Tummala Ranga Rao, vice-president, South Indian Floriculture Association, told The Financial Express Tuesday that the commerce ministry has already forwarded the proposal to the finance ministry and a decision is likely after the general elections in September.

Rao said the industry's demand for converting 50 per cent of their advances to equity is also under consideration by lending institutions. Several financial institutions and banks like IDBI, ICCI, State Bank of Hyderabad and Canara Bank have large exposure in floriculture loans.

The institutional assets, including banks in the region are estimated to be about Rs 200 crore. The demand for 50 per cent conversion of loans to equity is mainly because of the high interest burden, claim floriculturists.

``And this is difficult to service as the loans weretaken when the interest rates were high,'' Tummala said.

The size of a floriculture unit in the country is around four hectares and bank advance per unit average Rs five crore.

Ranga Rao said the initial euphoria over the good prospects of the floriculture industry could not be achieved as the units were depending on foreign consultants. Also, the industry was at the mercy of foreign airlines for transporting flowers overseas. In this regard, Rao was critical of Air India, which prefers other cargoes as freight realisations from transporting flowers are lower.

The foreign airlines tend to hike freight rates during the peak demand season for flowers abroad, Ranga Rao said.

The freight subsidy provided by Agriculture Processing and Export Development Authority (APEDA), was not of much avail as there was lot of red tapeism involved in processing claims for freight subsidy. The industry was in favour of processing of such claims at the local level, he said.

Currently, APEDA provides freight subsidyof Rs 10 per kilo of export to destinations within South East Asia and Gulf region, and Rs 25 per kilo on exports to destinations beyond these regions.

Ranga Rao said if these problems were sorted out, the floriculture industry could sustain a 20-per cent growth annually. During the last fiscal, the industry earned foreign exchange worth Rs 100 crore. During 1999-2000, the industry is hopeful of earning Rs 150 crore, Ranga Rao said.