IPIRTI (Indian Plywood Industries Research & Training Institute) wrote a letter to IG Forest Survey & Utilization, MOEF & CC suggesting for Policy Support to Panel Industry (Plywood and Wood/Agroresidue based PB and MDF). The institute explained it in details for the need of change and requested that panel industries need to be supported in a big way, not only by promoting Agro-Forestry to ensure availability of their wood requirements on a sustainable basis, but also by restricting the wood products import and encouraging export and declaring wood panel industry as an agro based industry and panel products as Agro-produces. The letter stated that outbreak of COVID-19 Pandemic is a challenging issue for the country to maintain a balance of prevention of the spread of virus and economic sustainability. Panel industry in India is consisting mainly of plywood with about 80% of market share, and remaining about 20% constitute Particle Board (PB) and Medium Density Fibreboard (MDF) based on wood, agro-residues (e.g baggasse, cottonstalk) and other lignocellulosic materials e.g. bamboo.
IPIRTI DESCRIBED THE NEED OF CHANGE IN POLICY WITH FOLLOWING REASONS:
1 MSME Sector including panel industry which is the steering force of country's economy has been worst hit by the nationwide lockdown. It is uncertain how long this pandemic is going to prevail further. Apart from other sectors, it has also directly affected functioning of panel industry in the country.
2. Revival of this sector is of utmost importance in a manner that its acceleration is achieved at the soonest and accordingly, panel industry and relevant associations would like to seek Govt. support to revive the MSMEs engaged in the manufacturing of Plywood and other panel products.
3. Indian Plywood & Panel Industry, as on the date, consists of around 3,300 units (small, medium and large units) scattered all over the country mostly in the rural and backward area. Out of these 3,300 units, nearly 3,200 units are in the un-organized sector, and has a market share of nearly 80% of the total panel production in the country. Production in these industries is done mostly by employing/engaging work force from nearby area. These units provide direct employment to more than 1 Million people and almost equal number of people is employed indirectly, mainly in rural India.
4. Wood based panels: The supply chain of MSMEs in case of wood based panels begins with farmers and ends with the home and offices employing more than 2 million farmers throughout the country in Agroforestry and almost similar numbers in manufacturing and supply chain. Most of the wood panel industries in India is now based mainly on Plantation Timber, such as Poplar & Eucalyptus in North and Rubber Wood, Silver Oak & Melia Dubia in South. Agro-forestry and farm forestry have taken deep roots in the country. These Trees outside Forests (ToF) are contributing to the increase in country's tree cover and are enhancing ecosystem services, besides meeting bulk of the country's demand for wood. Promoting ToF for wood industry may also promote uses of secondary and lesser known species through processing including seasoning and preservation. Most importantly, agro-forestry is providing a steady and climate resilient income to the farmers. Thus promoting use of wood obtained from sustainably managed agro-forests and trees would play a significant role in mitigating climate change and ensuring sustainable living. It is worth pointing out here that, realizing the importance of agro-forestry, many states like Punjab, Haryana, Karnataka, Tamil Nadu, Andhra Pradesh, Gujarat , Uttar Pradesh & others have already initiated massive plantation program. More than 90 % of timber requirement of this wood-based industry is being met by Farmers, who have now taken up plantation of this short rotation timber species - Agro Forestry, on a large scale (FIPPI 2020).
5. Agro-residue panels: The new rural supply chain of MSME Agro-residue based manufacturing units have been established in India, in last 30 years. These fiber boards only use leftover agro-residue in farm, which otherwise is burnt in open fields causing enormous' pollution in Northern India. Most of the Industries procure material like Sugarcane Bagasse from Agrobased industries like Sugarcane factory or from farmers directly. In year 2019-20, over 3 million tons of agrofiber is converted into 1.2 million cubic meter of usable furniture in rural India. About 2 million trees are directly saved from cutting for furniture purposes. A turnover of about 1000 Crores is also reached by different manufacturing units located in Maharashtra, Gujarat, UP, MP, Telangana, Haryana etc (AIABA 2020).
6. These panel products are for mass consumption, used extensively in housing and furniture manufacturing, mostly catering to the lower/middle income segment of the society. This Industry therefore can play a major role in boosting the economy of farmers and reviving the employment generation in rural areas.
7. The share of Imports in Total Turnover is still quite high, more so in PB and MDF. This is because imported panel products are available at a cheaper price than locally manufactured PB and MDF. With increasing thrust on Agro-forestry & day by day increasing wood availability for manufacture of these products within the country and thereby is a good scope to substituting import into the country. However, this is possible only if their end products are competitively priced. While on one hand, imports need to be discouraged, on the other hand production needs to be encouraged, not only to meet increasing domestic demand, but also offer products in international markets of Europe and Middle East where China is dominating. We also need more testing systems in order to speed up testing services for various export requirements. Currently, all exporters send products to China and other countries for testing at very high costs. By the time test results are obtained, the business loses its trade inquiries. India is losing lot of orders due to testing and certification delays. Similarly, large number of machinery and process equipment are currently being imported into India for the industry needs. The panel industry sector needs encouragement and support for locally made machinery and technologies, similar to the works done by few Indian Entrepreneurs who have developed 100% indigenous machinery technologies with high precision, equivalent to and better in ease of operation than some imported Chinese and European machines. These machineries and process technologies may cater to specific Indian working requirements.
