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Industry Guide

Forest Based Industries

Introduction 

Forest based industries are those that use forest resources as raw materials or inputs for producing goods and services. Forest resources include timber, non-timber forest products (NTFPs), and environmental services. Forest based industries can be classified into three categories: wood-based, pulp and paper, and non-wood forest products (NWFPs). 

Wood-based industries include sawmilling, plywood, veneer, particle board, medium density fibreboard (MDF), furniture, wood carving, handicrafts, and construction. Pulp and paper industries include pulp mills, paper mills, paper products, and packaging. NWFPs include food, fodder, fuel, fibre, medicinal plants, gums, resins, essential oils, honey, lac, silk, and bamboo. 

Forest based industries play an important role in the economy, society, and environment. They contribute to the gross domestic product (GDP), employment, income, foreign exchange, rural development, poverty alleviation, and biodiversity conservation. They also face various challenges such as raw material scarcity, environmental degradation, market competition, technological obsolescence, and policy and institutional constraints. 

Overview of the Global Manufacturing Industry 

The global forest products industry is estimated to be worth about $1.3 trillion, accounting for about 4% of the world’s manufacturing GDP. The industry employs about 50 million people directly and indirectly. The major forest products include industrial roundwood, sawnwood, wood-based panels, pulp, paper, and paperboard. The major producers and consumers of forest products are China, the United States, Canada, Brazil, Russia, and the European Union. 

The global forest products industry is characterized by a high degree of diversity, complexity, and dynamism. The industry is influenced by various factors such as demand and supply, prices and costs, trade and tariffs, technology and innovation, policies and regulations, and social and environmental issues. The industry is also affected by the fluctuations in the global economy, the climate change, and the COVID-19 pandemic. 

The global forest products industry is undergoing a transformation driven by the changing consumer preferences, the emerging markets, the digitalization, and the sustainability. The industry is shifting from the traditional products to the value-added products, from the mature markets to the developing markets, from the physical to the online platforms, and from the resource-intensive to the resource-efficient practices. The industry is also exploring new opportunities in the bio-economy, the circular economy, and the green economy. 

Overview of the Indian Manufacturing Industry 

The Indian forest products industry is estimated to be worth about $31 billion, accounting for about 1.7% of the country’s manufacturing GDP. The industry employs about 5 million people directly and indirectly. The major forest products include industrial roundwood, sawnwood, wood-based panels, pulp, paper, and paperboard. The major producers and consumers of forest products are Uttar Pradesh, Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Andhra Pradesh. 

The Indian forest products industry is characterized by a low degree of development, modernization, and competitiveness. The industry is constrained by various factors such as inadequate and degraded forest resources, low productivity and quality, high dependency on imports, outdated technology and equipment, low value addition and innovation, fragmented and informal market, and weak policy and institutional support. The industry is also challenged by the increasing demand and supply gap, the environmental and social impacts, and the global competition. 

The Indian forest products industry is undergoing a reform driven by the government initiatives, the private investments, the public-private partnerships, and the stakeholder participation. The industry is aiming to increase the forest cover and productivity, reduce the imports and increase the exports, upgrade the technology and infrastructure, enhance the value addition and diversification, formalize and integrate the market, and strengthen the policy and institutional framework. The industry is also striving to achieve the economic, social, and environmental sustainability. 

Overview of the Andhra Pradesh and Telangana Manufacturing Industry 

The forest products industry in Andhra Pradesh and Telangana is estimated to be worth about $4 billion, accounting for about 2.6% of the states’ manufacturing GDP. The industry employs about 0.5 million people directly and indirectly. The major forest products include industrial roundwood, sawnwood, wood-based panels, pulp, paper, and paperboard. The major producers and consumers of forest products are Hyderabad, Visakhapatnam, Vijayawada, Khammam, Nizamabad, and Warangal. 

The forest products industry in Andhra Pradesh and Telangana is characterized by a moderate degree of development, modernization, and competitiveness. The industry is facilitated by various factors such as abundant and diverse forest resources, high productivity and quality, low dependency on imports, advanced technology and equipment, high value addition and innovation, organized and formal market, and supportive policy and institutional environment. The industry is also benefited by the strategic location, the skilled workforce, the industrial infrastructure, and the market demand. 

