The economic impact owing to the Coronavirus pandemic will be severe. Indian economy as well as wood panel sector fears for a heavy loss to the businesses. People want to know what the industry veterans have to say on this crisis and how is the road ahead. It is in this context that the Ply Reporter, the leading voice of the Indian panel industry and trade, hosted a webinar on 12 April 2020 on COVID-19: Challenges & Possibilities for Indian Wood Panel Industries. The webinar was addressed by pioneers of the industry, representatives of industry associations and technical institutes. Mr Sajjan Bhajanka, Chairman, Century Plyboards Ltd; Mr Rajesh Mittal, CMD, Greenply Industries Ltd; Mr NK Agarwal, Chairman, Balaji Action Buildwell; Mr Rakesh Agarwal, Chairman, Shirdi Industries Ltd; Mr Mujeeb Rahman, President, AIKPBMA, Kerala; Mr Naresh Tiwari, Chairman, AIPMA; Mr J K Bihani, President, HPMA; Dr MP Singh, Director, IPIRTI and Mr D K Aggarwal, President, PHDCCI shared their insights. The webinar was moderated by Mr Pragath Dvivedi, chief editor, The Ply Reporter. Over 500 industry and trade professionals attended the webinar and more than 20,000 persons viewed it live on Facebook. The webinar received more than 200 questions’ chat from attendees related to wood panel industries and trade. The efforts put in by the team Ply Reporter in organising the webinar, during the course of the 21-day lockdown, on an issue close to the heart of the industry professionals were much appreciated.
Q. The wood panel industry is big and unorganised, what should be the industry’s approach to handle the situation of crisis arising out of COVID 19 pandemic?
MR SAJJAN BHAJANKA: We can’t take a collective decision for everyone because; there are different conditions with operational approach and workmen demography. I would like to suggest that the factory owners should talk to their workmen, take them into confidence, convince them and come out with a solution that is acceptable to all. Today, the industry is not in the situation to pay full wages. As a way out till the units remain closed or functions at lower capacity, we can help the workers sustain their lives with required financial support and when the units start functioning to its capacity and getting the situation better they can be compensated.
MR NK AGARWAL: Being an agrobased industry, we must ask the government to incentivise the industry similar to that being given to the farmers. The wood panel industry is a highly power consuming industry and in this crisis time the government should not impose fixed power charges. All the states that are still imposing the fixed power charges should do well to learn from the Government of Maharashtra that has done well to waive off it.
MR RAKESH AGRAWAL: This is a very challenging time. There cannot be a better service to the industry than this discussion and update the industry players with this valuable information. I see there is a solution emerging post the PM’s interaction with the CM of states. The PM’s note from ‘Jaan Hai to Jahaan Hai’ to ‘Jaan bhi Jahaan bhi’ marks a perceptible change. The PM’s statement implies that the government is thinking about industries and other activities of livelihood. The other challenge is the nonrecognition of our industry as a valuable contributor towards nation building and employment generation. In my observation the wood panel and furniture industry accounts for nearly 1.25 lakh crore man-days, but when it comes to support from the government, I feel we are abandoned. We are responsible for this state-ofaffairs of ours. When the COVID-19 crisis gets over, our requirement would be demand from the market, liquidity and reduction of overhead cost. If we talk about demand, there is a big front of import (furniture for corporate and house hold). The government can impose restriction on imports; it is allowed under the foreign trade act in times of pandemic. We should strongly pursue that import of furniture and boards must be restricted at least for a year or two. To increase the demand we can think of asking for a reduction in GST rates, IT rate cut, increase in consumer loan, etc.
Q. Is it possible to get rebate or help from the Government? What should be the industry approach and how should we move towards it? When should this initiative be taken?
MR DK AGARWAL: It (today) is the right time to make presentation before the government (centre and states) regarding relief and compensation. We should strongly present the issues of wood panel industry before the state as well as central government. After lockdown even if the industry works at 25-30% capacity, losses would be continue; there should be a long term planning for financial management. How can we pay the salary to our employees and workers must be the matter of our observation. The disaster management and epidemic management acts are with the capacity of being advisory. It is not binding and cannot be imposed upon the industry. However, we must approach it on humanitarian ground.
