SUGGESTIONS AND CONCLUSION - Shodhgangashodhganga.inflibnet.ac.in/bitstream/10603/22505/17/17_chapter7.pdf · witnessed large scale ancillarisation and cross entry than in ... scale

Chapter 7

SUGGESTIONS AND CONCLUSION

Contents

7.1 Focus of the Study 7.2 Major Findings

7.2.1 Various Actors 7.2.2 Relative Contribution 7.2.3 Performance of the Industry 7.2.4 Linkages, Governance and Upgrading 7.2.5 The Major Problems

7.3 Contributions of the Study

7.3.1 Hypotheses Tested and Modified 7.3.2 Comparison with other studies 7.3.3 Other Contributions 7.3.4 Future Research Issues

7.4 Implications

7.4.1 Theoretical Implications 7.4.2 Policy Orientation

7.5 Suggestions

7.6 Conclusion

Suggestions and Conclusion

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SUGGESTIONS AND CONCLUSION

Development, propelled largely by the construction sector, has

increased the demand for timber. Owing to a number of hurdles in using

traditional sources of timber as an input, rubber wood has become an

alternative renewable source. Though rubber wood industry is a ‘sunrise

industry’ in the Kerala industrial context, its performance is a great relief in

the midst of the poor industrial development of the state. The potential

growth of the rubber wood industry however is not explored properly. The

extent to which its potential growth can be explored in the background of

actual dynamism of the various actors is a crucial question to be addressed.

This study is an attempt towards this end.

7.1. Focus of the Study

The present study on rubber wood industry has been carried out in

the value chain framework. Value chain describes the full range of

activities which are required to bring a product or service from conception

through different phases of production, delivery to final consumers, and

final disposition after use (Kaplinsky, 2001). The value chain analysis

would enable the adoption of adequate measures for realizing the full

potential of the rubber wood industry. The institutional policies and

strategies of actors may affect the distribution of income and

competitiveness of the actors in the chain.


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The main objectives of the study are to identify the various actors in

the chain of rubber wood industry; to estimate the relative share of actors;

to understand the performance of the manufacturers along with the

linkages, governance structure, role of institutions and buyers in upgrading;

to analyse the problems of the industry; and finally to make policy

suggestions.

The study has been carried out by conducting a census study of

SPRWP units in Kerala as there are only 31 units in this sector. The

SPRWP units are classified in to four identical product groups- RSKD,

EGP, EGP Furniture and RSKD Furniture. The SPRWP sector is compared

with the plywood sector which belongs to primary processing by selecting

30 units in Perumbavoor. Data were also collected from farmers, brokers,

wood traders, wholesalers and retailers using a pre-structured and tested

interview schedule. The return submitted by the units with the registrar of

companies is also made use of in the study.

7.2. Major Findings

The major findings of the study are summarized in the following

sub-sections.

7.2.1. The Various Actors

The various players identified in plywood industry are farmers,

brokers, wood traders, veneer manufacturers, commission agents, plywood

manufacturers, domestic wholesalers and retailers, export/import agents,


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foreign retailers and consumers. The various players identified in SPRWP

sector are farmers, brokers, wood traders, saw mills, SPRWP

manufacturers, domestic wholesalers, domestic retailers, export/import

agents, foreign retailers, assembling and designing firms, and consumers.

The value chain developed by this study is not a simple one as there

are large numbers of intermediaries or unnecessary nodes. The conclusion

drawn from the analysis is that such a value chain may lead to wastages

and exploitation, thereby leading to inefficiency. The role of each actor is

analysed in terms of their relative contribution in order to estimate the

efficiency of the chain.

7.2.2. The Relative Contribution

a. The share of the farmers is less than 45 per cent in rubber wood

price, around 31.5 per cent in packing cases and veneer, 12.67 per

cent in plywood and less than seven per cent in high value added

products. It means that the contribution made by farmer comes

down as it moves from low value added products to high value

added products. Though the price received by the farmers show an

increasing trend, this increase is not in proportion to the rise in the

prices of rubber wood. Most of the farmers feel that they do not get

the right price, perhaps due to the relatively minor role played by

farmer in the price determination process.


