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IFC lends $10-m for United Riceland Basmati project

Fakir Chand in Bangalore

The International Financial Corporation has sanctioned a loan of $10-million to the Karnal-based United Riceland Ltd for setting up the hi-tech Basmati rice processing facility at Gurgaon in Haryana with a view to exporting its traditional variety to the European Union and the United States.

As the world's first rice company as well as India's only agro-business firm to have received such an investment from the World Bank-affiliate, Riceland's green-field project is being set up with at an estimated cost of Rs 120 crore (Rs 1.2-billion) with an installed capacity to process 160,000 tons of paddy annually to produce its brand of Basmati.

"The upcoming project, which will commence operations in 2003, will ease our capacity constraints in building sufficient stocks to export our flagship Basmati brands such as Resham, Pusa, Wandaful and Nazrana to Europe and the US markets, where we have lots of ethnic and non-Indian consumers," United Riceland director R S Seshadri told rediff.com in Bangalore on Tuesday.

Currently, the Rs 200-crore (Rs 2-billion) company exports about 80 per cent of its processed and only traditional variety of Basmati to a dozen countries in the European Union, with half of it to the UK alone, taking advantage of the special duty derogation on its branded products.

"Riceland is a direct beneficiary of the preferential treatment given to the Indian variety of Basmati under the World Trade Organisation, which enables our company to get a relief of euros 250 on every ton of Basmati we export to the EU countries. Our exports constitute around 45 per cent of India's total Basmati rice exports to the European Union.

"In fact, against many Indian companies and Indian varieties of Basmati, only two varieties of Pakistani rice are allowed to be exported to the EU as the latter produces either a hybrid or crossbreed Basmati," Seshadri claimed.

The 18-year-old company procures its entire paddy requirement from the mandis (market places) of Haryana and Punjab for processing them into high quality Basmati at its Karnal rice mill, which has an installed capacity of 120,000 tons per annum, and set up at an investment of Rs Rs 60 crore (Rs 600 million).

"With over 250,000 tons per annum combined capacity from next year, we will be expanding our presence in the domestic as well as international markets, including the Middle East and the Asia-Pacific region where increasing number of Indian migrants and traditional rice eaters will crave for such nutritious and aromatic Basmati variety," Seshadri stated.

Presently, Riceland has about 40 per cent market share in Gujarat and Maharashtra. Though the company's operations are located in north India, where the staple food of the people is mainly wheat, its Basmati brands vie for a considerable market share in the northern states of Punjab, Haryana, Uttar Pradesh and Himachal Pradesh with other national and regional brands.

"We are now targeting south India by launching our flagship brand Resham in Bangalore, which has a reputation of being the most cosmopolitan city in the country, with a large concentration of the Indian Diaspora," Seshadri affirmed, adding that the company would be entering the Tamil Nadu and Andhra Pradesh markets later this year.

To ensure high quality of Basmati in terms of nutrition and aroma, Riceland uses scientific methods such as sensory panel and a microbiological lab at Kurukshetra, in Haryana and a DNA identification facility at Gurgaon to certify the genetic purity of every grain.

"We market only traditional premium Basmati rice, which boasts of a grain length of 7mm under the Resham brand, and sell the broken grain under the Chamak brand, which is priced lower than the former."

To improve the Basmati paddy quality and better crop management, the company spends Rs 300,000 annually on agricultural extension services through its farmers' advisory program to educate and train farmers in the heart of India's Basmati-growing belt, which is Haryana, Punjab, and Uttar Pradesh.

"We have also set up a Rice Research Development Centre at Mysore in Karnataka to innovate and develop new varieties of Basmati rice. For over a decade, we have hired the Indian Remote Sensing IB satellite for mapping cropped area under Basmati," Seshadri disclosed.

Being a closely-held company, its promoters have not disclosed its source of funding and the net revenues. For its up-coming project, the company is infusing the required capital from its internal accruals.

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