MR RAJESH MITTAL: For people in general, wood panel and associated products will be the last item in their priority list after fulfilling their livelihood and other necessities for survival. We should keep patience and manage the problems with confidence. In times like the one we are faced with, companies should go for detailing to save cost where it is possible to do so to survive. We are doing that. The banks are coming forwardand allowing the support up to 10% of working capital of the company. In my knowledge the banks are eagerly interested. But, I also believe that it is being adopted in a case to case basis and on the company’s banking relationships. In terms of statuary cost the government has given relief. We are following the same and even started to negotiate at rentals and retainership. We are working on IT and reducing the cost.
Q. Should we focus on imports activity in terms of support to the nation as well as the industry?
MR SAJJAN BHAJANKA: In true sense we are an agro-based industry as 90% of our raw materials are agro produced and we are not able to get its benefit. Today in the condition of life threat we have to save our life and must have to survive and maintain our liquidity, so, talk to banks, suppliers, etc. There is also a problem that if bank declare you an NPA or wilful defaulter, then they can freeze your account. So, take them into confidence and manage the financial crisis.
Q. How can we raise payments from dealers and distributors?
MR NK AGARWAL: We have to convince the dealers/distributors about our expenses and that their sound support is the need of the hour. We should also talk to government to increase the credit limit so that the liquidity flow increases in the market. This is because we are uncertain as to when the sales volume will kick in as long as social distancing norms are in place. For workers management we should hold on to them and talk to them amicably for salary. As the government has given relief to new industries on Income Tax to the extent of 15%, it should be given to all irrespective of structure and strength. If the salary of MPs and MLAs has been deducted, the same should be adopted to private industries also. And for agro based industries like wood panel, we should call for a total ban on import whether it is plywood or board or furniture. We have a surplus of it and are not able to run on full capacity. At this time of global crisis of COVID 19, other country will also try to dump their produce at cheaper price.
MR RAKESH AGARWAL: 2020 is different as compared with the situation of 2008 recession. At present the damage is many times higher than that of 2008. In 2008, the excise duty was halved, service tax was decreased by 50% and nearly 1,400 items were restricted from imports. Besides, RBI had given a 2+8 scheme to resize in which there was a two year moratorium. The amount of loan was put on reduced rate of interest. Considering even parallel to 2008 the GST should be 9%, banking problems of any kind should be resolved. I request all to bring the industry to a specific strength and that should be acknowledged by the government.
Q. Can we get it done at the earliest?
MR NARESH TIWARI, Chairman, AIPMA: We must first break the chain of COVID 19 endemic and after that everything will be on its position sooner than later. The family of wood panel industry is bigger with its companies, labour, sales staff and professionals and everyone is making efforts to survive; so the industry will come out of the crisis soon. The labour also understands the situation and they will definitely support the industry. We should pray to God to save us and bring everything into normal condition.
Q. Can IPIRTI play a role to raise the voice of the industry before the government?
MR MP SINGH, DIRECTOR, IPIRTI: I think the government is interested to make efforts to boost the ‘Make in India’ initiative and for that our approach should be to restrict import of maximum goods. This is a very good opportunity to give priority in this regard. This is not the right time to ask for concession from the government as the government is already in financial crunch. The government has decided to reduce the expenditure from 25% to 15%, so how can it support the industry to the fullest. We should approach the government with the idea that suits them. For example the restriction on import is on priority because we have to save our industry, the government will take it seriously. Later on the internal matter of the industry should be taken up with the concerned departments and authorities with their specifications, like GST matching with agro-based industry and finance ministry. The government is also making efforts to double the farmers’ income and in that direction it would be good idea. For the immediate reason, we should approach with supportive needs. The liquidity issue can be resolved with the support of the banking system.