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b. The share of wood traders comes to 52 per cent in rubber wood

price, 37 per cent in veneer and packing cases, 15.3 per cent in

plywood and less than 10 per cent in furniture. It means that the

contribution made by trader also comes down as it moves from low

value added products to high value added products. In the case of

rubber wood price the role of the trader is very high as they are able

to increase the value addition through grading rubber wood. Though

the value addition made by trader is greater than that of the farmer,

their profit share is less when compared to the farmer.

c. It is hypothesized that a major portion of the price of the product is

pocketed by intermediaries. But the field survey finding is contrary

to this. The share of intermediaries or brokers is less than three per

cent in rubber wood price, while it is around two per cent in packing

cases and veneer, and less than one per cent in high valued furniture.

It means that on the one hand the share of brokers is low and on the

other it declines as the product moves from low valued to high

valued products.

d. Compared to the other actors the share of manufacturers is the

highest in the value of SPRWP and plywood. For plywood the share

of manufacturers is 37.87 per cent but for high valued SPRWP it

varies from 48 to 51 per cent. In packing cases and veneer the share

of manufacturers is less than 22 per cent. It means that the share of


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manufacturers is generally high. Moreover, their share goes up as a

product is processed further.

e. The average share of wholesalers is 6.22 per cent in SPRWP, and

4.24 per cent in plywood. In packing cases and veneer there are no

wholesale and retail traders since they are sold to other producing

units. It is either sold directly or through agents and traders who

arrange transporting and delivery. The share of commission agents

is around one per cent and the share of traders varies between seven

to 12 per cent.

f. The average share of retailers in SPRWP is 19.45 per cent. For units

producing only RSKD/S4S there are no retailers since it is sold to

other production units. In other sub sectors of SPRWP the share is

almost the same irrespective of the value addition in the product. In

plywood sector the share of retailers is 20.42 per cent. Thus, it is

concluded that the share of the domestic retailers in the value of

product is less than half of the share of the manufacturers, especially

in high valued products.

g. In the export of door to the Middle East, the share of export agents is

20 per cent and foreign retailer is 24 per cent. In the export of plywood

the share of export agent is 8.6 per cent and foreign distributor is 20 per

cent. As export is only 11 per cent of the output, the influence of the

foreign retailers on the industry as a whole is found to be weak.


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In the light of the above findings it can be concluded that the major

actors in the value chain are manufacturers, retailers, wood traders and

farmers. Manufacturers have the highest share in the value of the product in

all sectors and their share goes up as the product is processed further.

Retailers occupy the second position. Farmers and traders also play a

significant role though their share decreases as the value addition goes up.

7.2.3. Performance of the Industry

The performance of the SPRWP is analysed in terms of fixed capital,

working capital, employment, output, net value added, profit etc. and is

compared with plywood industry. The major findings regarding these

variables are:

a. Rubber wood industry, particularly SPRWP, in Kerala is

increasingly modernized in terms of ownership of firms as majority

is limited companies (61.29%). As against this, majority of the

plywood units (90%) are either proprietary or partnership firms. In

terms of scale of operation, all the plywood units are operating on a

small scale while 29 per cent SPRWP units are operating on a large

scale. The rubber wood industry has been operating for a

sufficiently long period as the average operating life is nine years.

The element of diversification is seen with great intensity in SPRWP

than in plywood industry. While the plywood units are producing

commercial plywood and higher varieties, the SPRWP sector


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produces EGP board, furniture etc. The SPRWP sector has

witnessed large scale ancillarisation and cross entry than in

plywood. Sixteen per cent of SPRWP firms have their own show

rooms and franchise centres.

b. As a result of the increasing modernization in the SPRWP, it is

found that the amount of capital employed in the sector is higher

than that in the plywood sector. The per unit fixed capital is

estimated as Rs 425 lakh in SPRWP, and Rs 67.2 lakh in the

plywood sector. The fixed capital employed per worker is Rs 0.83

lakh in the plywood sector and Rs 4.36 lakh in SPRWP. The

average working capital of a SPRWP unit is Rs 79.8 lakh and that of

a plywood unit is Rs 25 lakh. The ratio between working capital and

fixed capital in the plywood sector is worked out to be 0.35 while in

SPRWP it is only 0.18. In RSKD furniture the ratio is only 0.12.

