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Market Scene : A Field of Dreams on Tree Plantation : More than 100,000 Indians are investing in teak saplings, hoping to reap a harvest of money in 20 years.


VEERANVANALLUR, India — Five or six at a time, they come out here on Saturdays to look at their dreams taking root in the loamy soil 50 miles inland from the southern tip of India.

In 20 years, if the promoters are right, the $41 that these Indian investors have plunked down for a pencil-thin teak cutting will have grown into an adult tree whose durable, easily workable wood will be worth the projected rupee equivalent of $2,000.

The 168 acres planted in teak by Sterling Tree Magnum (India) Ltd. ("Where Mother Nature Helps Money Grow") lie west of Tirunelveli, a bustling market town where St. Francis Xavier settled in the 16th Century. Here the heat and abundant rainfall can make afternoons feel like a YMCA steam bath, and that's what this venture is banking on--the right weather in the right place for teak.

The plantation in the foothills of the ragged Western Ghats range, which runs parallel to the west coast, has been under cultivation for only two years, but many of the teak saplings are already 10 feet tall or more. Their dinner-plate-size, light-green leaves tremble in the faint afternoon breeze as gangs of youths chop away with broad-bladed hoes at weeds that have grown around their roots.

One hundred and fifty families, some of whom are paid wages of only 50 cents a day, minister to the trees.


The Madras-based operator of the tree farm is one of more than a score of companies offering investors a choice of young mango, coconut, cashew, eucalyptus, banana or teak trees that it says will bear financial fruit.

"As a small investment, it's quite OK," judges Soma Sekher, a correspondent for the Madras-based daily newspaper the Hindu. "If the area is not prone to natural disaster or pest problems, in 20 years you should get a handsome return on a small investment of 2,000 rupees ($64) or so."

Sekher cautions, however, that the monoculture tree plantations could wreak environmental damage, which is not a No. 1 topic among investors.

In the rapidly changing conditions of India's economy, people listen to the idea of a tree farm as a condominium with multiple owners with extreme interest. More than 100,000 have already signed up with Sterling Tree to accumulate a nest egg, to plan for retirement, to finance the marriage of their offspring or to pay for some other personal craving, executives of the company say.

That may only be the beginning. By the time the 21st Century begins, Sterling Tree's objective is to have 25 million trees planted on 20,000 acres in sites from the state of Tamil Nadu north to Madhya Pradesh in central India, Orissa on the Bay of Bengal and Maharashtra on the Arabian Sea.

Sterling Tree's genesis was the vast discrepancy between India's demand for wood and the domestic output. Teak is the country's most important and valuable tree, but the company's research found that India buys about $615-million worth of lumber abroad annually, about 60% of which is teak.

"Why should we import an item that can be grown in our own back yard?" asks Sterling Tree President Gopal Rajan, aptly nicknamed "Go-Go."

And India's appetite for wood will only increase, according to an estimate by the National Commission for Agriculture. By the year 2000, India's requirements for industrial wood products are expected to reach 2.2 billion cubic feet against a domestic yield now of 1.2 billion cubic feet.

Teak can take up to 60 years to grow to commercial height and girth in the wild, but Sterling Tree's foresters believe that with the use of intensive agricultural practices, they can pare the time down to 20 years.

Teak's moderately hard, very durable wood is excellent for shipbuilding and is used for bridges, buildings, piles, cabinetwork, beams, poles, railway carriages, decorative paneling and carvings. It is easy to season, to work and to saw.

That's why some investors have plunked down their money. In 20 years, they do not expect a cash return, just the 37 1/2 cubic feet of teak that is the guaranteed yield of their tree. The lumber will then be fashioned into their dream home or some other construction project.

In fact, scrutiny of the sales spiel shows the crop of commercial quality wood is the only return that Sterling is guaranteeing, meaning an investment in "Teakquity" may not be for everyone.

"We are not making any financial promises," Rajan stresses.

Sterling Tree believes that the 37 1/2 cubic feet of wood will be worth 62,000 rupees (just over $2,000 today) when it is cut. But that projection is based on a 6% annual increase in the price of teak. The company contends that rate is conservative.

In its first two years of operation, the Veeranvanallur plantation has already survived a caterpillar infestation and waterlogged tree roots, a problem to which teak, or tectona grandis, is especially sensitive as a species.

"There is a danger of drought too, but that will just retard the growth of the trees," retired Indian Forest Service Officer Subramaniam Sivasailam, now a Sterling consultant, says as he escorts a visitor around the plantation's rutted unpaved roads.

Sterling Tree and similar ventures are promoting themselves as a way for Indians to make their country greener and themselves richer, but Sekher and other doubters are not so sure.

"You might make money, but you will have lots of problems with degradation of the land," the correspondent for the Hindu maintains. "It's a question whether there will be anything that can grow there later. They haven't yet convincingly explained that there won't be environmental costs."

"The Cassandras might carp about the ethics of commercial agro-forestry," Sterling Tree shot back in one of its promotional brochures, "but the fact of the matter is that the greening of India is being done with action plans like this."

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