Due to capital crunch, the timber importers and factory owners at Asia’s largest timber cluster in Gujarat, situated near Kandla port are not able to get their goods from the warehouse. They have to bear nearly half of the investment for the goods on import in terms of GST, customs duty, bank margin and other expenses for taking them to their facility. Today, every industry is suffering and overhead expense is increasing with no work, bank interests, exchange rate fluctuations, etc. In the absence of payments, the importers have chosen to shift their goods at custom bonded warehouse.
The industry was standstill for over two months. After relief from lockdown from 18 May 2020, the demand has started but there is almost no work at the facility due to labour issues. The biggest loss for the importers is due to demurrage and ground rate charges for the wood kept on the ports because in the absence of labour and finance, they are not able to take it. According to an estimate 65% of imported timbers come at Kandla and Mundra ports. In a year nearly 35 lakh cbm of timber is imported and fed across the country to different wood based industry establishments. Variety of hardwood, softwood logs and lumber are imported from different countries like New Zealand, Malaysia, African countries, Latin America, Uruguay and European countries.
Talking to Ply Reporter, Mr Navneet Gajjar, President, KTA (Kandla Timber Association), said, “The economic package by the government after lockdown has given some respite, despite that the imported timer coming to Kandla Port is being dumped at the custom bonded warehouse. At present the pile stock of timber is over 2.5 lakh cbm worth Rs 450 crore. The importers are suffering from capital crunch due to low demand in the market and non-operation of their factories due to labor issues. Their overhead is increasing because the input costs are increasing from all sides.” He added further, “Initially when the lockdown was imposed there were no charges due to force major. Now the importers have to pay at the customs bonded warehouses also. The stake holders say that CFSA (container freight station association) is not ready to give any relief taking consideration of the central government guidelines for not charging if there is any crisis.”
“If we calculate all losses it goes to nearly Rs 1,500 crore to Rs 2,000 crore. There are nearly 2,000 saw mills and more than 100 plywood units and wood based industry in the proximity of Kandla port where nearly 80,000 to 1 lakh workforce have been employed. Most of the workforce are from Assam, Odisha, West Bengal, UP and Bihar. Today nearly 70% of the migrant labourers have gone to their homes,” he added.
Mr Sameer Garg, MD, SRG Group, said, “We have to bear a huge loss and for that we have demanded from the government that they provide subsidy in electricity, interest free loan, interest subsidy for the period of lockdown, the deferment of GST on imports and release the GST advance deposited with the government immediately, etc. We are of the observation that after the lockdown we will be able to run our units at 50% capacity for three months and if the situation remains under control for that period the industry will revive to normal.”
Mr Rohit Shah, Director, Woodman Ply, said, “The vessels had been loaded before lockdown; from 25 March, the industry as well as the markets in different region were closed for over 70 days. The importers have to bear the costs of customers’ duty, port charges, GST, etc, and for that nearly 50% cost of the goods is required so the importers are not able to get that without having to pay a huge amount. A lot of timber is left unsold and for that huge demurrage will continue. If it continues for two more months the goods will go into auction. Although, the government has given direction that authority should not get that charges, but they are not willing to accept it. We even moved to Supreme Court; the court said that the Mundra port is private body and you have personal agreement so the court cannot do anything.
” Mr Dharmesh Joshi, Proprietor, Kalpna Impex, said, “Our payment is stuck and the supply chain badly affected due to the lockdown of over two months. Also we are not getting any relaxation in LC payment. To avoid the LC default we have shifted the goods into bonded warehouse. My stock is nearly 1,200 cbm and in my observation over 80% importers have been affected from it. If we do not get any help from the banks on concessional interest rate it would not be normal. The government should take some good initiative to support the industry. Overall we have to make more than 50% of investment to release the material from the warehouse. After relief from lockdown, we were operating with 25% capacity initially but after the labour issue the production capacity has dropped to 15% capacity.”
“According to an estimate the wood based industry in Kutch area accounts for nearly Rs 10,000 crore with over 150 factories and importers, saw millers, veneer processors and plywood makers. We have made many representations before the government and the port authorities to give some relief; hopefully in a week or fortnight some good news will come,” added Mr Navneet Gajjar.
On the other hand Mr Anurag Thakur, Finance Minister (State), Government of India, said in a media briefing, “India imports furniture worth rupees thousands of crore from different countries. If we put zero duty on wood and offer export incentive then definitely the wood will come comfortably and also the technology. In this way we can have good supply within the country and can export in larger quantity. We are dedicatedly working on it and you will see its effect in coming time soon.”
Kandla Timber Association (Kta) Writes To Dpiit, New Delhi; Sates Problem Faced By Timber Industry In Kandla Due To Covid-19 Pandemic, Demands Relief
IGST on imports: IGST @18% has to be paid at time of import of timber. This is an advance payment collected by the government. GST has to be considered as a sales tax which should be payable only after sales of goods. Since paying this tax in advance at time of import is a drain of liquidity in an already financial crunch situation, we request to abolish the same on urgent basis as there are many bulk vessels and containers waiting and have arrived at Kandla / Mundra Ports.
Reduction in GST tax slab: Timber is a renewable source of energy and replacing materials like iron, copper, plastics, aluminium, etc, with timber products should be encouraged. This would not only help in reducing carbon foot print but is also a long term solution to save Mother Earth. Hence we request to reduce the tax slab to 5% and provide incentives for replacing non- renewable resources with Wooden Products i.e. Furniture, Construction Material and Industrial Packaging.
Financial initiatives: We are thankful for providing 20% enhancement in current credit limits to MSME sector. During the lockdown period, majority of cargo had to be shifted at Custom Bonds since no funds were available to clear the cargo. Approximately 7500 TEUs are uncleared at various CFS at Mundra. In this situation the government also faces loss of revenue and the supply chain has been adversely affected. Hence we request you to instruct banks immediately to follow RBI guidelines dated 22-5-2020 and provide sanction letter for 6 months (current 180 to 360 days import payment) extension of all our import payments and provide further adhoc limits to importers at a concessional rate of interest and low processing charges for clearing the cargo.
Import duty relaxation: Timber is being used as a raw material in a variety of industries. Import of timber reduces the burden on indigenous forest cover and also helps to meet the demand of local industries. Moreover for setting up Furniture Park near Deendayal Port Trust (formerly Kandla Port Trust) to manufacture world class furniture for consumption in Indian market as well as exporting furniture globally, they said that the step would help in making Indian furniture globally cost-competitive. Request was also made to keep zero percentage duty on import of round logs which would be of dual benefit: providing employment to people engaged in processing of logs into sawn timber as well as providing sawn timber at competitive cost to furniture industry.