Many units attributed this factor to the low capacity utilization and

low profitability. The high profitability in the plywood sector is due

to the low fixed capital base.

c. Both SPRWP sector and plywood sector are operating on a higher

scale when compared to all-India factory sector, all-India wood

sector and all-India SSI sector. In terms of output (gross) per unit,

output per employee, and employment per unit, SPRWP is

performing slightly better than plywood industry. While the average

output of a plywood unit is Rs. 269 lakh, it is Rs. 294 lakh in


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SPRWP. The output per unit is 9.29 per cent higher in SPRWP

when compared to plywood. Similarly output per employee in the

SPRWP is Rs 3.61 lakh and in plywood it is Rs 3.31 lakh. The

employment per unit in the plywood sector is 81, and in SPRWP

sector it is 98. However, it has been noticed that there is high dosage

of fixed capital in SPRWP and consequent high fixed capital to

output ratio than that of the plywood sector. The EGP board sector

in SPRWP presented more dynamism than other sub-sectors because

of its high gross output. The average output per unit is also the

highest in EGP furniture. Therefore it is inferred that among all the

sub-sectors in SPRWP, the EGP furniture has the highest prospects

for further development in Kerala. It is also inferred that the low

level of fixed capital is one reason for the increase in the number of

plywood units in Kerala.

d. It is inferred that the net value addition in SPRWP sector is higher

than that of plywood. The net value added per worker is also slightly

higher in SPRWP than that of plywood. The average net value

added by SPRWP unit (Rs. 143 lakh) is 57 per cent higher than that

of a Plywood unit (Rs. 91 lakh), whereas average output is higher

only by 9.25 per cent. The net value added per worker is Rs. 1.46

lakh in SPRWP and it is Rs. 1.12 lakh in plywood. Among the

various sub-sectors EGP furniture has the highest net value addition


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(Rs. 388 lakh) per unit in the SPRWP sector, and the net value

added per worker is the highest in RSKD furniture ( Rs. 2.57 lakh).

e. Though SPRWP units perform well when compared to plywood

units in terms of gross output and net value added, their performance

is weak in terms of profit. The profitability index of plywood is 9.85

per cent but it is negative (-5.3 per cent) for SPRWP units. Another

interesting point noted is the wide variation in profitability within

each sub-sector in the SPRWP, which varies between minus 26 (-

26) to 30 per cent. Among them RSKD, RSKD Furniture and EGP

units have positive profits while EGP furniture has negative net

profit. The profitability index of RSKD is 5.76 per cent, RSKD

furniture 3.47 per cent, EGP 1.4 per cent, and EGP furniture minus

12.2 per cent. Out of the 12 EGP board making units, three units are

running under losses while the remaining nine units are making

profit. Units with the highest profit in the SPRWP sector are those

with working capital/fixed capital ratio between 0.2 and 0.68. The

average working capital/fixed capital ratio of the loss making units

is only 0.16. The least profitable sub-sector is found to be EGP

furniture units due to the huge losses incurred by two units (due to

high interest cost, low working capital, mismanagement etc).

Excluding these two units the profitability of the other 4 EGP

furniture units is 3.58 per cent of the investment.


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f. The reasons for variations in profitability/losses are many. The low

capacity utilization, the high interest cost, and mismanagement of

the units are the major problems identified in this context. The

average capacity utilization in the SPRWP sector is only 60 per cent

while it is 88.14 per cent in the plywood sector. Therefore it is

inferred that the low capacity utilization is one reason for the low

productivity of capital and low profitability in the SPRWP sector

compared to the plywood sector. The average loan of a plywood unit

is Rs. 26.16 lakh, while it is Rs. 310.6 lakh in the SPRWP sector.