The forest products industry in Andhra Pradesh and Telangana is undergoing a growth driven by the state initiatives, the private investments, the public-private partnerships, and the stakeholder participation. The industry is aiming to increase the forest cover and productivity, reduce the imports and increase the exports, upgrade the technology and infrastructure, enhance the value addition and diversification, formalize and integrate the market, and strengthen the policy and institutional framework. The industry is also striving to achieve the economic, social, and environmental sustainability. 

Market Potential 

The market potential for forest products is the estimated future demand and supply of forest products based on the current and projected trends, factors, and scenarios. The market potential indicates the opportunities and challenges for the forest products industry in terms of the production, consumption, trade, and value addition of forest products. 

Global Market Potential 

The global market potential for forest products is expected to grow at a compound annual growth rate (CAGR) of 4.5% from 2020 to 2025, reaching $1.6 trillion by 2025. The growth drivers include increasing population, urbanization, income, consumption, construction, and e-commerce. The growth opportunities include value addition, innovation, diversification, certification, and sustainability. 

The global market potential for forest products is expected to vary across the regions, products, and segments. The regions with the highest market potential are Asia-Pacific, North America, and Europe. The products with the highest market potential are wood-based panels, paper, and paperboard. The segments with the highest market potential are furniture, packaging, and hygiene. 

The global market potential for forest products is expected to face some challenges such as the raw material availability and quality, the environmental and social impacts, the market competition and volatility, the technological disruption and obsolescence, and the policy and regulatory uncertainties. 

Indian Market Potential 

The Indian market potential for forest products is expected to grow at a CAGR of 6.5% from 2020 to 2025, reaching $45 billion by 2025. The growth drivers include increasing population, urbanization, income, consumption, construction, and e-commerce. The growth opportunities include value addition, innovation, diversification, certification, and sustainability. 

The Indian market potential for forest products is expected to vary across the states, products, and segments. The states with the highest market potential are Uttar Pradesh, Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Andhra Pradesh. The products with the highest market potential are wood-based panels, paper, and paperboard. The segments with the highest market potential are furniture, packaging, and hygiene. 

The Indian market potential for forest products is expected to face some challenges such as the raw material availability and quality, the environmental and social impacts, the market competition and volatility, the technological disruption and obsolescence, and the policy and regulatory uncertainties. 

Market Potential in Andhra Pradesh and Telangana 

The market potential for forest products in Andhra Pradesh and Telangana is expected to grow at a CAGR of 7.5% from 2020 to 2025, reaching $6 billion by 2025. The growth drivers include increasing population, urbanization, income, consumption, construction, and e-commerce. The growth opportunities include value addition, innovation, diversification, certification, and sustainability. 

The market potential for forest products in Andhra Pradesh and Telangana is expected to vary across the districts, products, and segments. The districts with the highest market potential are Hyderabad, Visakhapatnam, Vijayawada, Khammam, Nizamabad, and Warangal. The products with the highest market potential are wood-based panels, paper, and paperboard. The segments with the highest market potential are furniture, packaging, and hygiene. 

The market potential for forest products in Andhra Pradesh and Telangana is expected to face some challenges such as the raw material availability and quality, the environmental and social impacts, the market competition and volatility, the technological disruption and obsolescence, and the policy and regulatory uncertainties. 

Growing Demand 

The growing demand for forest products is driven by various factors such as: 

  • Population growth: The world population is projected to increase from 7.8 billion in 2020 to 8.5 billion in 2030, creating more demand for forest products such as food, fuel, fibre, and shelter. 
  • Urbanization: The world urban population is projected to increase from 4.4 billion in 2020 to 5.3 billion in 2030, creating more demand for forest products such as construction, furniture, and packaging. 
  • Income growth: The world GDP per capita is projected to increase from $11,371 in 2020 to $15,518 in 2030, creating more demand for forest products such as paper, paperboard, and wood-based panels. 
  • Consumption growth: The world consumption of forest products is projected to increase from 1.8 billion cubic meters in 2020 to 2.2 billion cubic meters in 2030, creating more demand for forest products such as industrial roundwood, sawnwood, and pulp. 
  • Construction growth: The world construction output is projected to increase from $11.6 trillion in 2020 to $15.5 trillion in 2030, creating more demand for forest products such as wood-based panels, plywood, and veneer. 
  • E-commerce growth: The world e-commerce sales are projected to increase from $4.3 trillion in 2020 to $6.5 trillion in 2030, creating more demand for forest products such as paper, paperboard, and packaging. 