Q. What should be the approach of industry associations/federations?
MR DK AGARWAL: We were talking to the finance Minister, Ms Nirmala Sitharaman. The industry associations have come to conclusion that the government is coming up with stimulus package. We have asked them for Rs 11 lakh crore package with salary re-imbursement, interest subvention, postponement of statutory cost for at least three months, reduction of GST, waiving off the utility bill of electricity for the extent of six months. Besides, no tax should be imposed on LLPs, partnerships, proprietorships, etc. The bank moratorium should be for one year. For the working capital, the automatic approval should be 25% instead of 10%. These proposals have been made to the ministry on behalf of PHDCCI, FICCI, CII and ASSOCHAM. There is very serious working going on it. We are continuously communicating with them and for any clearance they get back to us. We are very hopeful and very soon we will be having stimulus package from the government side. In my opinion the government is also kind that fiscal deficit is not important for them at this point of time and starting the economic activity is very important. It will be very difficult to start if we get delayed any further.
Q. Is it possible that the entire industry can work on the same model and adopt the wages of 50% or 75% or anything? Can it be a practical model for the entire industry? Can it be agreed upon so that no disturbance, grievances will arise and we can stand together?
MR SAJJAN BHAJANKA: If we restrict on wages arbitrarily, there will be another problem. We should amicably reach to a common programme.
MR NK AGARWAL: We should make efforts and talk to them and ask the government to support so that both can survive. Secondly the import restriction will offer breathing space to the industry as Plywood, MDF, Particle Board, etc are being imported in huge quantity. Due to imports we are unable to run our industry to its full capacity. MDF factories are running at 50% capacity and the similar situation is to plywood and Particle Board. Many plywood units are closed. So, we should request the government; workers and employees should contribute something from their side and stand together to move ahead.
MR SAJJAN BHAJANKA: Besides, banking support we should stand together with our suppliers. The government has also directed to the banks to offer relief by increasing CC limits, defer off interest, and defer the instalments. If we keep good relation with banks, they will definitely accommodate. If there is an existing NPA then the bank will not be able to support, but those having good accounting track record and goodwill will definitely get help from banks.
MR RAKESH AGARWAL: The bank will definitely help so that an existing account does not turn into an NPA. I think we as an industry are expecting help; the industry associations have asked for Rs11 lakh crore package. The USA government has given package of 11% of their GDP, Germany 6%. If on an average we consider 5% of India’s GDP that comes to about Rs 15 lakh crore. Our external loan is hardly 20% of GDP while the other developing economies are under 70% of their GDP. The government has lot of options like Fiscal Deficit, External Borrowing that they can consider. The wood panel industry is a bit specific and we should look at our domain and there are few things to be considered seriously like import ban; agro-forestry, plantation should be given extra care from our side. That would be good achievement for us. This is a testing and challenging time. Together we should make efforts to make our industry from forest based to agro-based, that would have perpetual benefit to us. I believe that in this industry nearly 50%of the revenue goes to labour of the entire chain from wood plantation to production and distribution.
MR SAJJAN BHAJANKA: To sum up, financial management is core priority and keeping the workforce in confidence is a must. The cycle of production to distribution will take time. It is a situation like DALDAL; so we need to make extra efforts amicably to come out of this crisis.
Q. Did we have any representation for wood panel industry also?
MR N K AGARWAL: Two days before we have had discussion with manufacturers and we will soon send our views/ recommendations to the ministry.
MR SAJJAN BHAJANKA: We have given our suggestions to FIPPI that industrialists and small manufacturers in plywood industry will not be able to pay wages for April onwards as the recovery is not there and banking limits are over. The government should think in this regard similar to the Singapore Govt. which has announced one month wages for all irrespective of scale, etc. it was despite that there was partial lockdown for a month. So, Government of India should support all industries with a minimum support of at least Rs 5000/- per employee. There are different levels of industries and many are unorganised, small working units or contractors are a bit difficult and the government can think for them separately.
Q. Distributors are stuck with no payment flow but the companies are asking them for it. They are a part of this industry, what should we do to help them?
MR SAJJAN BHAJANKA: Without any trust no one gives even a penny, so if we offer credit, we have certain types of trust with them.They have also given credit to their parties or customers, so their problems are also ours and we should consider it. The solution will come out if we talk to them. At present we should amicably talk to them and bring out a solution that suits all of us. We should increase by a more month or so for issuing CDs, if the payment is continued and genuine. This is not an enforcing area; the only way is to convince them. It is also their duty to help the industry genuinely in this crisis.