The high interest payment of SPRWP units is one of the factors

responsible for the net losses of the sector.

g. Though plywood is comparatively profitable than other sectors, it

cannot be concluded that EGP sector has no potential growth in the

light of the conclusions made above. In fact, in Kerala, the number

of plywood units is higher than that of SPRWP, but the demand for

plywood so high that the manufacturers are not able to meet the

demand. It is not as competitive as EGP due to the legal barriers of

entry in the plywood sector. In the case of EGP board, its demand is

very low due to the lack of awareness about the product. Adding to

this there is large import of EGP board from China, Malaysia and

other countries. As a result the supply is greater than demand on the

one hand and there is stiff competition on the other. This throws

light on the point that the distribution and marketing nodes in the


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value chain need to be made more efficient by linking it to the

manufacturing node. Apart from this it is necessary to overcome the

internal hurdles of the firms like mismanagement, non-availability

of cheap finance, low capacity utilization etc.

h. There is difference between plywood and SPRWP units in terms of

export. The percentage of exporting units in the plywood sector is

16.67 while the same in SPRWP is 35.48. But the value of export of

the plywood units is Rs. 1411 lakh (17.48% of the gross output)

while that of SPRWP units is Rs. 1047 lakh (11.49% of gross

output). Thus it becomes imperative that in order to strengthen this

sector export possibilities need to be explored further.

i. The rubber wood industry in Kerala has a high labour share in

output. The labour share in plywood is worked out to be 8.49 per

cent and in SPRWP it is 11.36 per cent. The same value in all-India

wood sector is only 4.5 per cent and in all-India factory sector is

3.85 per cent (ASI, 2004-05).

j. The analysis of the rubber wood value chain reveals that the

SPRWP has high value addition ranging from 233 per cent to 2033

per cent, whereas in primary processing it is below 172 per cent of

the domestic value of the product. The extent of value addition in

foreign price is 257 per cent more for door in the Middle East. But

for furniture components to Europe and the USA the additional


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value addition is more than 1000 per cent due to the additional cost

involved in transporting, assembling, designing etc.

It can be concluded that the gross output, net value added, output per

employee, output per unit and labour share in output are very high in

SPRWP units when compared to plywood units. But the latter is the most

profitable sector. At the same time the potential of SPRWP is very high

provided they are able to make the value chain more efficient by properly

linking it with distribution and marketing channels. It is also found that

EGP sub sector has more potential than others though there is loss making

EGP furniture units

7.2.4. Linkages, Governance and Upgrading

Though the achievements of natural rubber production in Kerala

have been widely applauded, it did not give rise to significant linkage

effect in the state. Forward linkage of natural rubber has been confined to

primary processing industry (George, 2005). Unlike natural rubber; rubber

wood industry has high linkages in the state as 85 per cent of the SPRWP

units are located within the state. The major findings relating to linkage are

the following.

a. The region-wise backward linkages to rubber wood are very high

because plywood sector uses 100 per cent of rubber wood, and

SPRWP units use 97 per cent of rubber wood which is procured

from the state itself. In the SPRWP sector around 10 per cent of


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rubber wood is directly purchased from farmers and the remaining

90 per cent through traders or brokers. In Plywood sector only four

percent is directly purchased from the farmers. In SPRWP around

30 percent of rubber wood is bought as sawn sizes from other saw

mills in the state. In plywood sector, 23 per cent of rubber wood is

bought in veneer form from other veneer units in the state.

b. In plywood sector the backward linkage to chemicals is very high as

90 per cent of it is purchased from the state. For SPRWP the

regional linkage to chemicals is around 32 per cent. Three units

have started their own resin manufacturing units in Perumbavoor in

2005 mainly for meeting their requirements. The demand for

chemicals and glue by the veneer, plywood and secondary

processing units resulted in the setting up of seven glue

manufacturing units in Kerala.

c. The plywood sector has backward linkage with other core veneer

units as 23 per cent of the raw material is bought in veneer form.