8. Therefore, there is a need to support these woodbased industries at this crucial stage through restrictions on import of wood based panel products. It can also be further noted in the table that the Imports are not able to compete against the Agro-residue based PB/MDF. A clear indication that these cost-effective materials can become a backbone of Indian Economy and also support the farmer if given importance and realize it's potential.
9. To save the industry from the impact of COVID-19 and revival of their economy it is requested that Govt. should encourage the demand and production of panel products, which in turn will increase the demand for agro-forestry wood & effective utilization of residues. While woodbased panel industry, shall encourage the entire chain — farmers involved in agro-forestry, workers employed in mfg. units, common man — who is the main consumer housing & furniture products, and the governments who can earn higher revenues on increased production, save foreign exchange due to reduction in imports, earn foreign exchange due to increase in exports. Everyone single person / entity in the chain benefits. Agro-residue panel Industry shall directly create value to Farmers, who are burning the agro-residue in open area and shall eliminate the air pollution and also double the income of traditional poor farmers, who are largely dependent on seasonal farming.
10. However, all this can be achieved only and only if the cost of these panel products to the end consumer, is somehow reduced, and without affecting any stakeholder in the chain. It is towards this objective, following suggestions may be considered: Wood based industry may be notified from present forest based sector to agro-forestry based industry so that products made are entitled to get the benefit and perks available at present to Agro based industry. Import of certain wood products such as furniture, plywood, MDF and particle board may be restricted/ banned to promote agro-forestry, increasing farmers' income and promote Make in India and Atma-nirbhar Bharat Abhiyan (Self-reliant India Mission). Give emphasize to promote export of panel products fulfilling the statutory obligation/ formalities to be completed in a least possible time, promoting indigenous machinery and technologies and facilitating testing services to ensure to meet the product quality at international level. Strengthening R&D and testing infrastructure including scientific workforce to develop more products and processes using various indigenous ligno-cellulosic materials for self-reliance of the country.
IWST (INDIAN WOOD SCIENCE TECHNOLOGY) ALSO GIVEN POLICY INPUT TO ISSUES RELATED TO WOOD BASED INDUSTRIES
1. Augmenting Raw Materials for the industries –
The industry needs to be supported in a big way, not only by promoting Agro-Forestry to ensure availability of their wood requirements on a sustainable basis, but also by relaxing/liberalizing the Licensing/Permits requirements for transportation and processing of Agro-Forestry Timber:
The concept of Agmark may be extended on products made from wood from the agriculture lands in India and wood imported from other country under any certified regime. Accordingly, Govt. consider removing the licensing of Wood based industries solely dependent on plantation wood like Eucalyptus, Poplar, Silver Oak, Rubber wood, Meliadubia etc and imported wood wherever in India. Most of such industries are in the nature of cottage and small industries. These convert the Plantation wood to raw-materials for Plywood industry.
The bureaucratic mind-set that the licensing helps check the illegal wood flow from natural and reserved forests is totally irrelevant for wood supply from agroforestry. Removal of licensing will result in more and more Veneer mills at the plantation centers and help improve the farmers income which is lost significantly in transport cost and limited demand results in low pricing for the wood given the fact that there is a big gap in demand and supply of wood and this imbalance is only increasing day by day
E-marketing platform like TimberCart should be developed on all India basis to augment raw materials for the industries. This will also facilitate timely auction of Wood from Government Depots, there is deterioration of timber value due to delay in auctioning timber from government forests.
2. Doubling Farmers income through supply of AgriWood produce from Agroforestry -
Declaring agro-forestry produce as Agro-based produce which enjoy all the tax benefits that is derived by agricultural produces
The concessional rate of Urea for the farmers may be extended to technical grade urea being used in plywood industries as Small and medium industries to reduce input cost so as to pass on the maximum benefits to farmers and compliance of low/zero emission of formaldehyde for general health of consumers and compliance with international standards.
However, the concept of minimum and maximum pricing for AgriWood should be invoked to facilitate level playing field for the farmers. There has been artificial crashing of prices of poplars and casurina species in the past. Government should consider setting up a Regulatory Authority, like Agricultural Prices Commission, comprising of renowned experts from forestry, agriculture, rural economics, administrators, representatives of state governments, wood based industries and farmers should be set up to deal with the issues related to minimum and maximum price for farm grown wood and transparent timber trade.
Government should review the current policy related to import of wood and wood based products and discourage import of pulpwood and veneers of such species that can be easily substituted by farm grown, poplars, eucalyptus, casuarina, Meliaspp; or other timber trees that our farmers normally grow. Specified species of durable hardwoods and conifers, that our farmers do not grow, can be permitted to be imported.
