TRADE AND MARKETING PROSPECTS OF TIMBER IN COMMUNITY FORESTRY.

(A Term Paper on SFM702 Community Forestry and Governance.)

Group MembersMadhuri Khadka* (Roll. No. 47)

(khadkamadhuri48@gmail.com )Manju KC (Roll. No. 48)

Sabita Thapa (Roll. No. 38)Shambhu Kumar Mishra (Roll. No. 46)

PRESENTATION OUTLINEINTRODUCTIONOBJECTIVESMETHODOLOGYDISCUSSIONSCONCLUSIONS

INTRODUCTION Community Forestry-a system where the symbiotic relationship of

people with the forest makes them managers and saviors of the forest helping sustain this relationship with or without direct commercial benefits (Rath, 2010).

The original focus of CF was to develop forests to supply forest products to the community members to fulfill basic needs during the 1970s and 1980s (Gilmour and Fisher 1991 cited in Paudel et al. 2010).

In recent years, there has been a shift towards commercialization of forest products to generate increased financial benefits (Paudel et al. 2010).

At present, a number of CFUGs stepped into monetized sector of economy in addition to fulfilling the basic needs of users (Jha, 2008).

Contd… CFUGs generate income from various sources among which

timber is the major one. Overall timber occupies the major share by contributing over two thirds to the CFUG income (Pokhrel, 2010).

Timber and fuel wood are main product for in country consumption whereas NTFPs, basically products with medicinal and aromatic value, have been used both within the country and for export (Dhugana and Bhattrai, 2008).

Despite of the fact that Nepal has abundant forest resources to meet the demand of the country as well as potential to trade timber, it still imports timber.

Community forestry-being most successful forest management regimes has enormous potential to trade timber.

OBJECTIVES

To study the timber trade procedure and practices in Community Forest.

To explore the prospects and issues of timber trade and marketing in Community Forest.

METHODOLOGY

Data CollectionSecondary – information collected via

different researches, newsletter, articles, books, journals, publications, websites etc.

DISCUSSIONS1. PROCEDURE OF TIMBER TRADE IN CF (Gritten et

al. 2013) Before cutting down the trees the user’s

committee should forward a request letter to district forest offices.

After getting approval, trees at all will be harvested need to be marked at a certain point from the bottom of the trees. This would enable the forest agency to check the number of the harvestable trees.

Contd… After harvesting, in case any forest product is available in

accordance with the Work Plan it should be consumed by the user group itself, the user group need to prepare the receipt in triplicate and hand over one copy to the buyer and other copy to the Concerned Area Forest Offices, and remaining copy by itself.

In case, if the users’ group want to sell the surplus forest product harvested within the limit of the approved work plan, user’s committee should acquire prior approval from the District Forest Offices.

After getting formal approval, user’s committee need to announced wood bidding in details at daily newspaper.

The collected sealed bidding forms need to be open in the presence of bidders or contractors, representatives from District Forest Offices and users’ committee member.

Contd… The committee shall issue timber collection permit to the highest

bidder, The contractor should deposit royalties and other legal charges to the

District Forest Offices before collecting timber from community forest, The users’ committee shall have to maintain accurate records of forest

products sold from their forest as well as the account of their income and expenditures.

The users’ committee shall prepare an iron stamp for the purpose of transporting the timber from community forest and submit an application to the District forest Offices for its registration.

For the purpose of transporting the timber outside the FUG, users’ committee need to mark the timber with the stamp issued by the District Forest Offices and issue a release permit,

Then the contractor is allowed to transport permitted timber only after informing the concerned Forest Offices in advance and having the matter endorsed by check post located en route.

Contd….2. PRACTICES OF TIMBER TRADE FROM COMMUNITY FOREST• VALUE CHAIN MAP OF TIMBER TRADE FROM CFA value chain map presents different supply channels that transform raw materials into finished products and then distribute those products to final consumers; and the different markets or market segments to which products are sold. Resource Production System/Harvesting (Wagle, 2012). In community forest production is restricted by community forest

inventory guideline. Annual Allowable Cut is restricted to 40-70% of annual increment of forest. Annual increment is fixed at 1-3% of total growing stock of forest. Priority of felling is given to fallen, dead, dying, diseased, decaying, and

malformed and so on. In many cases annual allowable cut is fulfilled by collecting fallen trees

only.

Contd...1. Actors involved and their function (MSFP, 2013).a. Community Forest User Groups In CF, CFUGs sale within user group and do auction if

there are surplus timber. There is no any policy or system of timber pricing. The people who participate in auction and bid

highest money get the timber. They generally sell to the saw mill or sale to the

market after sawing it as sawn timber (Wagle, 2012).

Contd…b. Saw millsWood of varying quality is collected from the

CFs.Saw mills then process these logs into timber

of different sizes, and sell the timber to furniture industries.

The price of timber is determined by the type of timber with Sal, Wild Sissoo and Satisal being the most valuable.

Contd…c. Log Traders In some cases, log traders purchase logs via auction mostly from CFs

and sell to saw mills. Anyone who is PAN and VAT registered as dealer in forest based

products can be a log trader.d. Furniture industries 4 categorizes 1. Industries that focus their products for rural communities/villagers.2. Industries that focus their products for commercial customers such

as offices, banks and restaurant's.3. Urban Industries4. Onsite Manufacturers

Contd….2. Consumers The purchasing capacity of consumers and availability of

furniture in their proximity determines the type of furniture used.