Ninety per cent of the face veneer used by plywood units is

produced by other firms. Earlier, face veneer was bought by

plywood units from outside the state. But now there are five face

veneer manufacturing units in Kerala. The Perumbavoor cluster has

started another unit in 2003. The SPRWP sector has backward

linkage with saw mill units as 18 to 27 per cent of rubber wood is

bought as sawn sizes. In SPRWP majority of the workers are from


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within the state while in plywood 90 per cent are from outside the

state.

d. In plywood sector 93 per cent of the units purchased the machinery

from the country while majority of SPRWP units (60%) purchased

machinery from both domestic and foreign markets. The

technological linkage of SPRWP is very high when compared to

plywood as is evident from the investment in plant and machinery

(plywood Rs. 1124 lakh and SPRWP Rs. 8300 lakh).

e. SPRWP sector has higher financial linkage to financial institutions

when compared to plywood sector. The demand for consumer

durables, construction materials, and other services in Perumbavoor

increased tremendously because of the growth of plywood units in

the locality. New hotels, lodges, transport companies, vehicles,

shops, petrol pumps, weigh bridges etc have come up. The industry

has linkage with other sectors of the economy like education, health,

and insurance.

f. The forward production linkage of RSKD is 76.89 per cent and for

EGP it is 39.31 per cent. This shows that a considerable part of the

output of RSKD and EGP go to other industries. The forward

linkage to the state is high for RSKD as 47 per cent of it is sold

within the state while for plywood it is only 25 per cent. The export


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linkage is the highest for RSKD furniture as 30 per cent of its output

is exported. For plywood the export linkage is 17.48 per cent.

g. Both Plywood and SPRWP sectors have direct linkage with trade

and commerce. Sixteen per cent of SPRWP units have their own

showrooms while only one plywood unit has its own showroom.

The supply of veneer and plywood to industrial units, and the supply

of finished products to wholesalers and retailers inside and outside

Kerala provide indirect employment to large number of workers for

loading and unloading.

The analysis of linkages helps one to arrive at the conclusion that all

the sectors have high backward linkage to the state as the major

input is rubber wood. RSKD has the highest forward linkage with

productive sector and local regions whereas EGP board

manufacturing units have strong linkage with productive sectors.

Thus it proves that the industries in the middle of the process have

the highest total linkage.

h. The industry has very thin form of governance. Producers have the

highest share in value addition. In 80 per cent of units the producers

design the product, co-ordinate activities between different actors,

and determine quality standards. The influence of buyer in quality,

design and branding is found only in three export units. In other

export units, the role of the buyers is limited to process and product


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specifications. Majority of the producers opined that the buyers do

not have a major role in determining price and quality. Therefore it

is concluded that the industry is mainly producer driven.

i. The institutions that support the SPRWP sector are government, the

Rubber Board and IRTF. Government has not tried to promote the

sales by purchasing the products. The Rubber Board provides

technical know-how and subsidy for upgrading. But only 38.7 per

cent of SPRWP units availed of subsidy from the Rubber Board

under modernization scheme. In the plywood sector, three units

which produced plywood and block board have upgraded to produce

EGP board. To reduce their costs and to make their units

competitive in the international market the Rubber Board has been

promoting a cluster based approach.

Seventy one percent of SPRWP units are members of IRTF but they

provide only legal and technical advice. The Plywood

Manufactures’ Association in Kerala provides legal, technical and

marketing assistance to all the member firms. The Perumbavoor

Plywood Cluster provides a common facility service centre, but it

provides less than 10 per cent of the face veneer requirement.

j. The role of foreign buyers in upgrading is negligible. In SPRWP,

25.8 per cent of the units have process upgrading. Five units have

upgraded to original brand manufacturing (16.12%). But the


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sequential pattern in upgrading from OEM to ODM and to OBM is

not visible. Buyers like Wal-Mart and IKEA have supported five

SPRWP units in upgrading by giving product and process

specifications. One unit had technical collaboration with Long Huat

Malaysia and still maintains export contract with them.

7.2.5. The Major Problems

The major problems that are identified in the field survey are the

following.

a. The most prominent problem in the SPRWP sector is the fall in the

number of units in Kerala over a short period of time (38 in 2002 to

31 in 2006). It is found that certain units were set up without proper

technical and economic viability study and had improper planning

which led to their closure. Mismanagement and corruption also

accounted for this. Eighty per cent of the units that were closed

down produced only RSKD and S4S, and the lack of diversification

to high value added products was another cause for their closure.

b. Another major problem identified is that majority of the customers

are not aware of the properties and uses of EGP boards and the

Rubber Board has not taken a proper marketing strategy to introduce

the innovative product concept to the customers in and outside

Kerala.


