Uttar Pradesh New Plywood Factories; Hope Alive Or…

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The Uncertainty on new wood based industry licenses in Uttar Pradesh is looming in negative direction, because state forest department is unable to provide enough facts in NGT during last two hearing related to timber availability in state. But the question is that what would happen to the investment made after a duly completed process followed for inviting licenses, granting them through computerizes lottery draw system? There are many such questions arising in wood panel industry due to delaying license process because it has gone on hold presently as per court orders. Who is responsible for this confusion and the hundreds of crores of investment already made in land, sheds, equipment’s and machines in new factories and expansions? If denied, how will it impact the growth of wood panel and plywood industry in the state? How would the investors get their money back? How do machinery suppliers compensate the loss? How will government satisfy farmer’s interest? Who will winner or Who will be looser?

The Ply Reporter made efforts to dig some facts from the opinion of new investors, present producers, government officials, machinery suppliers etc on this burning topic of 2019...

In 2019 beginning, the landscape of wood panel industries in India, was set to change with new grant of licenses in Uttar Pradesh for wood panel industries that included Plywood plants, Particle board and MDF plants, Peeling units and Saw mills. Later the, counter attack and legal appeal against provided data on timber availability by the authorities was questioned and the decision on granted licenses is now pending in NGT, with case hearing on. So far, the stay on granted licenses persist, causing hundreds of crores of investment already made by various industries and investors. The next hearing is on 18th December for which more than 200 people are eagerly waiting.

Presently, there is court ‘STAY’ effective on new wood based industries license, by the order of NGT (National Green Tribunal) because in the petition UP Forest Department has been accused of mis-representing the quantity of wood available in the state. The next hearing that is scheduled on December 18, 2019 and forest department will put the compliance report second time under the guide lines of Supreme Court order.

After grant of new wood based industry License in UP in December 2018, New industries and License recipients made huge investments. Approximately 50 companies, had initiated setting up new factories with land buying, lot of money invested in civil work, advance paid for new machines, bank involvements, product planning, team hiring etc but after the NGT Stay, all this stopped. There are so many sides to this matter where a large chunk of old manufacturers favor the stay where as many old ones favors the new industries because they wanted to expand and grow. Foresters and farmers favor the arrival of industry because it will increase timber demand hence for more plantation and better price. The neighboring state manufacturing plant are more or less happy with NGT stay order on UP new license matter, because it makes them feel less crowded and more in demand hence better prospects for the existing industry where supply is already much higher than demand.

The plywood clusters in Yamuna Nagar, Sampla, Gandhidham and Punjab are certainly getting the advantage of ‘no new factories’ because there is ease on timber prices. The exhisiting Particle Board and MDF plants too are breathing a sigh of relief other wise 16 new PB, MDF licenses were granted that could have escalated the pressure on sales and margins which is already under stress. The pressure of finished supplies and escalating timber prices due to arrival of more factories, is certainly a truth which must have caused further disbalance in wood panel industry and trade, which is already battling the real estate weakness and ongoing slowdown scenario in the country.

The new license holders are hopeful that the decision will come in favor of UP forest department and the stay will be vacated on duly processed licenses though it will take a couple of more hearings. Investors are hopeful that the court proceedings will delay the projects but already granted licenses won’t be denied. On the other side, the wood panel industries group which is not in favour of the new licenses is ready with its arsenal that support the logic where timber estimated and shown is actually not correct and hence new units can not be granted to operate. It is actually now upon NGT, that in which light and perspective, they are seeing the case. If there is a Farmer angle coming in play, the government may hope to have a favorable order. Now everything depends upon, how advocates and legal experts are going to place their logic and who find stronger support, OLD ones who oppose the License or NEW ones who favour and want the license.

According to sources, A number of strong and leading players have appointed experts to oppose the License grant where as a small faction is standing to fight the case. If NGT may issue order against the whole process, then there will be maximum loss for investors, if they continue civil work and machine installation. There are a lot of factors as well including the existing players who do not want to have more competitors. The farmer’s expectation for better return on agro-forestry with industry boost in UP is for the time being looks remote. The jump in seedling and plantation will be an area that will indicate what is going to happen next.

According to industry opinion in Uttar Pradesh, there are nearly 60 new players who have started plant related work and have already spent a bigger amount. Some of them are now thinking of converting into different venture, some have stopped and many are still waiting. Let see what happened in the next hearing.

