arabica and Robusta production are expected to increase by 93,000 and 257,000 tonnes, respectively, in 2021-22. According to estimates, Arabica production was 1,083,000 tonnes, up 29.3% year on year, while Robusta production was 2,607,000 tonnes, up 70.7 percent. However, considering the unpredictable weather conditions throughout the blossom, there might be a 10-15% production deficit.

In 2020-21, coffee exports decreased in quantity while increasing in value realisation and unit value.

The amount shipped fell by 159,000 tonnes to 3,107,000 tonnes, but the value realised climbed by Rs.252.72 crore to Rs 5,452.13 crore and the unit value realised increased by Rs.16.25 per kg.

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