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c. Both SPRWP (48%) and plywood (53.33%) units opined that the

most important problem is the shortage of raw material and its high

price. In the state level SSI sector only 13.4 per cent units raised this

problem.

d. At the state level 74.32 per cent of SSI units pointed out the lack of

demand as a major problem, while in SPRWP only 36 per cent

raised this problem whereas in plywood lack of demand is not a

problem at all.

e. Shortage of working capital is a problem to 50.19 per cent of SSI

units. Around 28 per cent SPRWP units and 6.67 per cent of units in

the plywood sector face this problem.

f. Shortage of workers is a problem to 46.67 percent of the plywood

units while labour strike is a problem to17.27 per cent of the

SPRWP units. At the state level only around four per cent units face

this problem.

g. In the SPRWP sector only five per cent of the workers are migrants

while in the plywood sector their presence is 86 per cent. These

migrants are contract workers and they do not get provident fund,

gratuity, ESI etc. which are enjoyed by permanent staff.

h. Shortage of power is a problem to around 10 per cent of SPRWP

units and seven percent of plywood units. At the state level around

ten percent SSI units face this problem.


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i. Majority of the units pointed out that high cost of capital and power

are the major hurdles for the entry and smooth operation.

j. The manufacturers are of the opinion that the taxation policy of the

Central government which imposes 16.3 per cent excise duty on

furniture and eight per cent duty on door is a burden for the

upcoming units. In Kerala these units have to pay 12.5 per cent

VAT, but if sold outside Kerala they need to pay only four per cent

CST. Three units that were functioning successfully were forced to

close down due to tax disputes with the Excise Department. The

firms with all accounted transactions cannot compete with local

furniture units who do not maintain proper accounts and sell without

excise tax. This is a serious threat to the rubber wood furniture units

in Kerala

k. Two problems raised in addition to these by the SPRWP units are

mismatch between the capacity of kiln and treatment plant

(17.24%), and other equipment problems (17.24%). At the state

level only around eight per cent of units have equipment problem.

l. The major challenge of the industry is that the current consumption

of rubber wood by the SPRWP sector is less than 12 per cent. The

industry has to fully exploit the cost advantage of rubber wood

products in comparison to other wood products. At the same time

the prospects for export is to be further exploited.


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7.3 Contribution of the Study 7.3.1 Hypotheses Tested and Modified

a. From the present study it is found that the relative contribution of

producer in the value added is the highest and the buyers exercise

very little power. Generally the industry is producer driven. Hence

the first hypothesis of the study that furniture industry is buyer

driven is rejected in the present context.

b. The second hypothesis derived from the review of literature was that

the linkages - within various sectors, between the industries within

the chain, and the domestic and foreign linkages - are strong. The

study reveals that the RSKD and EGP boards have the highest total

linkage and EGP furniture comes next. Thus the findings conform to

the linkage theory that industries in the middle of the process have

the highest total linkage. The hypothesis can be largely accepted, at

the same time it is to be emphasized that the weak linkages

especially foreign linkages must be further strengthened.

c. The third hypothesis was that the role of institutions, particularly the

link between producers, producer’s organization and buyers play a

decisive role in upgrading. The study reveals that the role of the

buyer is very low and the domestic institutional support is

insufficient. Therefore the third hypothesis can be accepted only

partially.


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7.3.2. Comparison with Other Studies

The present study differs from earlier studies in several respects.

a. This study is the first of its kind on rubber wood industry in Kerala

in the value chain frame work.

b. This is the first study which has covered all the working SPRWP

units in rubber wood industry in Kerala, and estimated their value

addition, profitability, and relative share of actors, linkages,

problems and policy implications.

c. This is the first study on the EGP making units in Kerala. The study

has covered the plywood sector to make a comparison with the

SPRWP sector.

