Tata Tea allots 5-per cent acreage for non-tea business
Business Standard — September 7, 2006

Tata Tea has earmarked 720 hectare or 5 per cent of its total acreage in North India Plantation Operations (NIPO) for non-tea revenue streams.

Percy Siganporia, managing director, Tata Tea, said that the total area would be 5 per cent, which the new company could develop in phases. NIPO comprises four estates in West Bengal and 20 in Assam.

Tata Tea has received approval from the Assam government for the alternative revenue streams and the West Bengal government had asked tea companies to table their proposals.

The model for the restructured NIPO was almost ready and the transaction was expected to be complete over the next 2 to 3 months.

Tata Tea would have less than majority in the new company. Siganporia said workers' participation would be there, but not to the extent of Kanan Devan Hills Plantation Company, given the valuations of the estates. He, however, did not comment on the partnership with another entity.

According to the company's annual review, yields of 30 million kg of own crop and 7.6 million kg of purchased crop were an all-time record for the plantations business in North India.

Siganporia said there would be multiple revenue sources and not just one crop. The NIPO model could be a hub-and-spoke one, where the sourcing could be at one place and the marketing at another, not necessarily the local wholesale market. This would, however, require some amount of logistics management as well.

He explained that the alternative revenue streams would be more profitable than those of tea. The pace for their growth was much higher.

Siganporia cited the example of Watawala Plantations, a Tata Tea joint venture company in Sri Lanka, where most of the profits came from non-tea revenue streams.

In the total acreage of Watawala Plantations spread over 12,442.13 hectare, 41 per cent is tea, 18 per cent rubber and 8 per cent under palm oil cultivation. Around 7 per cent is kept aside for the purpose of fuel wood.

When asked whether Tata Tea would exit Watawala Plantations as part of its strategy to reduce exposure in plantations, Siganporia replied, "Right now, we are in Watawala Plantations."

Tata Tea holds 49 per cent of Estate Management Services, which has a 52 per cent stake in Watawala Plantations. Watawala also has branded operations.