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Business: Wood-based industries in Phuentsholing are facing tough competition against the Indian made plywood that is readily available from the border town of Jaigaon. People opt for plywood across the border because it is cheaper.

Cheaper substitutes threaten local wood-based firms

Business: Wood-based industries in Phuentsholing are facing tough competition against the Indian made plywood that is readily available from the border town of Jaigaon. People opt for plywood across the border because it is cheaper.

As construction sector is gathering momentum, wood-based manufacturers feel that this cheap substitute could create long-term problem for the construction industry. It could also upset the very purpose of import substitution, which the government regards important for the economic growth and employment generation.

Country’s largest plywood manufacturer firm, Greenwood Manufacturing Corporation (GMC), has piled up huge stock in the recent time.

“With sale mostly down this year, our production has been limited,” GMC’s general manager Karma Wangdi said.

GMC sold plywood and other wood products worth Nu 0.99M in January 2016. In January 2014, the corporation made sales worth Nu 3.3M. In 2015, it was Nu 2.6M.

GMC’s production was 32 cubic metres of plywood in February this year, a drop from 36 cubic metres in January. The firm produced 96 cubic metres of plywood in December 2015.

Karma Wangdi said that GMC godown is fully stocked and that the firm produces only when there are specific orders.

Indian plywood Assam Tigers and Chinese plywood are available in Jaigaon. Compared with local price, plywood price across the border is less by almost 50 percent, local wood based manufacturers say.

Bhutan Ply, another manufacturer and exporter, is also facing similar market situation. Its deputy-managing director, PK Sharma, said sale at present is “very bad.”

“People are not bothered by the quality,” he said. “They just go for the cheaper ones.”

PK Sharma said that there are more advantages than just quality in buying the local plywood, which people do not consider. Unlike the products from across the border, local plywood is reliable with future service supports, he added.

Local plywood prices are higher because of labour charges involved in producing quality products. Timber prices are also high and there is no subsidy.

A 4mm thick local plywood is equivalent to 6mm plywood from across the border. This is how quality differs, PK Sharma said.

A local contractor in Phuentsholing also said that most Bhutanese buyers buy from Jaigaon.

“It is simple, the price is cheap there,” he said. “However, it is also true that the quality is inferior.”

The contractor said that people do not understand that buying from Jaigaon would also be equally expensive when taxes are paid.

Plywood Centre’s owner R Agarwal in Jaigaon, however, said that Bhutanese buy from them because they have different types of qualities in different prices.

“If they are looking for cheap ply, we would have it,” the businessman said. “We also provide the ply that are expensive and good in quality.”

People also buy from across the border when it is not available at the factories in Phuentsholing.

Meanwhile, wood industries that manufacture furniture share a same story. The proprietor of Phuntsho Sawmill, Phuntsho Wangdi, said furniture market also largely depended with the Jaigaon market.

“There is also one local sawmill that manufactures furniture although it is not allowed,” he said. “It is a case of fronting that authorities must look into.”

Phuntsho Wangdi said the sawmill uses smuggled timber that gives them added price advantage.

Proprietors of Chima Wood Industries, Tenzin, said it is prevailing mindset that pushes potential buyers to Jaigaon.

“They have in their brain that everything is cheaper in Jaigaon,” he said. “People do not consider the quality aspect.”

If this situation continues, wood-based companies could go out of market, say local firm owners.

GMC is planning to downsize the number of employees.

Rajesh Rai, Phuentsholing

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