7.3.3. Other Contributions

Firstly, the study analyzed the crucial role of farmers and their

relative contribution. The study found that the role of the farmers needs to

be improved in the determination of the price of rubber wood

Secondly, this is a comprehensive study on value chain as it covers the

various aspects of the chain like relative role of various actors and their

contribution, its linkages, governance structure, role of institutions and upgrading.

Thirdly, the study helps to identify the major achievements and

problems of the sector.

Lastly, the study is useful for the policy makers as it points out that

the value chain of SPRWP sector especially the EGP is to be strengthened;


241

the export potential is to be exploited; the role of farmers in the chain is to

be maintained etc.

7.3.4. Future Research Issues

The study has identified a few issues for future research:

a. Separate value chain studies are to be undertaken for EGP, furniture,

and plywood.

b. Separate studies are required to explore the role of exports and the

linkages.

c. The input-output structure of the industry is to be studied by

collecting data from other related industries.

d. Separate studies are needed to analyse the impact of global value

chain on the plight of workers in the industry.

7.4. Implications 7.4.1. Theoretical Implications

The value chain framework has theoretical implications as it

accommodates issues like the relative role of actors and their share in

value, its linkages to other nodes of other industries, the role of institutions

and governance structure in upgrading etc. At the same time the value

chain theory needs modification as it does not address the social issues and

social system in which the chain operates. The crucial problems of

workers, especially the problems of women are not addressed. Similar view

was made in the study on coir yarn spinning in southern India by Ram

Mohan (2003)


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7.4.2 Policy Orientation

The study also has policy implications.

The strong linkage found in EGP boards and its high employment

potential invites the need to encourage its production.

Sixty percent of the SPRWP units have a positive outlook about the

future prospects of the industry and they expect a rise in sales and profit

and look forward to diversification. Therefore support at various levels is

required for promoting the industry.

Since only less than 39 per cent of SPRWP units utilized the subsidy

given by the Rubber Board for modernization, the modernization and

upgrading schemes of Board are to be further strengthened and widened.

Since the present supply of plywood cannot meet the growing

demand of the economy, the ban imposed in starting new plywood units is

to be waived at least for those units that depend on rubber wood alone.

The existence of loss making units in the SPRWP sector invites

immediate attention so as to identify and resolve the managerial and

technical problems.

7.5. Suggestions

The suggestions put forward by the study are:

a. Long term planning and diversification schemes are required for the

sustainability of the units.


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b. A massive advertisement campaign is required to familiarize the

product concept of EGP to the customers and also to increase the

acceptability of rubber wood processed product. This initiative

should come from the Rubber board and IRTF. Moreover, the

scientific proofs must be made available to the general public

regarding the long durability of the processed wood.

c. Technical and economic viability studies are to be conducted and

reports to be published so that the units can purchase the right

combination of machinery, right proportion of working capital etc.

d. Use of rubber wood in the manufacture of MDF boards and other

particle boards are to be encouraged. Since it requires huge

investment, the IRTF cluster has to take the initiative for the same.

e. Use of eco-friendly chemicals for processing is to be strictly

enforced by government for increased acceptance of the product at

the domestic and international markets.

f. The ban on taking rubber wood logs to other states is to be re-

imposed so that the rubber wood logs can be processed in the state

itself and the tendency of the units to start processing units outside

the state can be discouraged.

Thus the present study has been able to fill the research gap to a

certain extent.


244

7.6. Conclusion

The high demand for rubber wood from plywood and SPRWP units

has increased the value addition of rubber wood. The steady availability of

rubber wood used in the production of high valued products can generate

not only additional employment and income but also strengthen the

economic linkages. No doubt the rubber wood industry can foster the

industrial development of the state economy, provided it is given adequate

thrust it duly deserves. Enhancing the efficiency of value chain is the best

solution for the realisation of the potential development of rubber wood

industry.

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SUGGESTIONS AND CONCLUSION - Shodhgangashodhganga.inflibnet.ac.in/bitstream/10603/22505/17/17_chapter7.pdf · witnessed large scale ancillarisation and cross entry than in ... scale