Opinion of some UP based industry players Mr. Sanjay Garg, Chairman, SRG Group:

Government’s fault is there, in the process of issuing license in UP, due to which the current situation has arisen in the state plywood industry. When NGT raised question on availability of wood, the state government is not able to give proper justification. We don’t see NGT getting convinced even on the third hearing on December 18th, 2019. I think, the date will extend for next two months because NGT is not able issue proper order on the wake of improper justification by the forest department.

Mr. Virendra Prakash Agarwal, President, Bareilly Plywood Manufacturing Association

The license was issued in December 2018 and the court stay was imposed in September 2019. In this period many of the licensewinners went ahead with their plans and invested huge. If the government is not able to convince NGT on Timber availability data, it means the data produced by agency is not authentic. On the basis of provisional license people have invested which is on stake at present.

Mr. Ashok Agarwal, President, UP Plywood Manufacturers Welfare Association

The government data given by the department is totally baseless. The industry consume volume of timber in a month has been presented for a year! The data presented was based on over 25 years’ old units and now the machines with efficient technology consume eight times more timber in same time. They were not properly prepared before issuing license, the current situation was inevitable. They should review the process and take further decision. The provisional license issued is clearly indicated that the license is ‘SUBJECT TO COURT JURISDICTION.’ Industry has invested in good faith of Government and the govt. must take care of them and compensate the losses after reviewing the matter. The forest department should take responsibility.

Mr. Ajay Sardana, General Secretary, UP Plywood Manufacturers Welfare Association

NGT asked for the report on timber availability with justification, but the government fails at many fronts on presenting logic in Court, due to which the industrial investors are in catch 22 situation. There is opinion that there is a clause that says ‘SUBJECT TO THE COURT DECISION’ as a terms and condition, but we would like to say if this was the situation, license should not have been issued before final decision of the court or without clearance of the tribunal. This clause indicates that stake holders have invested with their own risk not on government’s stake. NGT has asked to review the matter as per the norms denying the timber availability submitted by the forest department.

Mr. Rajendra Arora, Director,Ganga Veneers

We may hope, that even if veneer peeling and sawmill license are not allowed, some plywood press licenses may be continued as pasting press. I think, if license was provisional then investors should not have moved ahead. Probably few moved ahead, because they had second plan that if there is any trouble with new license they will purchase old. Those who have invested are mostly with the intention to start shuttering plywood production. Alternative to that the most of machines can also be used in laminate production. Many people are thinking that if the new license gets disturbed they will convert it to laminate production facility. The farmers are already in good condition as Poplar logs price in a year have increased to three times.

Chronology of development in new wood based industries licensing process in UP
June 2018: UP Govt invites online application for new wood based industries licenses in 8 categories such as 1) Saw Mill, 2) Veneer, 3) Plywood, 4) Veneer and Plywood, 5) Stand alone chipper, 6) MDF/HDF, 7) Particle Board, 8) MDF/HDF and Particle Board.
July 15, 2018: The last date of submission of application and govt received 15000 application
November 2018: After Scrutiny the Forest department found total 13433 application authentic
December 12, 2018: UP forest dept granted 815 licenses for wood units in different categories such as Saw Mills : 636, Veneer : 90, Veneer and Plywood (Veneer + Press) : 76, Particle Board : 05 and MDF/HDF + Particle Board : 08
May 2019: NGT’s asks UP government to submit the basis of issueing licenses
June 2019: UP forest department constituated a committee to prepare report
July 15, 2019: The committee submitted detail report to NGT
August 06, 2019: First Hearing at NGT. (NGT not satisfied, directed the state of UP to review)
October 01, 2019: Second Hearing (NGT directed UP Government to maintain the status quo)
October 23, 2019: NGT ask to submit the compliance report.
December 18, 2019: Next hearing on the matter at NGT

Mr. Ravi Nemani, Director, Nemani Group

As the plywood industry at present is suffering from different challenges and in this situation the lesser units open in coming time would be much better. Many of the new license winners are those who are old players. They somewhere adjusting the process and converting into different venture like adopting laminate industry or using the land as a godown. If the court proceeding continue for a year then the people who have already invested will not be able to establish their industry.

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