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Assam’s Luxmi Tea to develop 4,500 hectare plantation in Rwanda

LiveMint logoLiveMint 20-07-2017 Arkamoy Dutta Majumdar

In a first for an Indian company, Assam’s Luxmi Tea Co. Pvt. Ltd has concluded a deal with the government of Rwanda to develop around 4,500 hectares (ha) of tea plantation jointly with local growers.

Capping three years of negotiations, Luxmi Tea has secured 438ha under lease from the Rwandan government. The company will support local growers with know-how to cultivate 4,000ha more, and buy their crop paying a 44% share of revenue, director Rudra Chatterjee said in an interview.

Companies such as McLeod Russel India Ltd and Jay Shree Tea and Industries Ltd have invested in African countries such as Rwanda and Uganda, but they bought into existing plantations and expanded them. This is the first time an India company is developing a plantation from scratch.

Though a first for an Indian company anywhere in the world, this isn’t the first such project in Rwanda. A year ago, the Rwandan government struck a similar deal with consumer goods maker Unilever Plc. to develop two large plantations.

At the time of signing the deal in May last year, Unilever had said it would, over time, invest $40-50 million in the project, which would include a factory to process tea leaves. Luxmi Tea has budgeted for an investment of $25 million over eight years.

“This is a project for the long haul,” said Chatterjee. Production from Rwanda will be scaled up from 1 million kg to 8 million kg over 10-12 years, he added.

Like Unilever, Luxmi Tea, too, will set up a factory immediately.

Of the 4,500ha which is to be developed, around 400ha is currently under cultivation.

The UK’s funding agency Department for International Development (DFID) is also investing in the project. It is providing a grant of £6.8 million to help small growers develop their plantations, according to Chatterjee.

The project appears to have “tremendous potential” in view of the quality of the crop that Rwanda is known to produce, said Krishan Katyal, chairman and managing director of J. Thomas and Co. Pvt. Ltd, India’s largest tea broker and consultancy. Rwanda produces the CTC (crush, tear, curl) variant, which derives its name from the process of production. It sells at a premium over tea produced by other African countries, added Katyal.

The plantations to be managed by Luxmi Tea are at an elevation of 7,000ft, which means the company will not have to deal with pests. The yield is going to be similar to that in Assam at around 2,500kg per ha per annum, according to Chatterjee. When fully scaled up, the plantations are to employ up to 10,000 people, he added.

“The key challenge is to manage the plantation, which is our core strength,” he said.

Founded 105 years ago, Luxmi Tea currently has 18 estates and produces 15 million kg of tea. It has estates in Assam, Tripura and Darjeeling, where it bought the Makaibari tea estate.

“My father found the soil and climatic conditions in Rwanda extremely favourable,” said Chatterjee, referring to Dipankar Chatterjee, chairman of the group.

Rwanda’s soil is volcanic with high carbon content. It rains all year round, which means there is no need for irrigation.

“Also, production by volume does not fluctuate from month to month, and cup quality is consistent all year round,” said Chatterjee.

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