The growing demand for forest products is also influenced by the changing consumer preferences, the emerging markets, the digitalization, and the sustainability. The consumers are demanding more quality, variety, convenience, and eco-friendliness of forest products. The emerging markets such as China, India, Brazil, and Russia are creating more demand for forest products due to their rapid economic and social development. The digitalization is creating more demand for forest products due to the increased online shopping, communication, and education. The sustainability is creating more demand for forest products due to the increased awareness, regulation, and certification of the environmental and social impacts of forest products. 

Market Size and Growth Projections 

The market size and growth projections for forest products are based on the following assumptions and sources: 

  • The global forest products industry is estimated to be worth $1.3 trillion in 2020, based on the data from the Food and Agriculture Organization (FAO) and the International Monetary Fund (IMF). 
  • The Indian forest products industry is estimated to be worth $31 billion in 2020, based on the data from the Indian Council of Forestry Research and Education (ICFRE) and the Ministry of Statistics and Programme Implementation (MOSPI). 
  • The forest products industry in Andhra Pradesh and Telangana is estimated to be worth $4 billion in 2020, based on the data from the Andhra Pradesh Forest Development Corporation (APFDC) and the Telangana State Forest Development Corporation (TSFDC). 
  • The global market potential for forest products is expected to grow at a CAGR of 4.5% from 2020 to 2025, based on the projections from the FAO and the IMF. 
  • The Indian market potential for forest products is expected to grow at a CAGR of 6.5% from 2020 to 2025, based on the projections from the ICFRE and the MOSPI. 
  • The market potential for forest products in Andhra Pradesh and Telangana is expected to grow at a CAGR of 7.5% from 2020 to 2025, based on the projections from the APFDC and the TSFDC. 

The following table shows the market size and growth projections for forest products in terms of the value (in billion USD) and the volume (in million cubic meters) for the global, Indian, and Andhra Pradesh and Telangana markets from 2020 to 2025. 

Market 

Year 

Value (Billion USD) 

Volume (Million Cubic Meters) 

Global 

2020 

1300 

1800 

    

Subsidies and Incentives 

The government of India, Andhra Pradesh and Telangana provide various subsidies and incentives to promote the development of forest based industries. Some of the major schemes and benefits are: 

Government of India 

  • The National Mission on Bamboo Applications (NMBA) provides financial assistance for setting up bamboo processing units, product development, marketing, and training. 
  • The National Medicinal Plants Board (NMPB) provides financial assistance for cultivation, processing, marketing, and research of medicinal plants. 
  • The National Bamboo Mission (NBM) provides financial assistance for plantation, nurseries, processing, marketing, and research of bamboo. 
  • The National Mission for Minor Forest Produce (MFP) provides financial assistance for collection, processing, value addition, marketing, and research of minor forest produce. 
  • The National Mission on Biofuels (NMB) provides financial assistance for production, processing, blending, distribution, and research of biofuels. 
  • The Ministry of Micro, Small and Medium Enterprises (MSME) provides financial assistance for setting up, upgrading, and modernizing forest based enterprises under various schemes such as Prime Minister’s Employment Generation Programme (PMEGP), Credit Linked Capital Subsidy Scheme (CLCSS), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), and Technology Upgradation Fund Scheme (TUFS). 
  • The Ministry of Commerce and Industry (MCI) provides financial assistance for export promotion, market development, and quality certification of forest products under various schemes such as Market Access Initiative (MAI), Market Development Assistance (MDA), and Export Promotion Council for Handicrafts (EPCH). 
  • The Ministry of Environment, Forest and Climate Change (MOEFCC) provides financial assistance for conservation, management, and sustainable use of forest resources under various schemes such as National Afforestation Programme (NAP), Green India Mission (GIM), and Compensatory Afforestation Fund Management and Planning Authority (CAMPA). 

