It seems to be a classic case of resting on one's laurels. Not surprisingly, the famed plywood industry, situated on the banks of Yamuna, remains ill-equipped to tackle the emerging challenges. Cartelisation of inputs, lack of new technology, advent of multinational brands due to opening of economy and lack of marketing skills threatens to eventually derail this thriving industry.
One of the major challenges being faced by the plywood industry is the monopolisation of certain critical inputs for plywood manufacturing. Face veneer, which provides support and finishing to the plywood, is one such product. Prepared from gurgan and kuring woods imported from Burma and Malaysia, it is a monopoly item.
"The peeling of this imported wood is also done outside Haryana - at Vishakhapatnam in Andhra Pradesh, Gandhidham in Gujarat and Kolkata in West Bengal. This raises the cost of the plywood," says JK Bihani of Galaxy Plywood Industries.
Bihani says there is also cartelisation of urea formaldehyde resin, an adhesive used to bond core and face veneers in plywood manufacturing. "The annual requirement of urea formaldehyde resin for our plywood cluster is enormous and we have no facility to manufacture it in this cluster," he said.
Industry experts say that metal and glass pose the biggest challenge to the wood industry and the manufacturers are not tuned to this.
Consumers are now keen on using a range of different materials. Thus, wood manufacturers-merchants need to innovate quickly. The industry needs to understand and respond to changing requirements to exist and remain competitive.
Deepak Sharma, principal consultant at Chandigarh-based Access Consultancy Services who prepared a diagnostic study report (DSR) for the plywood cluster on behalf of the Haryana government, said consumers were now aware of the emerging trends, tastes and fashion prevalent throughout the world. Sharma said globalisation was posing a big challenge to exports of timber products from India. Consumers worldwide expect high-quality material on par with international standards, particularly with various certifications in place.
TL Satyaprakash, Haryana director of industries and commerce, said it had emerged during interaction with plywood entrepreneurs that to remain competitive in the domestic and international market, this cluster needed technology upgrade. He said quality of the products and manufacturing processes needed to be focused upon.
"Only a handful of manufacturers could introduce technological advancement in their production line. At present, there are no facilities in Yamunanagar to manufacture face veneer," he said. "But, considering the demand and the potential of this industry, I feel the market still remains largely untapped," he said.
Devender Chawla, president of the Haryana Plywood Manufacturing Association, said this industry generated direct and indirect employment in 70:30 ratio. "Therefore, it is imperative for us to adopt new technology to survive. And, the way to go is to make a collective effort to facilitate setting up of a government-backed common facility centre (CFC)," Chawla said.
The DSR says that there is lack of technical knowledge and trained technical hands in this industry. The industrialists in plywood trade are not professionally skilled entrepreneurs and lack professionalism. Besides, the quality marking centre at Jagadhri lacks testing facilities for the plywood sector. During a strength, weakness, opportunities and threat (SWOT) analysis, it emerged that low-end technology was being used by the manufacturers.
The machines in operation were very old, probably from the time of inception of these units. There was no local face veneer manufacturing unit and the products which were important to the value chain were either imported or procured from far-off places. This has resulted in increased costs. The analysis said that Yamunanagar plywood manufacturers were facing increasing competition from China and Vietnam as well as from alternative wood material such as rubber wood and compressed wood.
As per the DSR, a government-backed CFC will not only bring new technical knowhow but will also bring in a common branding solution for the local manufacturers known as "Yamunanagar Ply".
"The single brand will leverage us into a different league and also stabilise the price," said Vimal Chopra of Duna Plywood. The CFC also envisages providing urea formaldehyde resin manufacturing and high-density plywood pressing services to stakeholders. It will charge a nominal amount to meet operational expenses and build a corpus fund for future modernisation, upgrade and sustenance of the plant. The consortium members can utilise this CFC to make quality and value-added plywood and it will help increase their market potential and compete with manufacturers in Uttar Pradesh, Gujarat, Assam and West Bengal. Heavy-duty plywood press installed in the CFC can be utilised by the members to cater to bulk orders of heavy-density plywood. This CFC will ultimately help the plywood industry in Yamunanagar to increase productivity, improve quality, capacity utilisation, product diversification and marketing. Local manufacturer Devender Chawla says that the upgrade initiatives can't be taken up individually and required a collective effort.
"We are working towards building capacity of small manufacturers for a common supportive action through formation of CFCs. Our mandate is to diagnose the core problems of the plywood cluster and recommend workable solutions," said project consultant Deepak Sharma. Terming the region an important area for plywood manufacturing, he said: "The development of demanding and quality-orientated industries such as furniture manufacturing and interior decoration will ensure a steady and promising flow of business with other Asian countries."
* There are about 300 plywood units in twin cities of Yamunanagar and Jagadhari
* Majority of them are small enterprises
* These units manufacture plywood, ply board and door frames
* Annual turnover: R700 crore (approximately)
* Exports are almost negligible. Reason: lack of export education. Also, the nearest dry port is in Ludhiana. If a dry port is set up in Yamunanagar, veneer import will become cheaper and exports will be made easier
* Uttar Pradesh, Uttaranchal and Punjab are wood-producing states and the wood produced in these states plays a vital role in satisfying the requirement of the plywood industry of Yamunanagar
* Wood used for face veneer is, however, imported from Burma and Malaysia and peeling is done in Andhra Pradesh, West Bengal and Gujarat
* Value-added tax (VAT) on timber in Haryana is 12.5% as compared to 4% in some other states.