3. Import of Wood logs Vs Sawn Wood Products and Saw milling enterprises in India:
Logs dominate Indian imports, but the share of log imports has come down from 83 percent in 2007 to 48 percent in 2018. A favourable tariff structure has supported log imports, but the poor/ inadequate level of processing by domestic sawmills has prompted the Indian trade to import higher volumes of lumber versus logs in recent years. To encourage saw milling enterprises in India, the import duties on sawn timber or lumber and veneers may be increased from present 10% to 15% covering HS Code 4406 to 4409.
4. Import of Finished Wood Products:-
With the background provided in preceding paragraphs, it is important to levy higher import duty to make level playing field for our industrial wood products. Demand upto 25% will be generated by imposing higher import duty on items listed 4410 to 4421. Present rate of 10% custom duty should be increased to 25% to avoid dumping from other countries. It is pertinent to mention thatgenerating demand for such wood products will generate better market for wood from the farmers’ agricultural lands thereby helping in Make In India and Doubling Farmers Income scheme of the government, whereas foreign wood products are being sources from forests at the cost of the biodiversity conservation. Forests in India have been committed mainly for biodiversity conservation and local livelihoods.
5. Import of Paper Pulp and Paper products:-
Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard is being encouraged by imposing Custom Duty of 5% equivalent to that of wood logs, which is harming the interests of farmers who are ready to diversify their produce from the farms. This duty should be at least 15%, which will provide market for wood produce from the Agroforestry. Paper and paperboard; articles of paper pulp, of paper or of paperboard and Printed books, newspapers, pictures and other products of the printing industry; manuscripts, typescripts and plans can be under the bracket of 25% custom duty instead of 10% at present. All bamboo forests have been rendered unproductive because of lack of demand. Agroforestry of eucalyptus, casuarina, bamboos and such species at short rotation suits the requirement of farmers in getting renumeration at smaller intervals. This will boost income of farmers even in rain fed areas. Like Agarbatti bamboo sticks, augmentation of raw materials for pulp products from local farmers will not take much time.
6. Rationalization of GST and IGST to promote furniture industry: -
On two counts namely domestic market demand generation and application gradual value-added principle on wood products, GST should be rationalized. These products are from HS code 4401 to 4404 should be with 0% GST without any exception just like agricultural produce. This will support farmers’ cause in getting better price for wood from the agroforestry. Further items under HS code from 4406 to 4409 should be levied 5% GST as one step value additionas intermediary product at MSME such as Saw mills etc. Items with HS codes from 4410 to 4421 should be levied 12% GST. This will facilitate further value addition asWooden Furniture and modular furnishing, generating further employment under MSME sector and import of such furniture and lifestyle items will not be favorable.Thus, there is two pronged strategies, reducing GST on local manufactured furniture and increasing custom duty on imported furniture to augment wooden furniture and furnishing industry in India.
7. Seasoning and preservative treatment: -
Seasoning and preservative treatment of sawn timber, plywood and panel products including board, flooring and flush doors meant for use in buildings, residential houses and furniture making etc. should be made mandatory with due safeguards.
Modernization and expansion of capacity of existing factories and establishment of new wood based industries to manufacture high quality international standard products suitably treated to improve their longevity and durability exclusively from farm grown wood should be facilitated and incentivized.
Suitable regulations and standards should be laid down and institutional framework for quality marking and certification of such products should be put in place. These measures will prevent extensive damage caused to such untreated products by termites, wood borers and fungal pathogens and improve longevity, durability of wood products and their utility as long term carbon sinks. This will also prevent colossal losses suffered every year by the consumers and the nation and save our natural and planted forests indirectly
8. Import of Wood at ports and Plant Quarantine Condition
Arbitrary Phytosanitary requirement on Timber import should be rationalized. Several representations are pending without any outcome. There is a Schedule-III in P&Q Order 2003 which deals with prohibited timber. There are two schedules VI and VII permitting import under specified conditions. The sacrosanct condition is Methyl Bromide fumigation (MB) before export. Most Countries have banned it. There is a 5 times penalty on those who import timber with other fumigants approved in the country of export besides re-fumigation in India. Request is to allow any and all wood which is not on Schedule III by condition of MB fumigation in India without any penalty. Much good and competitive wood cannot be imported because of harsh conditions in P&Q Order 2003.
9. Export Promotion:-
Give emphasize to promote export of panel products fulfilling the statutory obligation/ formalities to be completed in a least possible time, promoting indigenous machinery and technologies and facilitating testing services to ensure to meet the product quality at international level. Strengthening R&D and testing infrastructure including Scientific workforce to develop more products and processes using various indigenous ligno-cellulosic materials for self-reliance of the country. Promote Make in India and Atma-nirbhar Bharat Abhiyan (Self-reliant India Mission).
10. Utilization of Agro/crop Residues for value Addition:-
The use of other renewable resources such as agricultural residues (wheat straw, rice straw, etc.) in the production of composite panels (i.e. particleboards, fiberboards) and paper products has recently been considered attractive both from the economical and environmental point of view. The use of straw can by this way help to protect the virgin forests in regions where there is a shortage of wood. In addition, great quantities of straw residues are available today where the burning of straw has been prohibited, and no proper (efficient) uses for these wastes have been found up to day. Special promotion as 0% GST and free inputs and establishment cost subsidies etc can be explored with a High-Powered Committee.