suggestions and conclusion -...
TRANSCRIPT
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
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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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234
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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235
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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236
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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237
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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239
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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240
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;
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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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242
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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243
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.
Suggestions and Conclusion
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.