Consumers in rural communities mostly demand door and window frames and simple beds.

Consumers on the high- ways, and near headquarters demand frames, cupboards, kitchen cupboards, beds etc.

Urban dwellers demand all types of products offered. Offices and corporate houses mostly demand tables,

chairs, and designer products.

Contd…3. Input suppliersInput suppliers supply the accessories needed

to manufacture furniture. These include: paint stores, hardware shops

(nails, screws, teak, dendrites, glues, ply wood, sun-mica), machinery suppliers etc.

They are again organized in their respective commodity associations and work closely with actors in the furniture value chain.

Contd…4. Enablers (MSFP, 2013) IRO issues PAN and VAT number, collects revenue and VAT amount

and is responsible for checking and verifying accounting matters and malpractices like under billing.

DFO is involved in policy implementation, registration of forest-based products and approving the operational plan of CFUGs.

MoCS and MoFSC prepare and promulgate the policy, rules, regulations and circulars.

TCN is a semi-autonomous government body that is authorize to sell timber throughout Nepal, in co-ordination with DFO.

CIAA regulates the harvesting, sale and auction of timber by publishing circulars.

FENFIT is the umbrella organization of forest based industries.

Contd...PROSPECTS OF TIMBER TRADE FROM CF1. Policy FrameworkConstitution 2015 (GoN, 2015) Interprovincial Trade: No obstruction of any kind or levying of taxes or

discrimination shall be made in the export and import of goods or services from one province or local level and in the transportation of any goods or services through the territory of any province or local level to another province or local level of Nepal (Part 20-236).

Budget of Fiscal Year 2016/17 (GoN, 2016) Scientific forest management program will be expanded from 6

districts to 11 districts that will help to increase production of timber and substitutes of its import.

Forest based industries will be treated as special industries with respect to income tax exemption.

Contd…2. Nepal’s Accession to WTO WTO has substantial impact on the economic and marketing

aspects of the forestry sector in Nepal. China is interested in buying Sal (Shorea robusta) and Sissoo

(Dalbergia sissoo) logs for much higher prices than the government royalties. Similarly, Japan is interested in buying (Pinus roxburghii) logs.(Dhungana and Bhattrai, 2008).

Wood is one of the items with largest proportion of cuts in import weighted tariffs as per WTO so that exporting countries of these products can reap benefits.

Nepal will have comparative advantage in exporting these logs

Contd...3. Initiatives likely to foster forest products trade and

marketing in CFa. Forest Certification Ensures sustainable forest management- increase the

supply of forest products. creates opportunities for exporting forest-based products to

the international market where demands for products from certified forests are increasing.

Currently in pilot phase-implemented only in 35 CFUGs of Dolakha and Bajhang.

If introduced in different other CFUGs-likely to enhance the international trade and marketing of forest products.

Contd...2. Scientific Forest Management New concept-currently have started taking pace. It is believed even if 50 percent of the different forest types

of Nepal can implement scientific forest management then a country can benefit around 15 million annually (GoN, 2014).

Experts and technicians have calculated that if the scientific forest management program model is applied and timber extracted without hampering environment, around 120 to 150 million cubic feet timber can be produced in Nepal itself (GoN, 2014).

After fulfilling the timber demands of CFUGs, surplus timber produced can be traded.

Contd…3. Marketing Information System A Marketing Information System can be defined as a set structure of

procedures and methods for the regular, planned collection, analysis and presentation of information for use in making marketing decisions (Kotler et al, 2006).

An MIS can provide all the necessary information on the required demands and supply of the forest products, markets for the products, price, distribution channels, etc which will facilitate the trade and marketing of the forest products.

New concept-only single MIS developed by ANSAB 2010 in operation. If can be developed further, the community forest users can easily sell

the different forest products like surplus timber, fuel wood and NTFPs.

Contd….Issues of Timber Trade in Community Forestry The formal procedure of timber trade does not allow any

misappropriation, both within community and the Forest Administration. However, in practice timber trade in community forestry is not transparent and controlled by nexus of committee elites, Forest Administration, contractors, political leaders, local administration, police, media and local goons.

The wood contractors reportedly enjoyed political and administrative support, so field staff and villages could not do a lot to stop them.

Source: Devkota, 2010.

Contd… There are cases that mainly in context of resource rich status of

CFs, where local wood contractors initiate the forest registration process in collusion with local political elites and foresters, tree felling is carried out immediately after the forest is handed over.

There are evidences that the government officials and influenced members of FUGs are making millions by selling the timber at a much reduced price than determined by the government to timber traders.

In order to make illegal trade wood contractors, foresters and users committees also pay commissions to the local journalists, political activists and individual who are helping to cover up the scam.

Source: Devkota, 2010.

CONCLUSION CF in Nepal from the days of its initiation had been protection

oriented and its production/commercial aspects had been sidelined. But the scenario is slowly changing. Commercialization is gaining pace in our community forestry.

CFUGs generate income from various sources among which timber is the major one. Overall timber occupies the major share by contributing over two thirds to the CFUG income.

Policies have begun to be more focused and favorable towards trade and marketing of timber.

Initiation of different scientific concepts in community forestry like certification, scientific forest management etc have further enhanced timber marketing and trade from community forest.

Politics is a major issue of timber trade in community forestry.

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