The Hindu Business Line : BILT bets on farm forestry to shore up margins

PAPER companies are aggressively looking at farm forestry operations to cut down on the landed cost of wood, which could translate into higher margins for them and also lower paper prices in the long run.

With transportation costs accounting for nearly 50 per cent of the wood cost for paper companies currently, developing farm forestry operations near their manufacturing units instead of relying on sourcing wood from the timber market, is being pursued by market leader Ballarpur Industries Ltd (BILT) and other players including ITC Bhadrachalam and Harihar Polyfibres.

"India is a fibre-deficient state since the Government policy does not allow forestry plantations for the corporate sector. So far we have been depending largely on market sources and also the Government sources for our wood requirement. The farm forestry operations we have started would help us shore up margins and ensure lower landed cost of wood," a senior BILT executive said.

The company, through its wing BILT Tree Tech Ltd, is supporting farmers in and around areas where the mills are located. Under the project, farmers are supplied seedlings and also given buyback support for the plantations.

The farmers, in turn, plant pulpwood, mostly Eucalyptus, Acacia and Casuarina trees, on land owned by them, which is mostly degraded forestland.

"We are currently working with about 12,000 farmers and have planted about 40,000 hectares. We expect to double this area in the next three years, and our target is that 30 per cent of the total wood requirement should come from the farm forestry operations," the executive said.

This would effectively mean that for BILT, sourcing of wood from the market sources — which has to be then transported to far-away mills resulting in higher transportation costs — would come down from 70-80 per cent of the wood pulp requirement currently to around 30 per cent.

Other players are also looking at farm forestry as a means of tiding over the Government's policy of not allowing corporates to develop plantations.

In fact, the area brought under farmland for tree cultivation had almost doubled from 20,000 hectares to over 40,000 hectares by 2002.

Companies such as Harihar Polyfibres and ITC Bhadrachalam are now getting a huge chunk of their wood from farmers.

Manufacturing a tonne of paper roughly requires four tonnes of wood. The National Forest Policy framed in 1988 stipulates the paper manufacturing industry to work with the farming community for sourcing industrial wood through farm forestry.

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