The global economic downturn has had a greater impact on the unorganised segment of the timber industry in Kolkata than is at first visible. The crisis has served to further highlight the differences in the way the organised and unorganised segments of the timber industry in the city function.
The industry’s two major problems are poor credit flow and the global bans on felling timber, which have created huge logistical pressure, especially on the unorganised segment.
Subrata Seel marketing executive at Rahul Plywood, a Kolkata-based enterprise with annual sales of Rs 50 lakh said, “The recession has provided excuses for dealers to delay payments, for as long as a year at times. We still have outstanding dues for almost 45 per cent of the products delivered last year.”
The unorganised sector’s problem has been magnified by the fact that most of the timber trade now works on imported teak and wood, payments for which have to be made upfront. Delayed payments over extended periods reduce profit margins, especially given the fact that most of these businesses work on bulk delivery-based profits rather than high margins.
Customers’ efforts to extract discounts after payments have been made are another bone of contention. “Many buyers ask for discounts after we have made payments, if they hear that others are willing to sell them the same product at a discounted rate. Since the industry is largely unorganised and we cannot afford to antagonise buyers, we accept the deal, since a refusal would often mean bad debts,” said Seel.
The situation for the bigger players is not as bad, given that they are able to make up for delays through higher trade margins and their exports are increasing. Their problems have a lot more to do with the availability of raw material, given the environmental policies of the local government and the protection of forests in the North-East.
Satyaprakash Pandey, proprietor of Prakash Plywood, one of the bigger players in the local market, said, “Credit and payment issues do not trouble us much. The problems we face have more to do with the availability of raw wood. Worsening situations at times mean that factories stay without work for days on end.”
Not everyone has a completely pessimistic view of the situation, though. At a recent press conference held in the city, Roshan Lal Agarwal, managing director of Mars Plywood, said, “The quality of imported timber is so high that we do not really feel the pinch of the higher cost or the added logistical costs.” Mars Plywood is one of India’s largest importers of timber, with an annual production capacity of 1,825,000 cu ft and an annual turnover of Rs 500 crore.
With a global ban on the felling of tropical timber, importers are relying on plantation of trees such as birch, beech, oak and pine to cater to the growing demand for wood furniture. Many cannot meet the stipulation that companies must plant as many trees as they cut. In the absence of viable alternatives for smaller businesses, and no real government aid in terms of policy initiatives, the industry is in dire straits.