MR RAJESH MITTAL: At present we should move ahead slowly and steadily taking all together. The banking facility is available as a tool for finance and we should use it to its maximum capacity.
Q. Will importing of products like decor paper, chemicals, etc get any relief on import duty?
MR RAKESH AGARWAL: In plywood industry the major raw material is wood which is domestically available. I believe in coming days its price will come down and also the imported face price will come down because the situation is same everywhere.
Q. What are the issue related to government support on PF to workmen?
MR JK BIHANI: There was an issue before the industry about the PF rebate by the government of India. Will it be deducted from workmen or will it be divided between the company and the labour. As per the notification, the ESI/PF is neither to be deducted by anyone nor to be given by the company.
MR SAJJAN BHAJANKA: This should have been exempted for the period till the situation gets normal. Then once the situation would have become normal, the contribution for ESI/PF could have been started. However, the government has decided to pay the ESI/PF, but with it there are a lot of riders like labour strength (should be less than 100 and 90% of the employee should be paid less than Rs 15,000). This will not be beneficial to all.
MR NARESH TIWARI: JK Bihani raised a very valid point as nearly 3,000 industries are there with at least 90 or 100 or 120 labourers. It should be cleared with employee’s salary irrespective of the number of employees in that company.
MR JK BIHANI: If we get out if this crisis of COVID 19 in a month or two, the demand will still be less. So, we should give thrust to exports. The GST rate should be reduced, that will improve the demand in the market and will increase liquidity flow. The payment for Jan-Feb bill has not come to us; we should be given a bank support so that it does not result in double financing. This would be a great mechanism to drive the liquidity to us. It should be applied to those who are long associated with us. It should be taken in consideration by the government and for that PHDCCI should approach them. This way there would not be loss to anyone and the liquidity flow will come to the industry.
MR RAJESH MITTAL: This is a very good suggestion and we should try for it.
MR MUJEEB RAHAMAN: We are facing challenging situation and without government support we cannot come out of it. We need at least 6 months moratorium on GST and waiver of bank interests.
Concluding Note
MR SAJJAN BHAJANKA: India is very close to China in terms of population and the Indian wood panel industry has huge potential for growth. The plywood consumption in India is 10 million cbm while in China it is 200 million cbm. In case of MDF and Particle Board, we are at 1 million cbm each while China is consuming 50 million cbm and 35 million cbm respectively. In India the population will increase and on the basis of it the industries will also witness its growth. Today we have very good advantage in terms of labour cost which is much cheaper compared to China. Our per capita consumption is also very less, so we have to go ahead in all respect and grow our industry. People think that in coming time the consumption of PB and MDF will increase. If we consider the Chinese market the growth of plywood has seen 200% growth while for MDF and PB there is no practical growth in last five years. So, I would like to say that the future of plywood industry is bright as the use of plantation based products will grow in coming days.
MR MP SINGH: We are ready to extend our help to the industry. I take this opportunity to announce that IPIRTI will provide technology free of cost to the industry. Industry players need to send their employees to us for training.
MR RAJESH MITTAL: I don’t think that there would be issue in terms of survival of the industry. In the coming days the wood panel and furniture industry will grow leaps and bounds as trade with China and other countries as well would be affected in this crisis. If we talk about Indian economy, this year will be a difficult phase, but looking ahead there is a bright side to the present scenario.
MR NK AGARWAL: Furniture import is very important factor and bringing this industry into agro-based will be a breathing factor and will impact the industry positively. With us there are lot of ancillary industry in which 20 or 30 or 50 workers are involved. They are facing deep financial crisis. So, all of them should be supported by banks.
MR RAKESH AGARWAL: IKEA has come to India and we should focus on exports. The Particle Board and MDF are not viable to export but in furniture segment it is very much consumed and viable to export with huge possibility. There must be lobbying with the government in this regard.
MR PRAGATH DVIVEDI: The government will play its role. But the industry should amicably raise fund with dealers/distributors and make a strong effort to convert the industry into agro-based industry from forestry-based and include farmers, industry, jobs in wider prospects. It has not been capitalised till now in the name of industry, imports and duty. With a strong effort we have to raise a strong voice. After this crisis of COVID 19 pandemic anything that can help us will be our efforts, and that will take us ahead.
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