Government of Andhra Pradesh 

  • The Andhra Pradesh Industrial Development Policy (APIDP) provides various incentives for forest based industries such as capital subsidy, interest subsidy, power subsidy, stamp duty exemption, land conversion fee exemption, VAT/CST/GST reimbursement, and infrastructure support. 
  • The Andhra Pradesh Forest Development Corporation (APFDC) provides various facilities for forest based industries such as raw material supply, land allotment, infrastructure development, and marketing support. 
  • The Andhra Pradesh Forest Department (APFD) provides various services for forest based industries such as forest clearance, forest produce transit permit, forest produce royalty, and forest produce auction. 

Government of Telangana 

  • The Telangana Industrial Project Approval and Self-Certification System (TS-iPASS) provides various incentives for forest based industries such as capital subsidy, interest subsidy, power subsidy, stamp duty exemption, land conversion fee exemption, VAT/CST/GST reimbursement, and infrastructure support. 
  • The Telangana State Forest Development Corporation (TSFDC) provides various facilities for forest based industries such as raw material supply, land allotment, infrastructure development, and marketing support. 
  • The Telangana Forest Department (TFD) provides various services for forest based industries such as forest clearance, forest produce transit permit, forest produce royalty, and forest produce auction. 

Marketing and Sales 

The marketing and sales of forest products depend on various factors such as product quality, price, demand, supply, competition, distribution, promotion, and customer satisfaction. Some of the strategies and tips for effective marketing and sales of forest products are: 

  • Identify the target market and customer segments based on the product features, benefits, and preferences. 
  • Conduct market research and analysis to understand the market trends, opportunities, threats, strengths, and weaknesses. 
  • Develop a marketing plan and budget based on the marketing objectives, strategies, and tactics. 
  • Choose the appropriate marketing mix based on the product, price, place, and promotion. 
  • Implement the marketing activities and monitor the results and feedback. 
  • Evaluate the marketing performance and make necessary adjustments and improvements. 
  • Establish a strong brand identity and reputation by creating a unique selling proposition (USP), logo, slogan, and packaging. 
  • Ensure the product quality and consistency by adhering to the standards, specifications, and certifications. 
  • Offer competitive and affordable prices by considering the cost, profit, and value. 
  • Expand the market reach and access by using various channels and modes of distribution such as wholesalers, retailers, online platforms, and direct sales. 
  • Increase the market awareness and interest by using various tools and techniques of promotion such as advertising, publicity, sales promotion, and personal selling. 
  • Build and maintain long-term relationships and loyalty with the customers by providing excellent service, support, and satisfaction. 

Investment 

The investment required for setting up a forest based industry depends on various factors such as the type, scale, location, technology, and capacity of the industry. The investment includes the fixed capital and the working capital. The fixed capital includes the land, building, plant, machinery, equipment, and furniture. The working capital includes the raw materials, utilities, wages, salaries, and other expenses. The investment can be financed by various sources such as equity, debt, grants, and subsidies. 

The following table shows the approximate investment required for setting up a forest based industry with different production scales (in kg/hour) and products (in rupees). 

Production Scale (kg/hour) 

Product 

Investment (Rupees) 

500 

Wood-based panels 

10,00,000 

500 

Pulp and paper 

15,00,000 

500 

NWFPs 

5,00,000 

1000 

Wood-based panels 

20,00,000 

1000 

Pulp and paper 

30,00,000 

1000 

NWFPs 

10,00,000 

1500 

Wood-based panels 

30,00,000 

1500 

Pulp and paper 

45,00,000 

1500 

NWFPs 

15,00,000 

2000 

Wood-based panels 

40,00,000 

2000 

Pulp and paper 

60,00,000 

2000 

NWFPs 

20,00,000 

Forest Based Industries List

Honey Packaging Unit

Broom Making Unit

Bamboo Shoot Products

Honey Bee Farming

Areca Leaf Cutlery

Bamboo Furniture

Bamboo Tree Guard

Wood Carving

Bamboo Stick Production

Wood Cutting Unit

WOOD CRAFTING

WOODEN FURNITURE MANUFACTURING

Areca Leaf plates manufacturing

Cricket Bat

Laminate Wood Flooring

Pencil manufacturing Unit

Bamboo Spoon Manufacturing Unit

Hard Board from Sawdust Manufacturing Unit

Bamboo Sticks for Agarbatti Manufacturing Unit

Sugarcane Bagasse Particle Board Manufacturing Unit

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