High Prices of Raw Materials in the Plywood Industry is the Biggest Pain - Mr Sameer Garg, Managing Director, Srg (Sumitra Rajkripal Group)

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Of late, many industries have been doing their best to cope despite price hikes and it is safe to say that the plywood industry is no exception to this concern. The trade industry has reacted differently to this problem and it has caused quite a bit of unrest among the traders.

Regarding this evident price hike, let us take a deeper dive into the reasons that have dampened the growth of the plywood industry, in conversation with Mr Sameer Garg, Managing Director, SRG (Sumitra Rajkripal Group) who is expanding its international spoor rapidly with its presence in more than 10 provinces in the present day.

Going forward, Sumitra Rajkripal group plans to maintain its trustworthiness and increase its value-driven business operations in the Asian subcontinent and arise as a leader in its fragment. The Brand name is popular and well established in the market as “SRG Ply and Boards”. The strong dealers/distributors network it has is unmatchable

How do you see plywood industry in India?

India is one of the major wood-users not only in the AsiaPacific region but worldwide. During 2011-2018, the plywood industry grew by an average of 4.76% annually, according to Juan Pablo Quiñónez Montiel, 2016, “Analysis of India’s plywood market -Opportunities for foreign and Finnish companies.” But since wood is a raw material, its availability poses an obstacle to the working of the plywood industry. Compared to other nations, the import of plywood is not as high if not insignificant. But, when it comes to production, India’s levels beat that of other countries such as Brazil, Canada and Finland. About 90% of production is commercialized among Indian endusers - this is why it is primarily manufactured in large quantities locally. With all these aspects in mind, India’s plywood industry holds great potential when it comes to enhancing exports in international markets.

What are the challenges, the industry is facing post covid-19?

Covid-19, the pandemic has brought uncountable repercussions to a plethora of industries all around the world. Every seller had to encounter acute hardships and challenges during the pandemic (particularly in the second wave). The widespread outbreak also led to extensive shortages and an unexpected increase in the price of raw materials which are required for the functioning of the industry.

 

The probability of the incoming third wave has also generated massive amounts of uncertainty. This has posed a doubt in the minds of many. Manufacturers and importers lack strategies and many are still unsure of methods they can undertake to bring their businesses back on track.

The influence of COVID-19 was strongly felt in logistics as it largely affected imports and export. There was a massive shortage of materials being imported. If imports did happen to take place, it was at a comparatively higher cost.

How do you see the change, internationally vs locally?

International levels: On an international level, there has been an increase in the prices of freight and transportation. Manufacturers are looking for newer opportunities to source raw materials and core chemicals such as Melamine, Phenol and Formaldehyde at a competitive price. In fact, this single factor alone is creating a ripple effect on the overall increase in the price of plywood products. Manufacturers are now compelled to increase the prices at which they sell their products. This in turn becomes a huge dilemma as people are not willing to purchase high-priced goods.

 

National levels: In light of the decrease in international levels of imports, the government has stepped in to bring relief to companies. Plywood companies have tried catering to the needs and demands of every plywood business and have worked to make amends for the damages caused by the pandemic. But considering the vast size of the plywood industry, the loss is yet to be recovered. There is still hope owing to the intervention of domestic manufacturers that are speeding up the recovery process. Even as prices are yet to be stabilised, the near future holds promise for the plywood industry.

What are the solutions to overcome present challenges?

The plywood industry has entered into a cut throat competition and for the market to exhibit moderate growth; certain changes are now more than necessary. For the industry to sustain, its first needs are to be stabilized which can be done by maintaining the optimum difference between the cost prices and selling prices.

Compared to other nations, the import of plywood is not as high if not insignificant. But, when it comes to production, India’s levels beat that of other countries such as Brazil, Canada and Finland. About 90% of production is commercialized among Indian end-users - this is why it is primarily manufactured in large quantities locally.

Government assistance can take place through the following.

While the GST rate currently stands at 18%, it would be beneficial if the government could reduce the GST rate to 12%.

The face, which is the outer layer of plywood, simply acts as an aesthetic value. This is a part of the ISI standards which is an additional expenditure on the part of manufacturers and is then passed on to the final consumers. Hence, this mandate should be done away with, similar to the system followed by international markets.

The ISI standards used in the plywood industry have been a part of the industry for years now and are not in tune with current times. It would benefit the plywood industry greatly if these standards could be reviewed and updated according to the status of the current market so that it meets the requirements of today.

The plywood industry consists of a large number of big and small manufacturers, most of which are not channelized or associated. If these manufacturers are associated, then it can operate in a channelized pattern which would lead to better output, healthy competition between the manufacturers and provide overall benefits to the end consumer.

Sustainability is everything in today’s market. However, manufacturers are finding themselves in unfavourable positions since they are not being able to recover their cost price, let alone margins. With added government intervention and more focus on the plywood industry, this sector is sure to flourish and continue its role as an essential part of the economy.

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